Seminar

Webex-seminar: Optimal capital ratios for European banks

On Thursday June 10th 2021, Bert Kramer (CPB) will give an online presentation titled: "Optimal capital ratios for European banks." To attend this seminar, please send an e-mail to Simone Pailer (S.Pailer@cpb.nl). Then you will receive a Webex-invitation via Outlook.

Date
June 10, 2021
Time
13:00 - 14:00
Location
Online (Webex). To attend this seminar, please send an e-mail to Simone Pailer (S.Pailer@cpb.nl). Then you will receive a Webex-invitation via Outlook.
Presentation
Bert Kramer (CPB)
Discussant
Lu Zhang (DNB)
Working language
English

In this paper we estimate the optimal level of capital for banks in the euro area. Higher bank capital requirements may be socially costly, as rising funding costs might result in higher lending rates. On the other hand, if increasing bank capital is socially costly, so too is not raising bank capital sufficiently. Reserves help banks absorb financial shocks and thereby reduces the likelihood of banking crises. Our baseline estimates show an optimal capital ratio of around 22 percent. However, we also find substantial heterogeneity across member states. Optimal ratios range from 27 percent for banks in Cyprus to as low as 8 percent in Belgium. This suggests that optimal ratios are likely inversely related to the strength of national economies and the ease with which banks in different member states can raise capital.

Contacts

Foto Simone Pailer
Simone Pailer +31 6 21856579 Read more