IDEAS home Printed from https://ideas.repec.org/a/bla/sajeco/v93y2025i1p27-42.html
   My bibliography  Save this article

The Lending Implications of Banks Holding Excess Capital

Author

Listed:
  • Neryvia Pillay
  • Konstantin Makrelov

Abstract

Banks hold capital above microprudential and macroprudential regulatory requirements for a variety of reasons, including as a risk mitigation measure. In this study, we assess how decisions around the size of excess capital as well as monetary and financial stability actions impact sectoral lending in South Africa. Using a unique set of micro data for the South African banking sector for the period 2008 to 2020, provided by South Africa's Prudential Authority, our analysis controls for bank characteristics such as bank size, profitability and liquidity. Our results suggest that banks' decisions around holding additional capital affect their lending. As expected, monetary policy actions have a strong impact on bank lending and so do regulatory changes to bank capital requirements. These impacts tend to be smaller for larger banks, in line with results published in the global literature. Our results highlight the difficulties of thinking about policy in a Tinbergen rule type of world. Fiscal, microprudential, macroprudential and monetary policy actions can affect price and financial stability goals through their impact on credit extension. When policies work at cross purposes, they can easily undermine each other's goals.

Suggested Citation

  • Neryvia Pillay & Konstantin Makrelov, 2025. "The Lending Implications of Banks Holding Excess Capital," South African Journal of Economics, Economic Society of South Africa, vol. 93(1), pages 27-42, March.
  • Handle: RePEc:bla:sajeco:v:93:y:2025:i:1:p:27-42
    DOI: 10.1111/saje.12394
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/saje.12394
    Download Restriction: no

    File URL: https://libkey.io/10.1111/saje.12394?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:sajeco:v:93:y:2025:i:1:p:27-42. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/essaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.