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The Determinants of Portuguese Banks’ Capital Buffers

Author

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  • Miguel Boucinha

Abstract

The purpose of the present paper is to shed some light on why Portuguese banks hold significant capital buffers above the required regulatory minimum, through the estimation of a dynamic panel data model. The main findings are that the capital buffer is positively influenced by several broad risk measures, suggesting that the introduction of the more sensitive regulation in Basel II might not affect Portuguese banks’ capital ratios as much as one could expect. Provisions and high and stable profitability are found to be substitutes for capital buffers, whereas larger banks seem to hold less excess capital. A negative business cycle effect is also found, and several other hypotheses are tested.

Suggested Citation

  • Miguel Boucinha, 2008. "The Determinants of Portuguese Banks’ Capital Buffers," Working Papers w200801, Banco de Portugal, Economics and Research Department.
    • Handle: RePEc:ptu:wpaper:w200801
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp200801.pdf
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    Citations

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    Cited by:

    1. Montagnoli, Alberto & Mouratidis, Konstantinos & Whyte, Kemar, 2021. "Assessing the cyclical behaviour of bank capital buffers in a finance-augmented macro-economy," Journal of International Money and Finance, Elsevier, vol. 110(C).
    2. Hans Degryse & Sanja Jakovljević & Steven Ongena, 2015. "A Review of Empirical Research on the Design and Impact of Regulation in the Banking Sector," Annual Review of Financial Economics, Annual Reviews, vol. 7(1), pages 423-443, December.
    3. Syed Moudud-Ul-Huq, 2019. "Banks’ capital buffers, risk, and efficiency in emerging economies: are they counter-cyclical?," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 9(4), pages 467-492, December.

    More about this item

    JEL classification:

    • 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
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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