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Original scientific paper
https://doi.org/10.15179/ces.20.2.3

Banking System Adjustment to Regulatory Capital Requirements

Ivica Klinac   ORCID icon orcid.org/0000-0001-6111-3664 ; Independent researcher, Zadar, Croatia
Roberto Ercegovac   ORCID icon orcid.org/0000-0003-0755-3487 ; University of Split, Faculty of Economics, Split, Croatia

Fulltext: english, pdf (1013 KB) pages 69-96 downloads: 457* cite
APA 6th Edition
Klinac, I. & Ercegovac, R. (2018). Banking System Adjustment to Regulatory Capital Requirements. Croatian Economic Survey, 20 (2), 69-96. https://doi.org/10.15179/ces.20.2.3
MLA 8th Edition
Klinac, Ivica and Roberto Ercegovac. "Banking System Adjustment to Regulatory Capital Requirements." Croatian Economic Survey, vol. 20, no. 2, 2018, pp. 69-96. https://doi.org/10.15179/ces.20.2.3. Accessed 1 Dec. 2021.
Chicago 17th Edition
Klinac, Ivica and Roberto Ercegovac. "Banking System Adjustment to Regulatory Capital Requirements." Croatian Economic Survey 20, no. 2 (2018): 69-96. https://doi.org/10.15179/ces.20.2.3
Harvard
Klinac, I., and Ercegovac, R. (2018). 'Banking System Adjustment to Regulatory Capital Requirements', Croatian Economic Survey, 20(2), pp. 69-96. https://doi.org/10.15179/ces.20.2.3
Vancouver
Klinac I, Ercegovac R. Banking System Adjustment to Regulatory Capital Requirements. Croatian Economic Survey [Internet]. 2018 [cited 2021 December 01];20(2):69-96. https://doi.org/10.15179/ces.20.2.3
IEEE
I. Klinac and R. Ercegovac, "Banking System Adjustment to Regulatory Capital Requirements", Croatian Economic Survey, vol.20, no. 2, pp. 69-96, 2018. [Online]. https://doi.org/10.15179/ces.20.2.3

Abstracts
The main objective of this paper is to explore the adjustment of bank business activities to new regulatory capital requests using panel data analyses of the European banking system. The research hypothesis assumes that the increase in capital requirements affects the banks’ balance sheet adjustment and bank lending to the non-financial sector. The banks can maintain the higher regulatory capital ratio by increasing the volume of share capital or by decreasing the risk-weighted assets and bank lending activities. The high equity premium upon a new equity issue due to asymmetric information about the bank’s net worth discourages the current shareholder to issue additional capital, which has resulted in bank lending constraints and has increased non-risk bank assets. Banks’ response to new capital requirements can announce a long-term negative impact to real economy and bank depending borrowers. The model of empirical analysis of the banking sector adjustment to new capital requirements will be demonstrated on the sample of publicly listed banking firms in the European Union in the period 2000–2016 using dynamic panel-data estimation with the Generalized Method of Moments (GMM) in one-step.

Keywords
dynamic panel; bank capital; bank lending; risk-weight assets

Hrčak ID: 216053

URI
https://hrcak.srce.hr/216053

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