The Effects of Higher Bank Capital Requirements on Credit in Peru
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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. 2018/222
Subject:
Bank credit Banking Capital adequacy requirements Countercyclical capital buffers Credit Financial institutions Financial regulation and supervision Loans Money
English
Publication Date:
September 28, 2018
ISBN/ISSN:
9781484378366/1018-5941
Stock No:
WPIEA2018222
Pages:
34
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