Liquidity Creation and Bank Capital

Autor: Barbara Casu, Filippo Di Pietro, Antonio Trujillo-Ponce
Rok vydání: 2018
Předmět:
Zdroj: Journal of Financial Services Research. 56:307-340
ISSN: 1573-0735
0920-8550
DOI: 10.1007/s10693-018-0304-y
Popis: This paper aims to evaluate the relationship between capital and liquidity creation following the implementation of the Basel III rules. These regulatory measures target both increased capital ratios and a reduction of banks’ maturity transformation risk, which could result in excessive constraints on bank liquidity creation, thereby negatively affecting economic growth. Using a simultaneous equation model, we find a bi-causal negative relationship, which suggests that banks may reduce liquidity creation as capital increases; and when liquidity creation increases, banks reduce capital ratios. Our results therefore imply a trade-off between financial stability (higher capital, reduced risk) and economic growth (liquidity creation).
Databáze: OpenAIRE