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Bank capital buffer releases, public guarantee programs, and dividend bans in Covid-19 Europe: An appraisal


Matyunina, Alexandra; Ongena, Steven (2022). Bank capital buffer releases, public guarantee programs, and dividend bans in Covid-19 Europe: An appraisal. European Journal of Law and Economics, 54:127-152.

Abstract

We analyse the recent policy decisions made by the European Central Bank and the national authorities related to capital and shareholders’ remuneration aimed at promoting banking credit supply in COVID-19-afflicted economies. We forecast the impact of the regulatory decisions based on the empirical literature and discuss the factors that reduce the banks’ incentives to expand their loan portfolios. We argue that the introduction of the dividend ban caused a surge in regulatory uncertainty and undermined banks’ market valuation raising the expected funding costs and contributing to the banks’ reluctance to make use of the capital buffers. We develop policy suggestions intended to mitigate this effect.

Abstract

We analyse the recent policy decisions made by the European Central Bank and the national authorities related to capital and shareholders’ remuneration aimed at promoting banking credit supply in COVID-19-afflicted economies. We forecast the impact of the regulatory decisions based on the empirical literature and discuss the factors that reduce the banks’ incentives to expand their loan portfolios. We argue that the introduction of the dividend ban caused a surge in regulatory uncertainty and undermined banks’ market valuation raising the expected funding costs and contributing to the banks’ reluctance to make use of the capital buffers. We develop policy suggestions intended to mitigate this effect.

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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 > Economics and Econometrics
Social Sciences & Humanities > Law
Scope:Discipline-based scholarship (basic research)
Language:English
Date:18 July 2022
Deposited On:16 Aug 2022 12:55
Last Modified:27 Jun 2024 01:38
Publisher:Springer
ISSN:0929-1261
OA Status:Hybrid
Free access at:Publisher DOI. An embargo period may apply.
Publisher DOI:https://doi.org/10.1007/s10657-022-09734-9
Other Identification Number:merlin-id:22359
  • Content: Published Version
  • Language: English
  • Licence: Creative Commons: Attribution 4.0 International (CC BY 4.0)
  • Content: Accepted Version
  • Language: English