The Impact of Capital Requirements on U.K. Bank Behaviour

8 Pages Posted: 29 Oct 2007

See all articles by Tolga Ediz

Tolga Ediz

affiliation not provided to SSRN

Ian Michael

affiliation not provided to SSRN

William Perraudin

Imperial College London - Accounting, Finance, and Macroeconomics

Date Written: October 1998

Abstract

The authors summarize some of the results of Ediz, Michael, and Perraudin (1998) on the impact of bank capital requirements on the capital ratio choices of U.K. banks. They use confidential supervisory data including detailed information about the balance sheet and profit and loss of all British banks over the period 1989-95. The conclusions they reach are reassuring in that capital requirements do seem to affect bank behavior over and above the influence of the banks' own internally generated capital targets. Furthermore, banks appear to achieve adjustments in their capital ratios primarily by directly boosting their capital rather than through systematic substitution away from assets such as corporate loans, which attract high-risk weights in the calculation of Basle Accord-style capital requirements.

Keywords: capital regulation

JEL Classification: G2, G3

Suggested Citation

Ediz, Tolga and Michael, Ian and Perraudin, William, The Impact of Capital Requirements on U.K. Bank Behaviour (October 1998). Economic Policy Review, Vol. 4, No. 3, October 1998. Available at SSRN: https://ssrn.com/abstract=1024836 or http://dx.doi.org/10.2139/ssrn.1024836

Tolga Ediz

affiliation not provided to SSRN ( email )

No Address Available

Ian Michael

affiliation not provided to SSRN ( email )

No Address Available

William Perraudin (Contact Author)

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom

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