Institutional Environment and Bank Capital Ratios

Bank Capital Ratios, Competition and Loan Spreads

This paper empirically investigates whether or not banks charge higher loan spreads for having high capital ratios by using a dataset of all syndicated loans issued by public nonfinancial U.S. borrowers during the 1993 to 2007 period. We find convincing evidence that well-capitalized banks can indeed charge a ’spread premium’. We further investigate whether this result can be explained by banks...

Capital Ratios and Bank Lending: A Matched Bank Approach

We thank staffs of the Board of Governors of the Federal Reserve and of the Federal Reserve Bank of New York, participants at the Federal Reserve System applied microeconomics conference, the Federal Deposit Insurance Corporation Annual Bank Research Conference and seminar participants at Villanova University for valuable comments. The views presented in this paper are solely those of the autho...

Bank Holding Company Capital Ratios and Shareholder Payouts

Such high shareholder payouts might be seen as a threat to banking institutions’ capital strength if profitability faltered. However, we find that the sharp rise in shareholder payouts during 1997 appears to have been driven primarily by increases in net stock repurchases rather than by a run-up in dividend payments. The composition of these payouts is important because banking companies can cu...

Capital Ratios and Credit Ratings as Predictors of Bank Failures

We examine the power of various capital ratios — scaled by total assets, riskweighted assets and gross revenues — to forecast U.S. bank failures. Capital ratios are the centerpiece of the 1988 Basel Accord, and various ratios are currently under consideration in Basel in connection with one of the three “pillars” of a more comprehensive approach to capital adequacy. Using data for the period 19...

Institutional environment and capital structure: evidence on EU companies