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Does banks' systemic importance affect their capital structure adjustment process?

Author

Listed:
  • Yassine Bakkar

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

  • Olivier de Jonghe

    (European Banking Center, Tilburg University and National Bank of Belgium. - Tilburg University and National Bank of Belgium)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

Frictions prevent banks to immediately adjust their capital ratio towards their desired and/or imposed level. This paper analyzes (i) whether or not these frictions are larger for regulatory capital ratios vis-à-vis a plain leverage ratio; (ii) which adjustment channels banks use to adjust their capital ratio; and (iii) how the speed of adjustment and adjustment channels differ between large, systemic and complex banks versus small banks. Our results, obtained using a sample of listed banks across OECD countries for the 2001-2012 period, bear critical policy implications for the implementation of new (systemic risk-based) capital requirements and their impact on banks' balance sheets.

Suggested Citation

  • Yassine Bakkar & Olivier de Jonghe & Amine Tarazi, 2017. "Does banks' systemic importance affect their capital structure adjustment process?," Working Papers hal-01546995, HAL.
    • Handle: RePEc:hal:wpaper:hal-01546995
    Note: View the original document on HAL open archive server: https://unilim.hal.science/hal-01546995
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    Keywords

    capital structure; speed of adjustment; systemic risk; systemic size; bank regulation;
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