Abstract
Frictions prevent banks to immediately adjust their capital ratio towards their desired and/or imposed level. This paper analyzes (i) whether or not these frictions are larger for regulatory capital ratios vis-à-vis a plain leverage ratio; (ii) which adjustment channels banks use to adjust their capital ratio; and (iii) how the speed of adjustment and adjustment channels differ between large, systemic and complex banks versus small banks. Our results, obtained using a sample of listed banks across OECD countries for the 2001–2012 period, bear critical policy implications for the implementation of new (systemic risk-based) capital requirements and their impact on banks’ balance sheets, specifically lending, and hence the real economy.
Original language | English |
---|---|
Article number | 105518 |
Journal | Journal of Banking and Finance |
Early online date | 07 Mar 2019 |
DOIs | |
Publication status | Early online date - 07 Mar 2019 |
Externally published | Yes |