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Cyclical Effects of Bank Capital Requirements With Imperfect Credit Markets / Agenor, Pierre-Richard
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Agenor, Pierre-Richard
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Access to Finance.
- Bank capital.
- Banks and Banking Reform.
- Borrowing.
- Capital adequacy.
- Capital markets.
- Capital regulation.
- Capital requirements.
- Contract enforcement.
- Currencies and Exchange Rates.
- Debt Markets.
- Deposits.
- Economic Theory and Research.
- Finance and Financial Sector Development.
- Financial markets.
- Financial stability.
- Housing.
- Inadequate disclosure.
- Interest rates.
- Macroeconomics and Economic Growth.
- Market discipline.
- Prudential regulations.
- Regulatory framework.
- Writedowns.
- Local Subjects:
- Access to Finance.
- Bank capital.
- Banks and Banking Reform.
- Borrowing.
- Capital adequacy.
- Capital markets.
- Capital regulation.
- Capital requirements.
- Contract enforcement.
- Currencies and Exchange Rates.
- Debt Markets.
- Deposits.
- Economic Theory and Research.
- Finance and Financial Sector Development.
- Financial markets.
- Financial stability.
- Housing.
- Inadequate disclosure.
- Interest rates.
- Macroeconomics and Economic Growth.
- Market discipline.
- Prudential regulations.
- Regulatory framework.
- Writedowns.
- Physical Description:
- 1 online resource (55 pages)
- Place of Publication:
- Washington, D.C., The World Bank, 2009
- System Details:
- data file
- Summary:
- This paper analyzes the cyclical effects of bank capital requirements in a simple model with credit market imperfections. Lending rates are set as a premium over the cost of borrowing from the central bank, with the premium itself depending on firms' effective collateral. Basel I- and Basel II-type regulatory regimes are defined and a capital channel is introduced through a signaling effect of capital buffers on the cost of bank deposits. The macroeconomic effects of various shocks (a drop in output, an increase in the refinance rate, and a rise in the capital adequacy ratio) are analyzed, under both binding and nonbinding capital requirements. Factors affecting the procyclicality of each regime (defined in terms of the behavior of the risk premium) are also identified and policy implications are discussed.
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