Arbeitspapier
Credit allocation, capital requirements and output
We show how banks excessive risk-taking, stemming from informational asymmetries in loan markets, can lead to an excessive output loss when a recession starts. Risk-based capital requirements can alleviate the output loss by reducing excessive risk-taking in normal times. Model simulations suggest that the differentiation of risk-weights in the Basel framework might be further increased in order to take full advantage of the allocational effects of capital requirements. Our analysis also provides a new rationale for the countercyclical elements of capital requirements.
- ISBN
-
978-952-462-619-4
- Language
-
Englisch
- Bibliographic citation
-
Series: Bank of Finland Research Discussion Papers ; No. 17/2010
- Classification
-
Wirtschaft
Market Structure, Pricing, and Design: Perfect Competition
Asymmetric and Private Information; Mechanism Design
Information and Market Efficiency; Event Studies; Insider Trading
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
- Subject
-
bank regulation
Basel III
capital requirements
credit risk
crises
procyclicality
- Event
-
Geistige Schöpfung
- (who)
-
Jokivuolle, Esa
Kiema, Ilkka
Vesala, Timo
- Event
-
Veröffentlichung
- (who)
-
Bank of Finland
- (where)
-
Helsinki
- (when)
-
2010
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Jokivuolle, Esa
- Kiema, Ilkka
- Vesala, Timo
- Bank of Finland
Time of origin
- 2010
Other Objects (12)
Credit allocation, capital requirements and procyclicality
Leverage ratio requirement and credit allocation and bank stability
Should bank capital requirements be less risk-sensitive because of credit constraints?
Credit crunch? An empirical test of cyclical credit policy
Bank safety under Basel II capital requirements
Quantity rationing of credit
The interest rate sensitivity of output in Finland
Output gaps and technological progress in European monetary Union
Government size and output volatility: is there a relationship?
Banking sector output and labour productivity in six European countries
Bank runs, liquidity and credit risk
The sources of output shocks in Finland and other EU countries
Credit allocation, capital requirements and procyclicality
Leverage ratio requirement and credit allocation and bank stability
Should bank capital requirements be less risk-sensitive because of credit constraints?
Credit crunch? An empirical test of cyclical credit policy
Bank safety under Basel II capital requirements
Quantity rationing of credit
The interest rate sensitivity of output in Finland
Output gaps and technological progress in European monetary Union
Government size and output volatility: is there a relationship?
Banking sector output and labour productivity in six European countries
Bank runs, liquidity and credit risk
The sources of output shocks in Finland and other EU countries
Credit allocation, capital requirements and procyclicality
Leverage ratio requirement and credit allocation and bank stability
Should bank capital requirements be less risk-sensitive because of credit constraints?
Credit crunch? An empirical test of cyclical credit policy
Bank safety under Basel II capital requirements
Quantity rationing of credit
The interest rate sensitivity of output in Finland
Output gaps and technological progress in European monetary Union
Government size and output volatility: is there a relationship?
Banking sector output and labour productivity in six European countries
Bank runs, liquidity and credit risk