Capital buffers not all working as intended – BoE paper
Some banks raised rates and contracted credit supply during the Covid-19 crisis
Basel III capital buffers only partially worked as intended during the Covid-19 crisis in the UK, research published by the Bank of England finds.
In the working paper, authors Aakriti Mathur, Matthew Naylor and Aniruddha Rajan use confidential regulatory data to explore how banks behaved in response to the pandemic shock.
In aggregate, they find banks raised their core capital ratios in 2020, possibly reflecting a desire to build “precautionary surpluses” in the uncertain environment. Banks
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