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June 2015 issue
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Clerc, Derviz, Mendicino, Moyen, Nikolov, Stracca, Suarez, Vardoulakis
Mésonnier, Monks
Cecchetti
Cuciniello, Signoretti
Pierret
Cerasi, Oliviero
Kharroubi
Alter, Craig, Raupach
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Did the EBA Capital Exercise Cause a Credit Crunch in the Euro Area?

by Jean-Stéphane Mésonniera and Allen Monksb

Abstract

We exploit a unique monthly data set of euro-area bank balance sheets to document the impact of the EBA's 2011/12 capital exercise on bank lending.We find that banks in a banking group forced to increase its CT1 capital ratio by 1 percent had an annualized loan growth (over nine months) that was 1.2 percent lower than that of banks in unconstrained groups. We also find at the country level that banks that did not have to recapitalize did not substitute for more constrained lenders. Our results are of particular relevance for the decisions facing the new European Single Supervisory Mechanism.

JEL Codes: C21, E51, G21, G28.

 
Full article (PDF, 43 pages, 461 kb)

Discussion by Jose M. Berrospide


a Banque de France
b Central Bank of Ireland