Real effects of bank capital regulations: Global evidence

Deli, Yota; Hasan, Iftekhar

doi:10.1016/j.jbankfin.2016.11.022

Cited by 61 publications

(35 citation statements)

References 29 publications

(28 reference statements)

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“…Following Deli and Hasan (2017) or Naceur et al (2018), among others, the growth in the amount of lending is defined as the annual growth rate of bank net loans over the level of total loans in the previous year (ΔLOANS) expressed in US dollars.…”

Section: Bank Stability and Loan Growthmentioning

confidence: 99%

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

Polizzi¹,

Scannella²,

Suárez

2020

Global Policy

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The aim of this paper is to examine whether and to what extent bank capital requirements and liquidity standards influence the level of bank stability. Our approach is that both capital and liquidity affect lending growth, which in turn affects bank stability. We construct a panel dataset on a sample of 2,054 commercial banks from 117 developed and developing countries during the 2000-16 period. By applying a two-stage least squares (2SLS) empirical methodology, our findings show that capital and liquidity have a negative direct impact on the level of bank stability. However, this influence is counteracted by an indirect positive effect through the increased level of credit. Our results are not homogeneous across legal and institutional environments. In particular, we provide evidence on more relevant relationships in countries with higher level of protection of creditor rights and lower restrictions on non-traditional banking activities. Our empirical findings are robust to different specifications of the empirical model and to potential endogeneity problems. Policy Implications• Notwithstanding the tightening Basel III regulation, lending has increased in the presence of higher capital requirements and liquidity coverage ratios. However, this increased in lending is not independent upon the legal and institutional setup.• Although it is fundamental to study the direct effects of capital and liquidity requirements on stability, policymakers should deal not only with these direct effects, but also with the different channels of this transmission mechanism and, specifically, with the lending channel.

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Section: Bank Stability and Loan Growthmentioning

confidence: 99%

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

Polizzi¹,

Scannella²,

Suárez

2020

Global Policy

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“…It is, therefore, no surprise that representatives from financial institutions have argued against overly-strict sector regulation, highlighting potential negative implications for activity levels (Institute of International Finance 2010). In contrast, academics and representatives from civil society have pointed out that previous increases in capital requirements have had little impact on credit growth, but helped make the economy more stable (Admati et al 2013;Deli and Hasan 2018;Kashyap et al 2010). Most of this work has concentrated on the impact of financial reforms on GDP growth and output levels, but so far, the labor market implications have rarely been part of a more detailed analysis, implicitly assuming a more or less fixed relationship between output and employment.…”

Section: Financial Market Regulation: Between Economic Development Anmentioning

confidence: 99%

“…The theoretical model discussed in Section 3 also offers the possibility to analyze directly the effect of financial sector reforms on job dynamics. Since the financial market crisis most of the discussion in this area has focused on the impact of reforms on financial sector stability and diversification rather than on real economic growth, with some notable exceptions (see, for instance, Admati et al 2013, Deli and Hasan 2018, Kashyap et al 2010, Basel Committee on Banking Supervision 2010, Financial Stability Board 2010). Rare have been the papers that have specifically looked into the effects such reforms might have on labor markets (see, for instance, Shapiro and Gómez 2015).…”

Section: Financial Market Reforms and Labor Market Flowsmentioning

confidence: 99%

Finance and Jobs: How Financial Markets and Prudential Regulation Shape Unemployment Dynamics

Ernst

2019

JRFM

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This article explores the impact of financial market regulation on jobs. It argues that understanding the impact of finance on labor markets is key to an understanding of the trade-off between economic stability and financial sector growth. The article combines information on labor market flows with indicators of financial market development and reforms to assess the implications of financial markets on employment dynamics directly, using information from the International Labour Organization (ILO) datatabse on unemployment flows. On the basis of a matching model of the labor market, it analyses the economic, institutional, and policy determinants of unemployment in- and out-flows. Against a set of basic controls, we present evidence regarding the relationship between financial sector development and reforms and their impact on unemployment dynamics. Using scenario analysis, the article demonstrates the importance of broad financial sector re-regulation to stabilize unemployment inflows and to promote faster employment growth. In particular, we find that encompassing financial sector regulation, had it been in place prior to the global financial crisis in 2008, would have helped a faster recovery in jobs.

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“…Because agricultural sector development and industrial sector development may be driven by country-level conditions that also affect banking sector development, we follow recent finance studies (see e.g., Bucă and Vermeulen, 2017;Deli and Hasan, 2017) and address endogenerity concerns by obtaining the new estimation results using the dynamic two-step panel generalized method of moments (GMM) technique. More specifically, we estimate a series of the following baseline dynamic two-step panel GMM models:…”

Section: Addressing the Endogeneity Concernmentioning

confidence: 99%

The impact of the banking sector on economic structure and growth

Tongurai

Vithessonthi

2018

International Review of Financial Analysis

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In this paper, we study the impact of banking sector development on changes in economic structure and growth. We argue that banking sector development has differential effects on industrial sector development and agricultural sector development. We test whether economic structure and growth foster banking sector development. To test our hypotheses, we construct a panel sample of all countries in the world during 1960−2016. We find that banking sector development has a negative effect on agricultural sector development but exerts no effect on industrial sector development. The negative effect of banking sector development on agricultural sector development is only observed for countries with high degrees of banking sector development. Our results further show that agricultural sector development exerts a negative effect on banking sector development while industrial sector development has a positive effect on banking sector development.

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Real effects of bank capital regulations: Global evidence

Cited by 61 publications

References 29 publications

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

Finance and Jobs: How Financial Markets and Prudential Regulation Shape Unemployment Dynamics

The impact of the banking sector on economic structure and growth

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