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CAR 2: the impact of CAR on bank capital augmentation in Spain

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  • Yener Altunbas
  • Santiago Carbo
  • Edward Gardener

Abstract

This paper reports on tests, using panel methods, of a new capital augmentation model on Spanish savings banks over the period 1987-1996. It is argued that this banking subsector and time frame provide an interesting laboratory of the potential impact of regulation on bank capital augmentation. Early modelling work in this area is built on by extending the control variables to encompass risks not factored into the regulatory capital adequacy ratio, managerial efficiency, innovation and a new productive efficiency variable. The results indicate strong evidence of the impact of the capital adequacy regulatory regime on bank capital augmentation. Furthermore, this impact appears to be related to the relative strictness of the regulatory regime. At the same time the model also confirms the particular importance of the expected return on bank capital and productive efficiency in explaining capital augmentation.

Suggested Citation

  • Yener Altunbas & Santiago Carbo & Edward Gardener, 2000. "CAR 2: the impact of CAR on bank capital augmentation in Spain," Applied Financial Economics, Taylor & Francis Journals, vol. 10(5), pages 507-518.
    • Handle: RePEc:taf:apfiec:v:10:y:2000:i:5:p:507-518
    DOI: 10.1080/096031000416389
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    References listed on IDEAS

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    1. Hall, B.J., 1993. "How Has the Basle Accord Affected Bank Portfolios?," Harvard Institute of Economic Research Working Papers 1642, Harvard - Institute of Economic Research.
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    1. Yener Altunbas & Santiago Carbo & Edward P.M. Gardener & Philip Molyneux, 2007. "Examining the Relationships between Capital, Risk and Efficiency in European Banking," European Financial Management, European Financial Management Association, vol. 13(1), pages 49-70, January.

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