IDEAS home Printed from https://ideas.repec.org/p/fip/fedgfe/2011-34.html

Capital ratios and bank lending: a matched bank approach

Author

Abstract

This paper examines the impact of bank capital ratios on bank lending by comparing differences in loan growth to differences in capital ratios at sets of banks that are matched based on geographic area as well as size and various business characteristics. We argue that such comparisons are most effective at controlling for local loan demand and other environmental factors. For comparison we also control for local factors using MSA fixed effects. We find, based on data from 2001 to 2009, that the relationship between capital ratios and bank lending is insignificant until the recent financial crisis. We also find that the effect of capital ratios on loan growth varies by type of loan, with some of the strongest effects in recent years being for commercial real estate loans. Finally, we show that the elasticity of bank lending with respect to capital ratios is higher when capital ratios are relatively low, suggesting that the effect of capital ratio on bank lending is nonlinear.

Suggested Citation

  • Mark A. Carlson & Hui Shan & Missaka Warusawitharana, 2011. "Capital ratios and bank lending: a matched bank approach," Finance and Economics Discussion Series 2011-34, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2011-34
    as

    Download full text from publisher

    File URL: http://www.federalreserve.gov/pubs/feds/2011/201134/201134abs.html
    Download Restriction: no
    File URL: http://www.federalreserve.gov/pubs/feds/2011/201134/201134pap.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedgfe:2011-34. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ryan Wolfslayer ; Keisha Fournillier (email available below). General contact details of provider: https://edirc.repec.org/data/frbgvus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.