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This book offers a comprehensive analysis of how changes in microprudential and macroprudential regulations—specifically, regulatory capital requirements—affect the lending behaviour of Canadian banks. Drawing on empirical data, the study explores three key dimensions. Loan Volume: It explores how increases in capital requirements lead to a measurable decline in the volume of gross loans extended to the non-financial sector, even after accounting for macroeconomic conditions. Interest Rates: It examines why, during periods of economic stability, higher capital requirements do not necessarily translate into higher loan interest rates—aligning with findings in the existing literature. Loan Portfolio Composition: It uncovers how different segments of the loan portfolio—Corporate & Commercial Loans, Residential Mortgages, and Consumer/Retail Loans—respond uniquely to regulatory changes, with corporate lending being the most sensitive. The book also examines how economic policy uncertainty and bank profitability influence lending decisions, offering nuanced insights into the interplay between regulation and financial behaviour.
A vital resource for policymakers, regulators, and financial scholars, this work contributes to the limited literature on capital regulation in Canada. It provides practical guidance on how to strengthen financial resilience without stifling the credit needed for economic recovery and growth.
Berenger Piper is a financial economist with more than 14 years of experience in financial risk management. He is currently an Associate Director in the Capital Market Risks and Controls division of one of the Top 3 Canadian Investment Banks in Toronto, Canada. He holds a Doctorate of Business Administration in Financial Economics (DBA in Financial Economics) from Jean Moulin University Lyon 3, IAE Lyon School of Management, France and The Business Science Institute, Luxembourg. In addition to his professional achievements in the banking sector, Berenger is a researcher in financial economics with research interests in macroprudential and microprudential regulations, financial markets, financial stability, asset pricing, and risk management.
List of contents
Chapter 1: Introduction.- Chapter 2: Impact of Bank Regulatory Capital Requirements On Canadian Banks’ Gross Lending Volume.- Chapter 3: Impact of Bank Regulatory Capital Requirements On Canadian Banks’ Gross Loan Interest Rates.- Chapter 4: Impact of Bank Regulatory Capital Requirements On Canadian Banks’ Gross Loan Portfolio.- Chapter 5: Conclusion. Appendix I: Detailed Summary of Managerial Recommendations.
About the author
Berenger Piper is a financial economist with more than 14 years of experience in financial risk management. He is currently an Associate Director in the Capital Market Risks and Controls division of one of the Top 3 Canadian Investment Banks in Toronto, Canada. He holds a Doctorate of Business Administration in Financial Economics (DBA in Financial Economics) from Jean Moulin University Lyon 3, IAE Lyon School of Management, France and The Business Science Institute, Luxembourg. In addition to his professional achievements in the banking sector, Berenger is a researcher in financial economics with research interests in macroprudential and microprudential regulations, financial markets, financial stability, asset pricing, and risk management.
Summary
This book offers a comprehensive analysis of how changes in microprudential and macroprudential regulations—specifically, regulatory capital requirements—affect the lending behaviour of Canadian banks. Drawing on empirical data, the study explores three key dimensions. Loan Volume: It explores how increases in capital requirements lead to a measurable decline in the volume of gross loans extended to the non-financial sector, even after accounting for macroeconomic conditions. Interest Rates: It examines why, during periods of economic stability, higher capital requirements do not necessarily translate into higher loan interest rates—aligning with findings in the existing literature. Loan Portfolio Composition: It uncovers how different segments of the loan portfolio—Corporate & Commercial Loans, Residential Mortgages, and Consumer/Retail Loans—respond uniquely to regulatory changes, with corporate lending being the most sensitive. The book also examines how economic policy uncertainty and bank profitability influence lending decisions, offering nuanced insights into the interplay between regulation and financial behaviour.
A vital resource for policymakers, regulators, and financial scholars, this work contributes to the limited literature on capital regulation in Canada. It provides practical guidance on how to strengthen financial resilience without stifling the credit needed for economic recovery and growth.
