Basel III Capital Buffers and Canadian Credit Unions Lending: Impact of the Credit Cycle and the Business Cycle

2018 ◽  
Author(s):  
HHlyoth Hessou ◽  
Van Son Lai
Keyword(s):  
Business Cycle ◽  
Credit Unions ◽  
Basel Iii ◽  
Credit Cycle ◽  
The Business Cycle

scholarly journals Are the New Basel III Capital Buffers Countercyclical? Exploring the Option of a Rule-Based Countercyclical Buffer

2018 ◽  
pp. 1-6
Author(s):  
Filippo Occhino
Keyword(s):  
Business Cycle ◽  
Banking System ◽  
Capital Requirements ◽  
Economic Fluctuations ◽  
Capital Regulation ◽  
Basel Iii ◽  
Rule Based ◽  
The Business Cycle ◽  
Over Time

Countercyclical capital regulation can reduce the procyclicality of the banking system and dampen aggregate economic fluctuations. I describe two new capital buffers introduced in Basel III and discuss why their countercyclical effects may be small. If over time regulators want to increase the degree of countercyclicality of capital regulation, they might consider adopting a rule-based countercyclical buffer, that is, a buffer that is automatically lowered during recessions according to a rule. I present a conservative example of such a rule and its effects on capital requirements over the business cycle.

scholarly journals TRI-CYCLES ANALYSIS ON BANK PERFORMANCE: PANEL VAR APPROACH

2017 ◽  
Vol 19 (4) ◽  
pp. 403-442 ◽  
Author(s):  
Denny Irawan ◽  
Febrio Kacaribu
Keyword(s):  
Business Cycle ◽  
Financial Risk ◽  
Balance Sheet ◽  
Banking System ◽  
Bank Performance ◽  
Panel Var ◽  
Vector Autoregressive ◽  
Dynamic Relationship ◽  
Credit Cycle ◽  
The Business Cycle

The previous financial crisis has revealed the importance of risk in the financial and business cycle within the economy. This paper examines relationship among three cycles in the economy, namely (i) business cycle macro risk, (ii) credit cycle and (iii) risk cycle, and their impacts toward individual bank performance. We examine the responses of individual bank credit cycle and risk cycle toward a shock in business cycle macro risk and its consequence to the bank performance. We use Indonesian data for period of 2005q1 to 2014q4. We use unbalanced panel data of individual banks’ balance sheet with Panel Vector Autoregressive approach based on GMM style estimation by implementing PVAR package developed by Abrigo and Love (2015). The result shows dynamic relationship between business cycle macro risk and financial risk cycles. The study also observes prominent role of risk cycles in driving bank performance. We also show the existence of financial accelerator phenomenon in Indonesian banking system, in which financial cycles precede the business cycle macro risk.

scholarly journals “Animal spirits” and bank’s lending behaviour, a disequilibrium approach

2019 ◽  
Vol 24 (2) ◽  
Author(s):  
Carl Chiarella ◽  
Corrado Di Guilmi ◽  
Tianhao Zhi
Keyword(s):  
Business Cycle ◽  
Dynamic Model ◽  
Credit Market ◽  
Collective Behaviour ◽  
Supply Side ◽  
Real Economy ◽  
Animal Spirits ◽  
Credit Cycle ◽  
The Business Cycle

AbstractThe paper analyses from a disequilibrium perspective the role of banks’ “animal spirits” and collective behaviour in the creation of credit that, ultimately, determines the credit cycle. In particular, we propose a dynamic model to analyse how the transmission of waves of optimism and pessimism in the supply side of the credit market interacts with the business cycle. We adopt the Weidlich-Haag-Lux approach to model the opinion contagion of bankers. We test different assumptions on banks’ behaviour and find that opinion contagion and herding amongst banks play an important role in propagating the credit cycle and destabilizing the real economy. The boom phases trigger banks’ optimism that collectively lead the banks to lend excessively, thus reinforcing the credit bubble. Eventually the bubbles collapse due to an over-accumulation of debt, leading to a restrictive phase in the credit cycle.

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