Citation

Discussion Paper Details

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Title: Bank Capital Redux: Solvency, Liquidity, and Crisis

Author(s): �scar Jord�, Bj�rn Richter, Moritz Schularick and Alan M. Taylor

Publication Date: March 2017

Keyword(s): bank liabilities, capital ratio, crisis prediction, financial crises, local projections, macroprudential regulation and Risk Taking

Programme Area(s): Economic History, Financial Economics and Monetary Economics and Fluctuations

Abstract: What is the relationship between bank capital, the risk of a financial crisis, and its severity? This paper introduces the first comprehensive analysis of the long-run evolution of the capital structure of modern banking using newly constructed data for banks' balance sheets in 17 countries since 1870. In addition to establishing stylized facts on the changing funding mix of banks, we study the nexus between capital structure and financial instability. We find no association between higher capital and lower risk of banking crisis. However, economies with better capitalized banking systems recover faster from financial crises as credit begins to flow back more readily.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11934

Bibliographic Reference

Jord�, �, Richter, B, Schularick, M and Taylor, A. 2017. 'Bank Capital Redux: Solvency, Liquidity, and Crisis'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11934