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The impact of capital requirements on Swedish bank lending: A study on the effects of higher capital regulations

Ljung, Anton LU and Schennings, Axel (2018) NEKN01 20181
Department of Economics
Abstract
The increased capital requirements, as a result of Basel III regulations, have been
widely debated among bankers, regulators and other agents. In this thesis, we aim to
evaluate if the increased capital requirements have had an effect on bank lending in
Sweden. To analyze this, we gather quarterly data from the four largest Swedish
banks and divide lending to the public into five categories. We use a dynamic panel
regression on our novel data set and regress loan growth for the different lending
sectors on increased capital requirements. We find that the increased capital
requirements seem to have no effect on loan growth for any of the sectors analyzed.
Also, we find indications that capital ratios have been affected by higher... (More)
The increased capital requirements, as a result of Basel III regulations, have been
widely debated among bankers, regulators and other agents. In this thesis, we aim to
evaluate if the increased capital requirements have had an effect on bank lending in
Sweden. To analyze this, we gather quarterly data from the four largest Swedish
banks and divide lending to the public into five categories. We use a dynamic panel
regression on our novel data set and regress loan growth for the different lending
sectors on increased capital requirements. We find that the increased capital
requirements seem to have no effect on loan growth for any of the sectors analyzed.
Also, we find indications that capital ratios have been affected by higher capital
requirements since the banks seem to gradually rebuild their capital buffer that they
initially held above the regulatory minimum. We conclude that regulators seem to
have been successful in not harming Swedish banks’ lending behavior. (Less)
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author
Ljung, Anton LU and Schennings, Axel
supervisor
organization
course
NEKN01 20181
year
type
H1 - Master's Degree (One Year)
subject
keywords
Capital requirements, Basel, Bank lending, Financial stability
language
English
id
8947616
date added to LUP
2018-07-03 14:21:00
date last changed
2018-07-03 14:21:00
@misc{8947616,
  abstract     = {The increased capital requirements, as a result of Basel III regulations, have been
widely debated among bankers, regulators and other agents. In this thesis, we aim to
evaluate if the increased capital requirements have had an effect on bank lending in
Sweden. To analyze this, we gather quarterly data from the four largest Swedish
banks and divide lending to the public into five categories. We use a dynamic panel
regression on our novel data set and regress loan growth for the different lending
sectors on increased capital requirements. We find that the increased capital
requirements seem to have no effect on loan growth for any of the sectors analyzed.
Also, we find indications that capital ratios have been affected by higher capital
requirements since the banks seem to gradually rebuild their capital buffer that they
initially held above the regulatory minimum. We conclude that regulators seem to
have been successful in not harming Swedish banks’ lending behavior.},
  author       = {Ljung, Anton and Schennings, Axel},
  keyword      = {Capital requirements,Basel,Bank lending,Financial stability},
  language     = {eng},
  note         = {Student Paper},
  title        = {The impact of capital requirements on Swedish bank lending: A study on the effects of higher capital regulations},
  year         = {2018},
}