Arbeitspapier
The cost of bank regulatory capital
The Basel I Accord introduced a discontinuity in required capital for undrawn credit commitments. While banks had to set aside capital when they extended commitments with maturities in excess of one year, short-term commitments were not subject to a capital requirement. The Basel II Accord sought to reduce this discontinuity by extending capital standards to most short-term commitments. We use these differences in capital standards around the one-year maturity to infer the cost of bank regulatory capital. Our results show that following Basel I, undrawn fees and all-in-drawn credit spreads on short-term commitments declined (relative to those of long-term commitments). In contrast, following the passage of Basel II, both undrawn fees and spreads went up. These results are robust and confirm that banks act to conserve regulatory capital by modifying the cost and supply of credit.
- Language
-
Englisch
- Bibliographic citation
-
Series: Staff Report ; No. 853
- Classification
-
Wirtschaft
Banks; Depository Institutions; Micro Finance Institutions; Mortgages
Financial Institutions and Services: Government Policy and Regulation
- Subject
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Basel accords
capital regulation
cost of capital
loan spreads
- Event
-
Geistige Schöpfung
- (who)
-
Plosser, Matthew C.
Santos, João A. C.
- Event
-
Veröffentlichung
- (who)
-
Federal Reserve Bank of New York
- (where)
-
New York, NY
- (when)
-
2018
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
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
- Plosser, Matthew C.
- Santos, João A. C.
- Federal Reserve Bank of New York
Time of origin
- 2018
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