Liquidity Regulation and Bank Lending
Résumé
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.
Origine : Fichiers produits par l'(les) auteur(s)
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