Milne_MANUSCRIPT_25Jan_acceptedFeb10th.pdf (583.72 kB)
In good times and in bad: bank capital ratios and lending rates
journal contribution
posted on 2016-03-11, 09:29 authored by Matthew Osborne, Ana-Maria Fuertes, Alistair MilneAlistair MilneThis paper investigates the relationship between bank capital ratios and lending rates using data from 1998 to 2012 for 13 large banks accounting for 75% of total UK lending. We document a substantial change in the coefficient of the Tier 1 capital ratio in reduced-form regressions for secured household lending rates; the coefficient changes from positive pre-crisis to negative in crisis. Significant changes are also detected in the relationship for unsecured household and corporate lending. Such instability is difficult to reconcile with many well-established theories of financial intermediation but is consistent with the relatively recent theories of bank portfolio decisions emphasising cyclical variation in bank leverage and risk-appetite.
History
School
- Business and Economics
Department
- Business
Published in
International Review of Financial AnalysisVolume
51Pages
102 - 112Citation
OSBORNE, M., FUERTES, A-M. and MILNE, A., 2017. In good times and in bad: bank capital ratios and lending rates. International Review of Financial Analysis, 51, pp.102-112.Publisher
© ElsevierVersion
- AM (Accepted Manuscript)
Publisher statement
This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/Publication date
2016-02-18Notes
This paper was accepted for publication in the journal International Review of Financial Analysis and the definitive published version is available at http://dx.doi.org/10.1016/j.irfa.2016.02.005ISSN
1057-5219Publisher version
Language
- en