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Identifier to cite or link to this item: https://hdl.handle.net/10086/13951

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Title
The Effect of the Basel Accord on Bank Lending in Japan
Creator
Creator Name
Montgomery, Heather Montgomery, Heather
Affiliation
Affiliation Name
The Asian Development Bank Institute
Editor
Contributor Name
Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University
Key Word
Japanese Banks
Capital Adequacy
Basel Accord
Credit Crunch
JEL
G21
G28
C23
E51
Abstract
This study investigates the hypothesis that stricter capital adequacy requirements introduced under the 1988 Basel Accord caused Japanese banks to restrict loan growth. Using a panel of Japanese bank balance sheets for fiscal years 1982-1999, this study finds that the 1988 Basel Accord regulation requiring international banks to hold a BIS (Bank for International Settlements) capital to risk-weighted asset ratio of at least 8% increased the sensitivity of total loan growth to capitalization for international banks in Japan. A similar, but quantitatively smaller, finding is reported for a group of "switcher" banks that initially pursued the 8% BIS capital adequacy requirement following the signing of the Basel Accord in 1988, but then later switched to pursue a domestic 4% MOF (Ministry of Finance) capital adequacy requirement. Domestic banks, which were subject to the 4% MOF capital adequacy requirement for the entire post-Basel period, show no evidence of increased sensitivity of lending to capitalization in the post-Basel period.
Description
This paper was presented at the conference on Designing Financial Systems in East Asia and Japan: Toward a Twenty-First Century Paradigm. This two-day conference was co-organized by the International Monetary Fund and the CEI. It was held during September 24-25, 2001 at Hitotsubashi Memorial Hall in Tokyo, Japan. A select group of academics, researchers and policy makers from around the world gathered to examine the timely issue of how the financial systems and corporate governance in East Asia and Japan should be redesigned in order to achieve sustainable economic development. The conference included six sessions with 17 papers. All the presented papers were added to the CEI series of working papers. The series, as well as the contents of the conference, can be reached at http://cei.ier.hit-u.ac.jp.
Publisher
Institute of Economic Research, Hitotsubashi University
Issued Date
2001-09
Language
English(eng)
Resource Type
technical report
Version Type
VoR
Is Part OfRelation -
Related Title
CEI Working Paper Series ; No. 2001-22
Relation
Related Identifier
URI
  http://cei.ier.hit-u.ac.jp/index.html
NCID
AA11590659
Number of Pages
27
Appears in Collections
CEI Working Paper Series
URL
https://hdl.handle.net/10086/13951