Economic and financial debates no. 8: The Real Effects of Bank Capital Requirements

We measure the impact of bank capital requirements on corporate borrowing and business activity. We exploit the intrinsic heterogeneity of the Basel II regulatory framework, which has been in place in France since 2008, and make capital requirements vary across both banks and across firms. This two-way variation allows us to control for firm-level credit demand shocks and bank-level credit supply shocks. We find a large
effect of capital requirements on bank lending: a one percentage increase in capital requirements leads to a reduction in lending by approximately 10%.

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Economic and financial debates no. 8: The Real Effects of Bank Capital Requirements
  • Published on 07/20/2013
  • FR
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Updated on: 03/19/2019 15:36