Capital requirements impact collateral demands – BoE paper

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The Bank of England

Capital requirements may impact the flow of credit to small businesses by encouraging banks to demand collateralised loans, according to research published on February 1 by the Bank of England.

Hans Degryse, Artashes Karapetyan and Sudipto Karmakar study a 2011 action by the European Banking Authority that required banks to meet higher capital ratios. The shock only affected some banks, presenting the authors with a “quasi-natural experiment”.

The authors find affected banks become more likely

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