EconStor >
Deutsche Bundesbank, Forschungszentrum, Frankfurt am Main >
Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/19730
  
Title:Does capital regulation matter for bank behaviour? Evidence for German savings banks PDF Logo
Authors:Heid, Frank
Porath, Daniel
Stolz, Stéphanie
Issue Date:2004
Series/Report no.:Discussion Paper, Series 2: Banking and Financial Supervision 2004,03
Abstract:The aim of this paper is to assess how German savings banks adjust capital and risk under capital regulation. We estimate a modified version of the model developed by Shrieves and Dahl (1992). This paper contributes to the literature in three ways. First, we test the capital buffer theory (Marcus 1984, Milne and Whalley 2002). Second, we use dynamic panel data techniques that explicitly take unobserved heterogeneity into account. And third, we provide new evidence for non-US banks by using a new dataset of supervisory data collected by the Deutsche Bundesbank. We find evidence that the coordination of capital and risk adjustments depends on the amount of capital the bank holds in excess of the regulatory minimum (the "capital buffer"). Banks with low capital buffers try to rebuild an appropriate capital buffer by raising capital while simultaneously lowering risk. In contrast, banks with high capital buffers try to maintain their capital buffer by increasing risk when capital increases. These findings support the capital buffer theory.
Subjects:bank regulation
risk taking
bank capital
JEL:G28
G21
Document Type:Working Paper
Appears in Collections:Discussion Paper Series 2: Banking and Financial Studies, Deutsche Bundesbank

Files in This Item:
File Description SizeFormat
200403dkp_b.pdf257.89 kBAdobe PDF
No. of Downloads: Counter Stats
Download bibliographical data as: BibTeX
Share on:http://hdl.handle.net/10419/19730

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.