Time‐Varying Capital Requirements and Disclosure Rules: Effects on Capitalization and Lending Decisions |
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| Authors: | BJÖRN IMBIEROWICZ JONAS KRAGH JESPER RANGVID |
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| Abstract: | We investigate how banks’ capital and lending decisions respond to changes in bank‐specific capital and disclosure requirements. We find that an increase in the bank‐specific regulatory capital requirement results in a higher bank capital ratio, brought about via less asset risk. A decrease in the requirement implies more lending to firms but also less Tier 1 capital and higher bank leverage. We do not observe differences between confidential and public disclosure of capital requirements. Our results empirically illustrate a tradeoff between bank resilience and a fostering of the economy through more bank lending using banks’ capital requirement as policy instrument. |
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| Keywords: | G21 G28 capital requirement bank lending bank capital structure capital disclosure rules |
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