Capital Requirements and Banks’ Leniency

OPEN ARCHIVE

Union Jack
Dannebrog

Capital Requirements and Banks’ Leniency

Show simple item record

dc.contributor.author Dietrich, J. Kimball en_US
dc.contributor.author Wihlborg, Clas en_US
dc.date.accessioned 2009-02-04T10:24:53Z
dc.date.available 2009-02-04T10:24:53Z
dc.date.issued 2003-11-21T00:00:00Z en_US
dc.identifier.uri http://hdl.handle.net/10398/6804
dc.description.abstract We investigate the effect of changes in capital regulation on the strictness (leniency) of loan terms using a simple model of bank capital requirements and asset quality examinations. Banks offer different levels of "leniency" in the sense of willingness to offer automatic extensions of loans in the presence of temporary payment difficulties of borrowers. Banks offering lenient (less strict) loan terms must have higher initial levels of capital and charge higher loan rates. When capital requirements are increased, both strict and lenient banks hold higher levels of initial capital and they raise loan rates. As capital requirements increase the difference between initial capital levels and between interest rates of strict and lenient banks decrease. Thus, higher capital requirements in recessions tend to reduce the interest rate premium paid for leniency. If a recession is interpreted as an increase in the required return, the interest rate premium paid for leniency is increased in recession at a given level of required capital. en_US
dc.format.extent 29 s. en_US
dc.language eng en_US
dc.relation.ispartofseries LEFIC working paper;2003-08 en_US
dc.subject.other kapitaldækning en_US
dc.subject.other banker en_US
dc.subject.other bankvæsen en_US
dc.subject.other udlån en_US
dc.subject.other kreditrisiko en_US
dc.subject.other kreditvurdering en_US
dc.title Capital Requirements and Banks’ Leniency en_US
dc.type wp en_US
dc.accessionstatus modt03nov21 inrumo en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Finansiering en_US
dc.contributor.departmentshort LEFIC en_US
dc.contributor.departmentuk Department of Finance en_US
dc.contributor.departmentukshort DF en_US
dc.idnumber x656312717 en_US
dc.publisher.city København en_US
dc.publisher.year 2003 en_US


Creative Commons License This work is licensed under a Creative Commons License.

Files Size Format View
wplefic082003.pdf 355.9Kb PDF View/Open

This item appears in the following Collection(s)

Show simple item record