Template-Type: ReDIF-Paper 1.0
Author-Name: Stefan Avdjiev 
Author-X-Name-First: Stefan 
Author-X-Name-Last: Avdjiev 
Author-Name: José María Serena Garralda
Author-X-Name-First: José María
Author-X-Name-Last: Serena Garralda
Title: Regulatory capital, market capital and risk taking in international bank lending
Abstract: We investigate the links among US monetary policy, bank capital, and risk taking in international bank lending. Using syndicated loan data, we find that low US interest rates spur the origination of risky dollar-denominated international loans through two distinct mechanisms. First, consistent with the existence of a regulatory capital channel, banks with higher levels of regulatory capital originate riskier loans when interest rates decline. Second, banks with low levels of market capital have a higher propensity to extend riskier loans in response to falling interest rates. This finding implies the existence of a market capital channel, which operates in the opposite direction to the regulatory capital channel.
Length: 50 pages
Creation-Date: 2020-12
File-URL: https://www.bis.org/publ/work912.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work912.htm
File-Format: text/html
Number: 912
Keywords: interest rates, bank capital, risk taking, international leveraged loans
Classification-JEL: G21, G32
Handle: RePEc:bis:biswps:912