Effects of Bank Capital Requirements on Lending by Banks and Non-Bank Financial Institutions

61 Pages Posted: 14 Nov 2023

See all articles by Peter Bednarek

Peter Bednarek

Deutsche Bundesbank

Olga Briukhova

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

Steven Ongena

University of Zurich - Department Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Natalja von Westernhagen

Deutsche Bundesbank

Multiple version iconThere are 2 versions of this paper

Date Written: 2023

Abstract

What is the impact of a sudden and sizeable increase in bank capital requirements on the lending activity by directly affected banks and by non-affected non-bank financial institutions (NBFIs)? To answer this question, we apply a difference-in-differences methodology around the capital exercise by the European Banking Authority (EBA) in 2011 with German credit register data. We find that insurance companies, financial enterprises, and factoring companies - but not leasing companies - and Non-EBA banks expand their corporate lending relative to EBA banks. In particular, NBFIs use the opportunity to expand their credit activities, in riskier and more competitive borrower segments, but NBFIs do not seem to rely on increased bank funding to finance this expansion.

Keywords: non-bank financial intermediation, bank capital requirements, EBA capital exercise

JEL Classification: E50, G21, G23, G28, C33

Suggested Citation

Bednarek, Peter and Briukhova, Olga and Ongena, Steven R. G. and von Westernhagen, Natalja, Effects of Bank Capital Requirements on Lending by Banks and Non-Bank Financial Institutions (2023). Deutsche Bundesbank Discussion Paper No. 26/2023, Available at SSRN: https://ssrn.com/abstract=4630645 or http://dx.doi.org/10.2139/ssrn.4630645

Peter Bednarek (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany
004969 9566-8972 (Phone)

HOME PAGE: http://www.bundesbank.de

Olga Briukhova

University of Zurich - Department of Banking and Finance ( email )

Plattenstrasse 14
8032 Zurich
Switzerland
+41446343931 (Phone)

Swiss Finance Institute ( email )

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

Steven R. G. Ongena

University of Zurich - Department Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Natalja Von Westernhagen

Deutsche Bundesbank ( email )

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

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