What is the impact of a sudden and sizeable increase in bank capital requirements on the lending activity by directly affected banks and by non-affected non-bank financial institutions (NBFIs)? To answer this question, we apply a difference-in-differences methodology around the capital exercise...

The internal ratings-based (IRB) approach maps bank risk profiles more adequately than the standardized approach. After switching to IRB, banks' risk-weighted asset (RWA) densities are thus expected to diverge, especially across countries with different supervisory strictness and risk levels....