Bank holding company capital targets in the early 1990s: The regulators versus the markets

Several studies suggest that the credit crunch was due in large part to banks' needs to raise their capital ratios. The changes in bank capital ratios may have been in response to financial market or regulatory standards. This study develops a model to test the relative impact of the regulators...

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Bibliographic Details
Published in:Journal of banking & finance 1995-06, Vol.19 (3), p.563-574
Main Authors: Wall, Larry D., Peterson, David R.
Format: Article
Language:English
Subjects:
Bank capital
Bank holding companies
Banking
Banks
Capital
Capital requirements
Credit crunch
Finance
Market
Ratios
Regulation
Regulation of financial institutions
Studies
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Summary:Several studies suggest that the credit crunch was due in large part to banks' needs to raise their capital ratios. The changes in bank capital ratios may have been in response to financial market or regulatory standards. This study develops a model to test the relative impact of the regulators and the financial markets on bank holding companies' (BHCs) capital ratios. The results suggest that most BHCs were relatively satisfied with their capital ratios in 1989. However, the regulators appear to have placed increased pressure on banks in 1990, 1991 and 1992, especially BHCs that were subject to regulatory orders.
ISSN:0378-4266
1872-6372
DOI:10.1016/0378-4266(94)00139-T