The Effects of Higher Bank Capital Requirements on Credit in Peru

Author/Editor:

Xiang Fang ; David Jutrsa ; Maria Soledad Martinez Peria ; Andrea Presbitero ; Lev Ratnovski ; Felix J Vardy

Publication Date:

September 28, 2018

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper offers novel evidence on the impact of raising bank capital requirements in the context of an emerging market: Peru. Using quarterly bank-level data and exploiting the adoption of bank-specific capital buffers, we find that higher capital requirements have a short-lived, negative impact on bank credit in Peru, although this effect becomes statistically insignificant in about half a year. This finding is robust to estimating different specifications to address concerns about the exogeneity of capital requirements. The fact that the reform was gradual and pre-announced and that banks were highly profitable at the time could explain the short-lived effects on credit.

Series:

Working Paper No. 18/222

Subject:

English

Publication Date:

September 28, 2018

ISBN/ISSN:

9781484378366/1018-5941

Stock No:

WPIEA2018222

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

34

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