Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/83470
Authors: 
Kapan, Tümer
Minoiu, Camelia
Year of Publication: 
2013
Series/Report no.: 
Discussion Paper, Deutsche Bundesbank 33/2013
Abstract: 
We examine the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy. Using data from the syndicated loan market, we exploit variation in banks' reliance on wholesale funding and their structural liquidity positions in 2007Q2 to estimate the impact of exposure to market freezes during 2007-08 on the supply of bank credit. We find that banks with strong balance sheets were better able to maintain lending during the crisis. In particular, banks that were ex ante more dependent on market funding and had lower structural liquidity reduced the supply of credit more than other banks. However, higher levels of better-quality capital mitigated this effect. Our results suggest that strong bank balance sheets are key for the recovery of credit following crises, and provide support for regulatory proposals under the Basel III framework.
Subjects: 
bank lending channel
wholesale funding
capital
net stable funding ratio
Basel III
JEL: 
G21
G18
G01
ISBN: 
9783865589521
Document Type: 
Working Paper

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