The Forced Safety Effect: How Higher Capital Requirements Can Increase Bank Lending

• 成果类型: Article
• 署名作者: Bahaj, Saleem; Malherbe, Frederic
• 署名单位: University of London; University College London
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12958
• 发表日期: 2020
• 页码: 3013-3053
• 关键词: policy; cost

摘要

Government guarantees generate an implicit subsidy for banks. A capital requirement reduces this subsidy, through a simple liability composition effect. However, the guarantees also make a bank undervalue loans that generates surplus in states of the world in which it defaults. Raising the capital requirement makes the bank safer, which alleviates this problem. We refer to this mechanism, which we argue is empirically relevant, as theforced safety effect.