Higher US capital buffers leave firms’ debt unchanged – Fed paper

Federal Reserve

Higher bank-specific capital buffers in the US reduce individual banks’ lending, but overall the firms’ debt levels remain the same, a paper published by the Federal Reserve finds.

Researchers Jose Berrospide and Rochelle Edge use bank level data to examine the effects on lending of higher capital buffers imposed as a result of the Fed’s stress tests. They also study how an individual firm’s loan volume differs between banks, according to differences in the sizes of the lenders’ capital buffers

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