Time-Varying Capital Requirements and Disclosure Rules: Effects on Capitalization and Lending Decisions

50 Pages Posted: 20 Aug 2018 Last revised: 21 Feb 2019

See all articles by Björn Imbierowicz

Björn Imbierowicz

Deutsche Bundesbank - Research Centre

Jonas Kragh

Copenhagen Business School

Jesper Rangvid

Copenhagen Business School

Multiple version iconThere are 2 versions of this paper

Date Written: 2018

Abstract

We investigate how banks' capital and lending decisions respond to changes in bankspecific capital and disclosure requirements. We find that an increase in the bankspecific 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.

Keywords: capital requirement, bank lending, bank capital structure, capital disclosure rules

JEL Classification: G21, G28

Suggested Citation

Imbierowicz, Björn and Kragh, Jonas and Rangvid, Jesper, Time-Varying Capital Requirements and Disclosure Rules: Effects on Capitalization and Lending Decisions (2018). Deutsche Bundesbank Discussion Paper No. 18/2018. Available at SSRN: https://ssrn.com/abstract=3234182

Björn Imbierowicz (Contact Author)

Deutsche Bundesbank - Research Centre ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Jonas Kragh

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
Denmark

Jesper Rangvid

Copenhagen Business School ( email )

Solbjerg Plads 3
Frederiksberg C, DK - 2000
DENMARK

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