Analysis of the usability of capital buffers during the crisis precipitated by COVID-19

Luis Fernández Lafuerza, Matías Lamas, Javier Mencía, Irene Pablos and Raquel Vegas
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Luis Fernández Lafuerza: BANCO DE ESPAÑA
Javier Mencía: BANCO DE ESPAÑA
Irene Pablos: BANCO DE ESPAÑA

No 2223, Occasional Papers from Banco de España

Abstract: This paper analyses the ability of banks to use voluntary and regulatory capital buffers, taking advantage of the experience of the COVID-19 pandemic. In the first place, we find that the usability of macroprudential buffers is not hampered in Spain by other parallel banks’ requirements. Additionally, we find that the existing voluntary buffers over capital requirements at the beginning of the pandemic have had significant effects on the financial markets, affecting the evolution of European bank stock prices, as well as the holdings of bank shares by investment funds. Lastly, we find no significant aggregate effect of voluntary capital buffers on the provision of financing to non-financial companies in Spain. However, we do identify negative effects in the supply of credit from banks with lower voluntary buffers to companies with which they had more recent relationships. Likewise, if the analysis is carried out exclusively on credit operations without public guarantees, we observe that those banks with lower voluntary capital buffers reduced credit more.

Keywords: capital usability; voluntary capital buffers; bank stock prices; provision of credit (search for similar items in EconPapers)
JEL-codes: G20 G21 G28 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2023-03
New Economics Papers: this item is included in nep-cba, nep-cfn, nep-eec and nep-rmg
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https://www.bde.es/f/webbde/SES/Secciones/Publicac ... 22/Files/do2223e.pdf First version, March 2023 (application/pdf)
https://www.bde.es/f/webbde/SES/Secciones/Publicac ... s/22/Fich/do2223.pdf Spanish version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:bde:opaper:2223e

DOI: 10.53479/29750

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