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Pré-publication, Document de travail

Liquidity Regulation and Bank Lending

Abstract : Bank liquidity shortages during the global financial crisis of 2007-2009 led to the introduction of liquidity regulations, the impact of which has attracted the attention of academics and policymakers. In this paper, we investigate the impact of liquidity regulation on bank lending. As a setting, we use the Netherlands, where a Liquidity Balance Rule (LBR) was introduced in 2003. The LBR was imposed on Dutch banks only and did not apply to other banks operating elsewhere within the Eurozone. Using this differential regulatory treatment to overcome identification concerns and a difference-in-differences approach, we find that stricter liquidity requirements did not reduce the lending of Dutch banks relative to other banks not subject to the provisions of the LBR. However, the LBR did lead Dutch banks to modify the structure of loan portfolios by increasing corporate lending and reducing mortgage lending relative to banks not subject to the LBR. Dutch banks also experienced a significant increase in deposits and issued more equity relative to counterparts not subject to the liquidity requirements. Overall, our results have obvious relevance for policymakers tasked with monitoring the impact of liquidity regulations on banks and the real economy.
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https://hal-unilim.archives-ouvertes.fr/hal-02516749
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Soumis le : mercredi 14 octobre 2020 - 11:05:41
Dernière modification le : vendredi 16 octobre 2020 - 03:36:35

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  • HAL Id : hal-02516749, version 2

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Foly Ananou, Amine Tarazi, John O.S Wilson. Liquidity Regulation and Bank Lending. 2020. ⟨hal-02516749v2⟩

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