Bank resilience over the COVID-19 crisis: the role of regulatory capital

Research output: Journal PublicationArticlepeer-review

Abstract

Using COVID-19 as an exogenous shock to the banking system, we implement the Difference-in-Differences method to empirically evaluate the role of the regulatory capital in strengthening the resiliency of bank lending activities during the crisis period. Our results suggest that banks with a higher level of regulatory capital ratio prior to the COVID-19 shock lend more resiliently to the real economy during the crisis than those with lower regulatory capital ratios ex-ante. It implies that the recent reforms on bank regulatory capital have effectively built up bank strength which in turn helped banks continue lending to the real economy during the COVID-19 crisis.
Original languageEnglish
Article number102891
Number of pages19
JournalFinance Research Letters
Volume48
DOIs
Publication statusPublished Online - 26 Apr 2022

Keywords

  • COVID-19
  • Credit Supply
  • Bank Resilience
  • Financial Stability
  • Capital Regulation
  • Basel III

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