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The distribution of the Capital Purchase Program funds: Evidence from bank internal capital markets

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  • Tarun Mukherjee
  • Elisabeta Pana

Abstract

We investigate the role played by the internal capital markets of bank holding companies in the distribution of the Capital Purchase Program funds to subsidiaries. We find that while all banks used a similar internal capital allocation to support their subsidiaries, program participants transferred more capital to their subsidiaries than nonparticipants. Smaller bank subsidiaries with lower capital and earnings received more capital than other subsidiaries. Our results support the argument that the distribution of capital was done in accordance with regulatory requirements that mandate bank holding companies to act as a source of strength for their subsidiaries.

Suggested Citation

  • Tarun Mukherjee & Elisabeta Pana, 2018. "The distribution of the Capital Purchase Program funds: Evidence from bank internal capital markets," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 27(4), pages 125-143, November.
    • Handle: RePEc:wly:finmar:v:27:y:2018:i:4:p:125-143
    DOI: 10.1111/fmii.12095
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