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Bank capital (requirements) and credit supply: Evidence from pillar 2 decisions


De Jonghe, Olivier; Dewachter, Hans; Ongena, Steven (2020). Bank capital (requirements) and credit supply: Evidence from pillar 2 decisions. Journal of Corporate Finance, 60:101518.

Abstract

We analyze how time-varying bank-specific capital requirements affect bank lending to the non-financial corporate sector as well as banks' balance sheet adjustments. To do so, we relate Pillar 2 capital requirements to a comprehensive corporate credit register coupled with bank and firm balance sheet data. Our analysis consists of three components. First, we investigate how capital requirements affect the supply of bank credit to the corporate sector, both on the intensive and extensive margin, as well as for different types of credit. Subsequently, we document how bank and firm characteristics as well as the stance of monetary policy impact the relationship between bank capital requirements and the supply of credit. Finally, we examine how time-varying bank-specific capital requirements affect banks' balance sheet composition.

Abstract

We analyze how time-varying bank-specific capital requirements affect bank lending to the non-financial corporate sector as well as banks' balance sheet adjustments. To do so, we relate Pillar 2 capital requirements to a comprehensive corporate credit register coupled with bank and firm balance sheet data. Our analysis consists of three components. First, we investigate how capital requirements affect the supply of bank credit to the corporate sector, both on the intensive and extensive margin, as well as for different types of credit. Subsequently, we document how bank and firm characteristics as well as the stance of monetary policy impact the relationship between bank capital requirements and the supply of credit. Finally, we examine how time-varying bank-specific capital requirements affect banks' balance sheet composition.

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3 citations in Scopus®
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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Banking and Finance
Dewey Decimal Classification:330 Economics
Scopus Subject Areas:Social Sciences & Humanities > Business and International Management
Social Sciences & Humanities > Finance
Social Sciences & Humanities > Economics and Econometrics
Social Sciences & Humanities > Strategy and Management
Language:English
Date:1 February 2020
Deposited On:13 May 2020 06:50
Last Modified:07 Jun 2020 06:38
Publisher:Elsevier
ISSN:0929-1199
OA Status:Closed
Free access at:Related URL. An embargo period may apply.
Publisher DOI:https://doi.org/10.1016/j.jcorpfin.2019.101518
Official URL:https://www.sciencedirect.com/science/article/pii/S0929119918307521
Related URLs:https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3356726 (Organisation)
Other Identification Number:merlin-id:18479

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