Evidence On The Response Of Us Banks To Changes In Capital Requirements
Download and Read Evidence On The Response Of Us Banks To Changes In Capital Requirements full books in PDF, ePUB, and Kindle. Read online free Evidence On The Response Of Us Banks To Changes In Capital Requirements ebook anywhere anytime directly on your device. We cannot guarantee that every ebooks is available!
Evidence on the Response of Us Banks to Changes in Capital Requirements
Author | : Craig Furfine |
Publisher | : |
Total Pages | : 32 |
Release | : 2006 |
Genre | : |
ISBN | : |
Download Evidence on the Response of Us Banks to Changes in Capital Requirements Book in PDF, Epub and Kindle
This paper develops a structural, dynamic model of a banking firm to analyze how banks adjust their loan portfolios over time. In the model, banks experience capital shocks, face uncertain future loan demand, and incur costs based on their proximity to regulatory minimum capital requirements. Non-linear relationships between bank capital levels and lending are derived from the model, and key parameters are estimated using panel data on large US commercial banks operating continuously between December 1989 and December 1997. Using the estimated model, the optimal bank response to changes in capital requirements, shocks to bank capital, and changes to bank loan demand is simulated. The simulations predict that increases in risk-based and leverage capital requirements, negative capital shocks, or a decline in loan demand cause a reduction in loan growth. Nevertheless, by calculating the optimal portfolio response to these various changes, it is shown that changes in capital regulation are a necessary ingredient to explain the decline in loan growth and the rise in bank capital ratios witnessed nearly a decade ago. Thus, this study suggests that the current effort to redesign bank capital requirements should work under the assumption that banks will optimally respond to the economic incentives found in the regulation.
Evidence on the Response of Us Banks to Changes in Capital Requirements Related Books
Pages: 34
Pages: 32
Pages:
Pages: 38
Pages: 50