Bank Capital Buffers and Procyclicality in Latin America

In this chapter, we conduct an empirical study of fluctuation patters of regulatory capital buffers with respect to the business cycle for the 2001 to 2003 period with data of 18 countries and 456 Latin American and Caribbean banks. We also present results for Argentina, Brazil, Mexico, Panama and Venezuela. Our results show that, although the general intuition sustaining the countercyclical approach of Basel III capital buffers agrees with the data, patterns vary across countries, being determining variables bank size, their forms of organization and levels of competition in the region’s banking systems.