Do banks adjust their capital when they face liquidity shortages? Evidence from U.S. commercial banks
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13 octobre 2023
- ISIDORE Id: 10670/1.2b7e99...
- hal: hal-04240196
info:eu-repo/semantics/OpenAccess
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Thierno Amadou Barry et al., « Do banks adjust their capital when they face liquidity shortages? Evidence from U.S. commercial banks », HAL SHS (Sciences de l’Homme et de la Société), ID : 10670/1.2b7e99...
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We investigate how small and large banks behave when they face liquidity shortages. Our findings reveal that only small banks increase their capital ratios during episodes of liquidity shortages. They do so by downsizing but also by holding less risky assets and by reducing their lending. Furthermore, the increase in capital ratios is higher for small banks which are more reliant on market liquidity and small banks operating below their target capital ratio. On the whole, our findings show that small banks operate prudently whereas large banks are less concerned. Our work has strong implications for bank regulation and supervision.
