Economics, Econometrics and Finance
5 years ago

Commercial banks shifting to government securities due to risk-based capital requirements.

Econometric Reviews
Capital Requirements and Shifts in Commercial Bank Portfolios
Joseph G. Haubrich, Paul Wachtel

Paper Summary

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Commercial banks in the U.S. have been moving their money from business loans to government securities since 1989. By looking at data from individual banks, it was found that this change might be because of new rules about how much money they need to keep in reserve. These rules could be responsible for some of the shift in where banks put their money.