Estimating the impact of changes in aggregate bank capital requirements on lending and growth during an upswing

Noss, Joseph; Toffano, Priscilla

doi:10.1016/j.jbankfin.2015.09.020

Cited by 70 publications

(38 citation statements)

References 16 publications

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“…We assume that this is costly and affects the lending spread through the reserve ratio. This assumption is in line with studies which show that achieving higher capital requirements through retained earnings has also translated into higher lending spreads (Aiyar et al 2014;Bridges et al 2014;Noss and Toffano 2016). The rise in financial sector savings also reflects our specification that financial sector and non-financial sector savings adjust to ensure that the savings-investment equilibrium is maintained.…”

Section: Resultssupporting

confidence: 88%

Fiscal multipliers in South Africa: The importance of financial sector dynamics

Makrelov¹,

Arndt²,

Davies³

et al. 2018

WIDER Working Paper

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Section: Resultssupporting

confidence: 88%

Fiscal multipliers in South Africa: The importance of financial sector dynamics

Makrelov¹,

Arndt²,

Davies³

et al. 2018

WIDER Working Paper

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“…The size of the effect we find is similar to Aiyar et al (2014), even though, in our data, the effect on lending is shorterlived than in theirs. In that respect, our results are closer to Noss and Toffano (2016), who find that the effect of a capital requirement increase fades to zero in about a year. Unlike the existing literature, and somewhat surprisingly, we do not find that banks consistently retrench more from loans with higher risk weights.…”

Section: Introductionsupporting

confidence: 81%

“…They estimate a bank-level lending regression and show that a 1 percentage point increase in bank capital requirement is associated with 5.7-8 percent lower bank lending in the following three quarters. Noss and Toffano (2016) study the same regulatory data in a VAR setting and find a smaller effect. A 15 basis points increase in capital requirements leads to a 0.25 percentage point reduction in quarterly lending growth after two quarters, and it fades to zero after about one year.…”

Section: Literature Reviewmentioning

confidence: 88%

The Effects of Higher Bank Capital Requirements on Credit in Peru

et al. 2018

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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.

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“…If the instability of the banking sector increases, the access to finance is hampered. Further, regulatory agencies may impose additional capital requirements, which diminish the banks' capacity to grant loans (Noss and Toffano, 2016 where:…”

Section: Review Of the Literature On Financial Environment And Fdi Inmentioning

confidence: 99%