Banks respond differently to capital target deviations, ECB paper shows

Healthy options

There are notable asymmetries in banks' reactions to deviations from optimal capital levels, an ECB working paper shows.

Banks "prefer to reshuffle risk-weighted assets or increase asset holdings" when they are above their optimal Tier I ratio, Christoffer Kok and Glenn Schepens write in Bank reactions after capital shortfalls, whereas when they are below target, they "try to increase equity levels or reshuffle risk-weighted assets without changing asset holdings".

The paper investigates whether

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact or view our subscription options here:

You are currently unable to copy this content. Please contact to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Central Banking? View our subscription options

Register for Central Banking

All fields are mandatory unless otherwise highlighted

This address will be used to create your account

You need to sign in to use this feature. If you don’t have a Central Banking account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account