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Hahn, Franz R.
Year of Publication: 
Series/Report no.: 
WIFO Working Papers 498
The prevailing view in the banking industry is that increased bank capital requirements drag down bank lending. This is because capital is assumed to impose higher funding costs on banks than debts. The leading scholarly view in finance maintains the contrary. We are able to present microeconometric evidence in support of the theoretical proposition that the bank capital-bank lending linkage remains positive under a minimum capital requirement regime. Most importantly, the empirical analysis indicates that this finding may hold well in both short and long run.
Bank capital
Credit crunch
Minimum capital requirement
Document Type: 
Working Paper

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