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Does banks’ systemic importance affect their capital structure and balance sheet adjustment processes?

Author

Listed:
  • Yassine Bakkar
  • Olivier De Jonghe
  • Amine Tarazi

    (UNILIM - Université de Limoges, LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges, IUF - Institut universitaire de France - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche)

Abstract

Frictions prevent banks to immediately adjust their capital ratio towards their desired and/or imposed level. This paper analyzes (i) whether or not these frictions are larger for regulatory capital ratios vis-à-vis a plain leverage ratio; (ii) which adjustment channels banks use to adjust their capital ratio; and (iii) how the speed of adjustment and adjustment channels differ between large, systemic and complex banks versus small banks. Our results, obtained using a sample of listed banks across OECD countries for the 2001–2012 period, bear critical policy implications for the implementation of new (systemic risk-based) capital requirements and their impact on banks' balance sheets, specifically lending, and hence the real economy.

Suggested Citation

  • Yassine Bakkar & Olivier De Jonghe & Amine Tarazi, 2023. "Does banks’ systemic importance affect their capital structure and balance sheet adjustment processes?," Post-Print hal-04678216, HAL.
    • Handle: RePEc:hal:journl:hal-04678216
    DOI: 10.1016/j.jbankfin.2019.03.002
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