Abstract
Using the real estate lending share of the bank's loan portfolio at the peak of the land-price bubble as an instrument for bank capital, we identify the impact of capital adequacy on the allocation of bank lending under the Basel regulatory framework. We find that, in Japan, a large loss of bank capital caused by the regulator's excessively tough stance towards banks not only induced the contraction of the bank lending supply but also the banks' reallocation of their lending portfolios to financially unhealthy industries with a higher concentration of non-performing loans.
| Original language | English |
|---|---|
| Pages (from-to) | 116-136 |
| Number of pages | 21 |
| Journal | Journal of the Japanese and International Economies |
| Volume | 24 |
| Issue number | 1 |
| DOIs | |
| Publication status | Published - 2010 Mar |
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Keywords
- Bank capital
- Evergreening
- Instrumental variable
- Real estate lending
ASJC Scopus subject areas
- Economics and Econometrics
- Finance
- Political Science and International Relations
Cite this
Does a large loss of bank capital cause Evergreening? Evidence from Japan. / Watanabe, Wako.
In: Journal of the Japanese and International Economies, Vol. 24, No. 1, 03.2010, p. 116-136.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Does a large loss of bank capital cause Evergreening? Evidence from Japan
AU - Watanabe, Wako
PY - 2010/3
Y1 - 2010/3
N2 - Using the real estate lending share of the bank's loan portfolio at the peak of the land-price bubble as an instrument for bank capital, we identify the impact of capital adequacy on the allocation of bank lending under the Basel regulatory framework. We find that, in Japan, a large loss of bank capital caused by the regulator's excessively tough stance towards banks not only induced the contraction of the bank lending supply but also the banks' reallocation of their lending portfolios to financially unhealthy industries with a higher concentration of non-performing loans.
AB - Using the real estate lending share of the bank's loan portfolio at the peak of the land-price bubble as an instrument for bank capital, we identify the impact of capital adequacy on the allocation of bank lending under the Basel regulatory framework. We find that, in Japan, a large loss of bank capital caused by the regulator's excessively tough stance towards banks not only induced the contraction of the bank lending supply but also the banks' reallocation of their lending portfolios to financially unhealthy industries with a higher concentration of non-performing loans.
KW - Bank capital
KW - Evergreening
KW - Instrumental variable
KW - Real estate lending
UR - http://www.scopus.com/inward/record.url?scp=77349088913&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=77349088913&partnerID=8YFLogxK
U2 - 10.1016/j.jjie.2010.01.001
DO - 10.1016/j.jjie.2010.01.001
M3 - Article
AN - SCOPUS:77349088913
VL - 24
SP - 116
EP - 136
JO - Journal of the Japanese and International Economies
JF - Journal of the Japanese and International Economies
SN - 0889-1583
IS - 1
ER -