Effects of Bank Capital Requirements on Lending by Banks and Non-Bank Financial Institutions
52 Pages Posted: 10 Jan 2024 Last revised: 30 Jan 2025
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Effects of Bank Capital Requirements on Lending by Banks and Non-Bank Financial Institutions
Date Written: January 13, 2025
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 or very large NBFIs — 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.
Keywords: non-bank financial intermediation, bank capital requirements, EBA capital exercise
JEL Classification: E50, G21, G23, G28, C33
Suggested Citation: Suggested Citation