Wholesale Bank Funding, Capital Requirements and Credit Rationing
January 31, 2013
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Summary
This paper analyzes how different types of bank funding affect the extent to which banks ration credit to borrowers, and the impact that capital requirements have on that rationing. Using an extension of the standard Stiglitz-Weiss model of credit rationing, unsecured wholesale finance is shown to amplify the credit market impact of capital requirements as compared to funding by retail depositors. Unsecured finance surged in the pre-crisis years, but is increasingly replaced by secured funding. The collateralization of wholesale funding is found to expand the extent of credit rationing.
Subject: Bank credit, Bank deposits, Banking, Credit, Loans
Keywords: credit rationing, financial crisis, WP
Pages:
22
Volume:
2013
DOI:
Issue:
030
Series:
Working Paper No. 2013/030
Stock No:
WPIEA2013030
ISBN:
9781475571622
ISSN:
1018-5941
