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Please use this identifier to cite or link to this item: https://dspace.lboro.ac.uk/2134/20545

Title: In good times and in bad: Bank capital ratios and lending rates
Authors: Osborne, Matthew
Fuertes, Ana-Maria
Milne, Alistair
Keywords: Bank capital
Interest margins
Bank regulation
Capital requirements
Issue Date: 2016
Publisher: © Elsevier
Citation: OSBORNE, M., FUERTES, A-M. and MILNE, A., 2016. In good times and in bad: Bank capital ratios and lending rates. International Review of Financial Analysis, In Press.
Abstract: This 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.
Description: This paper is in closed access until 18th Aug 2017.
Version: Accepted for publication
DOI: 10.1016/j.irfa.2016.02.005
URI: https://dspace.lboro.ac.uk/2134/20545
Publisher Link: http://dx.doi.org/10.1016/j.irfa.2016.02.005
ISSN: 1057-5219
Appears in Collections:Closed Access (Business School)

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