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Liquidity and capital in bank lending: Evidence from European banks

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  • Thornton, John
  • Tommaso, Caterina di
Abstract
We examine whether the effect of bank capital on credit growth differs depending upon the level of liquidity in a panel of up to 521 banks from 21 European countries. We find that the effect of an increase in bank capital is positively associated with the level of bank liquidity, suggesting that capital exerts a significantly positive effect on European banks’ credit growth after they retain sufficient liquid funds.

Suggested Citation

  • Thornton, John & Tommaso, Caterina di, 2020. "Liquidity and capital in bank lending: Evidence from European banks," Finance Research Letters, Elsevier, vol. 34(C).
    • Handle: RePEc:eee:finlet:v:34:y:2020:i:c:s1544612318305282
    DOI: 10.1016/j.frl.2019.08.021
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    References listed on IDEAS

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    Cited by:

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    More about this item

    Keywords

    Bank capital; Liquidity; Lending behavior; European banks;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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