Journal Article

Capital regulation and bank lending


Abstract: Bank regulation in general and capital regulation in particular are widely perceived as having become stiffer in the 1990s. The stiffer regulatory environment in turn is argued to have curtailed bank lending. This article determines the extent to which capital standards changed in the 1990s and examines the relationship between capital positions and the bank lending. The empirical results suggest that capital standards did increase in the 1990s. The analysis also shows that bank loan growth rates are positively related to capital-to-assets ratios. Moreover, sensitivity of bank lending to capital positions appears to have increased in the 1990s. Regionally, capital regulation likely had the most pronounced. effect on bank lending in New England.

Keywords: Bank supervision; Bank capital; Bank loans;

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Bibliographic Information

Provider: Federal Reserve Bank of San Francisco

Part of Series: Economic Review

Publication Date: 1992

Pages: 23-33

Order Number: 3