Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/148332
Authors: 
Gropp, Reint
Mosk, Thomas
Ongena, Steven
Wix, Carlo
Year of Publication: 
2016
Series/Report no.: 
SAFE Working Paper Series 156
Abstract: 
We study the impact of higher capital requirements on banks' balance sheets and its transmission to the real economy. The 2011 EBA capital exercise provides an almost ideal quasi-natural experiment, which allows us to identify the effect of higher capital requirements using a difference-in-differences matching estimator. We find that treated banks increase their capital ratios not by raising their levels of equity, but by reducing their credit supply. We also show that this reduction in credit supply results in lower firm-, investment-, and sales growth for firms which obtain a larger share of their bank credit from the treated banks.
Subjects: 
Bank capital ratios
Bank regulation
Credit supply
JEL: 
E51
G21
G28
Document Type: 
Working Paper

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