IDEAS home Printed from https://ideas.repec.org/a/ijc/ijcjou/y2023q3a4.html
   My bibliography  Save this article

Empirical Evidence on the Effectiveness of Capital Buffer Release

Author

Listed:
  • Vasja Sivec

    (STATEC/ANEC)

  • Matjaz Volk

    (Bank of Slovenia)

Abstract

With the new regulatory framework, known as Basel III, policymakers introduced a countercyclical capital buffer. Due to its recent introduction, empirical research on its effects is limited. We analyze a unique policy experiment to evaluate the effects of buffer release. In 2006, the Slovenian central bank introduced a temporary deduction item in the capital calculation, creating an average capital buffer of 0.8 percent of risk-weighted assets. It was released at the start of the financial crisis in 2008 and is akin to a release of a countercyclical capital buffer. We estimate its impact on bank behavior. After its release, firms borrowing from banks holding 1 pp higher capital buffer received 11 pp more in credit. Also, we find the impact was greater for healthy firms, and it increased loan loss provisioning for firms in default.

Suggested Citation

  • Vasja Sivec & Matjaz Volk, 2023. "Empirical Evidence on the Effectiveness of Capital Buffer Release," International Journal of Central Banking, International Journal of Central Banking, vol. 19(3), pages 139-173, August.
    • Handle: RePEc:ijc:ijcjou:y:2023:q:3:a:4
    as

    Download full text from publisher

    File URL: http://www.ijcb.org/journal/ijcb23q3a4.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brzoza-Brzezina, Michał & Kolasa, Marcin & Makarski, Krzysztof, 2015. "Macroprudential policy and imbalances in the euro area," Journal of International Money and Finance, Elsevier, vol. 51(C), pages 137-154.
    2. Michela Bia & Alessandra Mattei, 2008. "A Stata package for the estimation of the dose–response function through adjustment for the generalized propensity score," Stata Journal, StataCorp LP, vol. 8(3), pages 354-373, September.
    3. Bonaccorsi di Patti, Emilia & Sette, Enrico, 2016. "Did the securitization market freeze affect bank lending during the financial crisis? Evidence from a credit register," Journal of Financial Intermediation, Elsevier, vol. 25(C), pages 54-76.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Volk, Matjaž, 2024. "The transmission of targeted monetary policy to bank credit supply," The Quarterly Review of Economics and Finance, Elsevier, vol. 94(C), pages 104-112.
    2. Cristina Jude & Grégory Levieuge, 2024. "Doubling Down: The Synergy of CCyB Release and Monetary Policy Easing," Working papers 961, Banque de France.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sivec, Vasja & Volk, Matjaz & Chen, Yi-An, 2018. "Empirical Evidence on the Effectiveness of Capital Buffer Release," MPRA Paper 84323, University Library of Munich, Germany, revised 02 Jan 2018.
    2. Noémi Kreif & Richard Grieve & Iván Díaz & David Harrison, 2015. "Evaluation of the Effect of a Continuous Treatment: A Machine Learning Approach with an Application to Treatment for Traumatic Brain Injury," Health Economics, John Wiley & Sons, Ltd., vol. 24(9), pages 1213-1228, September.
    3. Mădălin Viziniuc, 2017. "Potential Gains from Cooperation Between Monetary and Macroprudential Policies: The Case of an Emerging Economy," Eastern European Economics, Taylor & Francis Journals, vol. 55(5), pages 420-452, September.
    4. Jerzy Michalek & Pavel Ciaian & d’Artis Kancs, 2014. "Capitalization of the Single Payment Scheme into Land Value: Generalized Propensity Score Evidence from the European Union," Land Economics, University of Wisconsin Press, vol. 90(2), pages 260-289.
    5. Alexandra Born & Zeno Enders, 2019. "Global Banking, Trade, and the International Transmission of the Great Recession," The Economic Journal, Royal Economic Society, vol. 129(623), pages 2691-2721.
    6. Andrea Orame, 2020. "The role of bank supply in the Italian credit market: evidence from a new regional survey," Temi di discussione (Economic working papers) 1279, Bank of Italy, Economic Research and International Relations Area.
    7. Hilal Atasoy & Rajiv D. Banker & Paul A. Pavlou, 2016. "On the Longitudinal Effects of IT Use on Firm-Level Employment," Information Systems Research, INFORMS, vol. 27(1), pages 6-26, March.
    8. Tugba Akkaya Hocagil & Richard J. Cook & Sandra W. Jacobson & Joseph L. Jacobson & Louise M. Ryan, 2021. "Propensity score analysis for a semi‐continuous exposure variable: a study of gestational alcohol exposure and childhood cognition," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 184(4), pages 1390-1413, October.
    9. Knar Khachatryan & Vardan Baghdasaryan & Valentina Hartarska, 2018. "Is the model loans-plus-savings better for microfinance in ECA? A PSM comparison," Working Paper c5a69366-4231-479c-879d-c, European Microfinance Network.
    10. Arapi-Gjini, Arjola & Möllers, Judith & Herzfeld, Thomas, 2020. "Measuring dynamic effects of remittances on poverty and inequality with evidence from Kosovo," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 58(4), pages 283-308.
    11. Salim Dehmej & Leonardo Gambacorta, 2019. "Macroprudential Policy in a Monetary Union," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 61(2), pages 195-212, June.
    12. Jelena Zivanovic, 2021. "An Optimal Macroprudential Policy Mix for Segmented Credit Markets," Staff Working Papers 21-31, Bank of Canada.
    13. Benes, Jaromir & Kumhof, Michael, 2015. "Risky bank lending and countercyclical capital buffers," Journal of Economic Dynamics and Control, Elsevier, vol. 58(C), pages 58-80.
    14. Hylton Hollander, 2014. "The effectiveness of countercyclical capital requirements and contingent convertible capital: a dual approach to macroeconomic stability," Working Papers 19/2014, Stellenbosch University, Department of Economics.
    15. Ignaciuk, Ada & Malevolti, Giulia & Scognamillo, Antonio & Sitko, Nicholas J., 2022. "Can food aid relax farmers’ constraints to adopting climate-adaptive agricultural practices? Evidence from Ethiopia, Malawi and the United Republic of Tanzania," ESA Working Papers 324073, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    16. Chung Choe & Alfonso Flores-Lagunes & Sang-Jun Lee, 2015. "Do dropouts with longer training exposure benefit from training programs? Korean evidence employing methods for continuous treatments," Empirical Economics, Springer, vol. 48(2), pages 849-881, March.
    17. Ida D'Attoma & Silvia Pacei, 2018. "Evaluating the Effects of Product Innovation on the Performance of European Firms by Using the Generalised Propensity Score," German Economic Review, Verein für Socialpolitik, vol. 19(1), pages 94-112, February.
    18. Marisa Coetzee, 2013. "Finding the Benefits: Estimating the Impact of The South African Child Support Grant," South African Journal of Economics, Economic Society of South Africa, vol. 81(3), pages 427-450, September.
    19. Pierre‐Richard Agénor & Timothy Jackson & Enisse Kharroubi & Leonardo Gambacorta & Giovanni Lombardo & Luiz A. Pereira Da Silva, 2021. "Assessing the Gains from International Macroprudential Policy Cooperation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(7), pages 1819-1866, October.
    20. José Abad & Antonio I Garcia Pascual, 2022. "Usability of Bank Capital Buffers: The Role of Market Expectations," IMF Working Papers 2022/021, International Monetary Fund.

    More about this item

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    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:ijc:ijcjou:y:2023:q:3:a:4. 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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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: Bank for International Settlements (email available below). General contact details of provider: https://www.ijcb.org/ .

    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.