Basel III and Bank-Lending: Evidence from the United States and Europe
IMF Working Papers, November 15, 2017
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- Basel III and Bank-Lending: Evidence from the United States and Europe
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Bibliographic details
- Authors: Jérémy Pépy, Caroline Roulet
- Published: November 15, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484328309.001
Summary
- Using data on commercial banks in the United States and Europe, this paper analyses the impact of the new Basel III capital and liquidity regulation on bank-lending following the 2008 financial crisis.
- Authors: Jérémy Pépy, Caroline Roulet
- Date: November 15, 2017
- Series: IMF Working Papers, Working Paper No. 2017/245
- Pages: 50
- DOI: https://doi.org/10.5089/9781484328309.001
- Issue: 245
- ISBN: 9781484328309
- ISSN: 1018-5941
Key findings
- U.S. banks reinforce their risk absorption capacities when expanding their credit activities.
- Capital ratios have significant, negative impacts on bank-retail-and-other-lending-growth for large European banks in the context of deleveraging and the “credit crunch” in Europe over the post-2008 financial crisis period.
- Liquidity indicators have positive but perverse effects on bank-lending-growth.
- The evidence supports the need to consider heterogeneous banks’ characteristics and behaviors when implementing new regulatory policies.
Policy implications and interpretation
- Regulatory design and implementation of Basel III should account for heterogeneity across banks, including differences between U.S. and European banks.
- The negative association between capital ratios and lending growth for large European banks suggests potential trade-offs between strengthening capital buffers and maintaining credit provision during deleveraging episodes.
- The observed perverse effects of liquidity indicators on lending growth indicate that liquidity regulation can produce unintended behavioral responses that merit careful monitoring and calibration.
Subject coverage and keywords
- Subject: Asset and liability management; Banking; Basel III; Capital adequacy requirements; Credit; Financial institutions; Financial regulation and supervision; Global financial crisis of 2008-2009; Liquidity management; Loans; Money
- Keywords: bank regulatory capital; bank risk appetite; banking regulation; Basel III; Capital adequacy requirements; Credit; credit crunch; determinants of bank-lending; Europe; European bank; financial crisis; Global; introduced bank capital regulation; lending supply; leverage ratio; Liquidity management; liquidity requirements; Loans; U.S. bank; WP
IMF Working Paper by Jérémy Pépy and Caroline Roulet, “Basel III and Bank-Lending: Evidence from the United States and Europe”, November 15, 2017, Working Paper No. 2017/245.
Content in this bundle
- Basel III and Bank-Lending: Evidence from the United States and Europe, WP/17/245, September 2017