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Cyclical patterns in profits, provisioning and lending of banks and procyclicality of the new Basel capital requirements

PSL Quarterly Review

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Title Cyclical patterns in profits, provisioning and lending of banks and procyclicality of the new Basel capital requirements
 
Creator Bikker, Jacob A.
Hu, Haixia
 
Subject —
Bank, Banking, Boom, Business Cycle, Credit, Cycle, Lending, Macroeconomics, Procyclical
G21, G28, E32
 
Description The proposed risk sensitive minimum requirements of the new Basel capital accord have raised concerns about possible (acceleration of) procyclical behaviour of banking, which might threaten macroeconomic stability. This article analyses the interaction between business cycles and banks over the past two decades for 26 industrial countries. As expected, profits appear to move up and down with the business cycle, allowing for accumulation of capital in boom periods. Provisioning for credit losses rise when the cycle falls, but less so when net income of banks is relatively high, which reduces procyclicality. Lending fluctuates with the business cycle too, but appears to be driven by demand rather than by supply factors such as (shortage of) capital, which contradicts the assumptions underlying capital crunch theory. All in all, over the last decades, distortion caused by procyclical behaviour of banks has been limited, banking crises excepted.   JEL Codes: G21, G28, E32Keywords: Bank, Banking, Boom, Business Cycle, Credit, Cycle, Lending, Macroeconomics, Procyclical
 
Publisher Economia civile
 
Contributor —
 
Date 2012-04-19
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
—
 
Format application/pdf
 
Identifier http://annalidibotanica.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9907
 
Source PSL Quarterly Review; Vol 55, No 221 (2002)
PSL Quarterly Review; Vol 55, No 221 (2002)
2037-3643
ISSN 2037-3635
 
Language eng
 
Relation http://annalidibotanica.uniroma1.it/index.php/PSLQuarterlyReview/article/view/9907/9789
 
Rights Copyright (c) 2016 Jacob A. Bikker, Haixia Hu
http://creativecommons.org/licenses/by-nc-nd/4.0