Changes in the Cost of Bank Equity and the Supply of Bank Credit

Ongena, Steven; Célérier, Claire; Kick, Thomas; Mayer, Colin; Micossi, Stefano; Onado, Marco; Pagano, Marco; Polo, Andrea

doi:10.1093/oso/9780198815815.003.0010

Cited by 19 publications

(19 citation statements)

References 19 publications

(37 reference statements)

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“…Quantitatively, a reduction of one percentage point in the IRAP rate is associated with an increase of 0.45 percentage points in the ratio of securities to total assets and an increase of 0.4 percentage points in the ratio of loans to total assets. This result is in line with that found by Célérier et al (2016) for the effects of changes in the allowance for corporate equity in Europe. On the contrary, banks's response to a reduction of one percentage point in the IRAP rate is to cut down the ratio of bad loans to total asset by 0.11 percentage points.…”

Section: Tax Effects On the Credit Portfolio Of Bank Assetssupporting

confidence: 92%

“…Schepens (2016) exploits an exogenous variation in the tax treatment of debt and equity created by the introduction of a tax shield for equity and shows that reducing the difference in the tax treatment of debt and equity increases bank capital ratios. This result is in line with Célérier et al (2016) on the effects of tax reforms in Europe. Along similar lines, Bond et al (2016) investigate the effects of tax on the capital structure of banks by employing exogenous regional and time variation in the rate of IRAP (Imposta regionale sulle attività produttive) and data on Italian mutual banks (credit cooperative banks, or CCBs).…”

Section: Introductionsupporting

confidence: 89%

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The Effects of Tax on Bank Liability Structure

Gambacorta

Ricotti

Sundaresan³

et al. 2017

SSRN Journal

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BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).

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Section: Tax Effects On the Credit Portfolio Of Bank Assetssupporting

confidence: 92%

Section: Introductionsupporting

confidence: 89%

The Effects of Tax on Bank Liability Structure

Gambacorta

Ricotti

Sundaresan³

et al. 2017

SSRN Journal

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“…This stylized fact is supported by micro-level evidence documented elsewhere. See for instance Cortes et al (2018); Gropp et al (2016); Juelsrud and Wold (2017); Celerier et al (2017); Auer and Ongena (2016) and De Jonghe et al (2016) for evidence of a shift in lending away from riskier borrowers in response to higher bank funding costs and in particular increases in required capital.…”

Section: Introductionmentioning

confidence: 99%

Should Bank Capital Requirements Be Less Risk-Sensitive Because of Credit Constraints?

Ambrocio

Jokivuolle

2017

SSRN Journal

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Firms' borrowing constraints imply that optimal capital requirements are less risk-sensitive than purely risk-based ones as they trade off the efficient allocation of credit against the social costs of bank failures. We demonstrate this in a simple model and show that firms' productivity differences amplify the effect. However, when matched to US corporate loan data, the model suggests that adjusting the Basel/IRBA risk weights would only have second-order welfare benefits. These benefits are increasing in the correlation between firm productivity and risk, the bank equity premium, and decreasing in the social cost of bank failures.

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“…The financial corporation debt-to-equity ratio in France, at 4.5 is slightly above the OECD average ( Figure 5). Existing evidence based on the Belgian experience shows that offering an ACE is associated with a decrease in leverage in the banking sector by 13 percent (Schepens, 2016) and increased lending to firms (Celerier et al, 2017). France imposes a bank levy of 0.222 on minimum equity.…”

mentioning

confidence: 99%

France: Selected Issues

Fund¹

2017

IMF Staff Country Reports

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A REVIEW OF CAPITAL TAXATION IN FRANCE 1 The government's planned tax reforms are an important opportunity to make capital taxation in France more efficient and growth friendly. The current system is characterized by a range of distortions and inefficiencies. The corporate income tax (CIT) regime features a high statutory rate but low revenue productivity, as well as a bias toward debt financing, ineffective size-dependent regimes, and inefficient tax incentives. Profit-insensitive taxes are comparatively high. Anti-tax-avoidance rules are strong, but risks to outbound profit shifting remain. Tax uncertainty is another concern. At the individual level, the system of taxing wealth and capital income is complex, with distortions from differential taxation across savings instruments. To address some of these issues and make the tax system more supportive of growth and job creation, the government plans to reduce the CIT rate, further cut the labor tax wedge, unify taxes on capital income, and narrow the wealth tax. Staff's analysis suggests that complementing these reforms with measures to remove inefficient tax incentives, further reduce the debt bias, address disincentives to company growth, and streamline the taxation of long-term savings could enhance their impact on competitiveness, revenues, and growth. RightsLink Copyright Clearance Center ® FRANCE 4 INTERNATIONAL MONETARY FUND B. Key Features of Capital Taxation in France 5. France's tax ratio is higher than in most comparator countries, reflecting the large size of the public sector. At more than 56 percent of GDP, government spending is one of the highest in the OECD. The state plays an extensive role in the economy, especially in social protection and health. Accordingly, at 53 percent of GDP, the revenue ratio exceeds that of most comparator countries. Taxes are equivalent to 45½ percent of GDP, again one of the highest in the OECD. 6. The composition of tax revenues (the tax mix) is broadly similar to comparator countries, whereas tax-to-GDP ratios are relatively high, except for indirect taxes (Figure 1). Both the level of capital taxes (about 10.8 percent of GDP), and their share of total tax revenues (23.5 percent), are higher than the EU average and Germany, but broadly in line with Italy and the UK. Labor taxes are high in relation to GDP, though their share in total tax revenue is comparable to many European countries. By contrast, the share of indirect taxes in total revenue is below that of most other countries. Figure 1. Levels and Composition of Tax Revenues Source: Eurostat statistics. 7. A considerable portion of capital taxation is insensitive to income or profits, including taxes on personal wealth, real estate, and local taxation of businesses. The tax on capital is split into a tax on the capital stock (4.3 percent of GDP) and a tax on capital income (6.5 percent of GDP). The latter is decomposed as 2.8 percent from corporate income ("impôt sur les sociétés"; IS, referred to in this paper as CIT), 1.8 percent from household income, and 1...

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Changes in the Cost of Bank Equity and the Supply of Bank Credit

Cited by 19 publications

References 19 publications

The Effects of Tax on Bank Liability Structure

The Effects of Tax on Bank Liability Structure

Should Bank Capital Requirements Be Less Risk-Sensitive Because of Credit Constraints?

France: Selected Issues

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