The Effects of Higher Bank Capital Requirements on Credit in Peru

Fang, Xiang; Jutrsa, David; Pería, María Soledad Martínez; Presbitero, Andrea F.; Ratnovski, Lev; Várdy, Felix

doi:10.2139/ssrn.3285221

Cited by 3 publications

(9 citation statements)

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“…The analysis of the relationship between profitability and credit growth has shown a positive and statistically significant relationship in the four estimated specifications. Our results confirm those obtained by Kim and Sohn (2017) and Fang et al (2018). This result demonstrates that the credit activity plays an important role in the consolidation and strengthening of the profitability of banks operating in the MENA region.…”

Section: Resultssupporting

confidence: 90%

“…Regarding the relationship between liquidity and credit growth, the findings show a negative and statistically significant correlation in three models. These results match with those obtained by Gambacorta and Mistrulli (2004), Roulet (2018) and Fang et al (2018). It was revealed that an increase in liquidity drives banks to reduce the amount of credit granted to the economy.…”

Section: Resultssupporting

confidence: 89%

“…Moreover, a positive relationship was revealed between profitability and size on one side and the growth rate of credit on the other side. Our findings confirm those revealed by Kim and Sohn (2017) and Fang et al (2018) which demonstrates that the credit activity plays an important role in the consolidation and strengthening of the profitability of banks operating in the MENA region.…”

Section: Discussionsupporting

confidence: 90%

“…More so, it has been revealed that it is highly correlated with the likelihood of bank failure. The expected effect of this variable on the supply of credit is negative since the realization of losses will drive banks to reduce their credit supply (Fang et al , 2018).…”

Section: The Methodological Frameworkmentioning

confidence: 99%

“…A positive relationship exists between this variable and credit supply. This is because a profitable and strong banking sector is more resistant to the negative shocks, and higher profits will lead to a higher ability to generate loans (Kim and Sohn, 2017; Fang et al , 2018).…”

Section: The Methodological Frameworkmentioning

confidence: 99%

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Bank regulation and credit crunch: evidence from MENA region commercial banks

EL-Moussawi

Kassem

Roussel

2021

IJOEM

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PurposeThis paper focuses on the relationship between the regulatory capital requirements and the supply of credit for commercial banks that are operating in the MENA region from 1999 till 2017.Design/methodology/approachThe application of the Fixed Effects Model on a panel of commercial banks in the MENA region has shown a negative relationship between supply of credit and both the capital requirements and solvency ratios.FindingsThe results showed that the idiosyncratic, the macroeconomic and the institutional variables affect the supply of credit behavior of banks. The robustness tests using the Two-Stage Least Square method (2SLS) also led to a negative correlation between the growth of credit and capital requirements. Specific macroeconomic and institutional variables have revealed the expected sign and are significant regardless of the estimated specifications.Research limitations/implicationsThis work can be subjected to further future extensions. The explanatory power of our model can be improved by incorporating variables that reflect the corporate governance and structure of banking sector. Similarly, we can also include a variable that takes into account the increasing competition that could affect the stability of the banking sector and therefore the prudential banking regulation.Originality/valuePrevious studies that investigated only the relationship between capital level and risk-taking behavior of banks in the MENA region did not take into account neither the economic and institutional environment nor the impact of these regulations on credit (loans) supply.

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Section: Resultssupporting

confidence: 90%

Section: Resultssupporting

confidence: 89%

Section: Discussionsupporting

confidence: 90%

Section: The Methodological Frameworkmentioning

confidence: 99%

Section: The Methodological Frameworkmentioning

confidence: 99%

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Bank regulation and credit crunch: evidence from MENA region commercial banks

EL-Moussawi

Kassem

Roussel

2021

IJOEM

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The Effects of Regulatory Capital Requirements and Ownership Structure on Bank Lending in Emerging Asian Markets

Akhtar

Kayani

Yousaf

2019

JRFM

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This study examines the impact of regulatory capital requirements and ownership structure on bank lending in Emerging Asian Markets. The findings of the study imply that banks with excess capital are less affected by capital constraints and enjoy opportunities to extend their credit portfolios. The monitory policy indicator has the expected negative and significant impact on bank lending. In case of well-capitalized banks, the interaction between the excess capital and monetary policy indicator has a significant positive relation with bank lending, which means that banks with excess capital have capability to raise uninsured financing and shield their loan portfolios as compared to less-capitalized banks that reduce their lending in the period of monetary tightening. In the case of bank ownership structure, banks with excess capital ratios and ownership concentration lead towards an increase in lending activity. The findings also show that well-capitalized banks with managerial ownership tend to reduce lending which validates agency theory of corporate governance.

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Financial Stability in the MENA Region: The Impact of Banking Capitalization and Institutional Environment on Credit Availability

ALLOUCHE,

HIJAZI

2024

IBR

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This study aims to analyze the applicability of the supply-side credit crunch in the MENA region by investigating the influence of bank capitalization and the institutional environment on the lending activities of banks operating in the region from 1999 to 2020. Employing the generalized method of moments (GMM) panel data estimator, our analysis reveals that bank lending is shaped by specific bank-related variables, country-level macroeconomic variables, and the quality of institutions. Our findings underscore that increases in bank capitalization levels, competition levels, or banks' liquidity ratios exert a negative impact on credit availability. Conversely, the size and profitability of banks have a positive effect on the accessibility of loans. It is evident that the banks under consideration consistently expand their credit supply in tandem with economic expansion and low inflation rates, thereby positively influencing credit demand. Furthermore, our study indicates that robust anti-corruption measures, political stability, and adherence to the rule of law act as catalysts, encouraging banks to enhance their lending availability.

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The Effects of Higher Bank Capital Requirements on Credit in Peru

Cited by 3 publications

References 0 publications

Bank regulation and credit crunch: evidence from MENA region commercial banks

Bank regulation and credit crunch: evidence from MENA region commercial banks

The Effects of Regulatory Capital Requirements and Ownership Structure on Bank Lending in Emerging Asian Markets

Financial Stability in the MENA Region: The Impact of Banking Capitalization and Institutional Environment on Credit Availability

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