The aim of this paper is to assess how German savings banks adjust capital and risk under capital regulation. We estimate a modified version of the model developed by Shrieves and Dahl (1992). This paper contributes to the literature in three ways. First, we test the capital buffer theory...

A healthy banking system is a fundamental condition for financial stability. When assessing the riskiness of the banking system, analysts often restrict their focus to large banks. This may create a distorted picture in countries like Germany with fragmented banking systems. In Germany, savings...