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Capital requirements, banking supervision and lending behavior: evidence from Tunisia

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  • Brahim Guizani

Abstract

This paper represents a contribution to the very meager literature on the impact of the prudential regulations on Tunisian bank behavior. It attempts to examine the effect of the capital requirements on bank credits during the period from 1999 to 2010 and assess the effectiveness of the banking supervision policy in containing the financial system's risk. On the basis of a theoretical dynamic model, the results show that the capital requirement ratio was binding bank credits during the period of study; well-capitalized banks have been lending more than less-capitalized ones. Despite this apparent stringency of the Tunisian bank regulator, our paper reveals that the supervision policy was weakly effective in restraining systemic risk. This research recommends further reinforcement of the supervision policy and initiating the assessment of its current design in order to improve its effectiveness.

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  • Brahim Guizani, 2015. "Capital requirements, banking supervision and lending behavior: evidence from Tunisia," Middle East Development Journal, Taylor & Francis Journals, vol. 7(2), pages 175-194, July.
    • Handle: RePEc:taf:rmdjxx:v:7:y:2015:i:2:p:175-194
    DOI: 10.1080/17938120.2015.1072930
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    1. Ken Miyajima, 2020. "What influences bank lending in Saudi Arabia?," Islamic Economic Studies, Emerald Group Publishing Limited, vol. 27(2), pages 125-155, April.

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    More about this item

    JEL classification:

    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • D92 - Microeconomics - - Micro-Based Behavioral Economics - - - Intertemporal Firm Choice, Investment, Capacity, and Financing
    • 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

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