The Impact of the 2008 Financial Crisis and Regulation Reforms on Loan Growth: Evidence from the Effect of Capital and Liquidity



Author:Liu, Chi-Chun, Stephen G. Ryan and Szu-Jung Wu




In the wake of the 2008 financial crisis, bank behavior and banking supervision have been criticized, prompting a series of regulations, such as the Dodd–Frank Act and Basel III reforms. Focusing on the periods before and after the 2008 financial crisis, this study examines whether the lending behavior of banks changed after the 2008 crash. We use a sample composed of U.S. bank holding companies during the period from 2001Q2 to 2015Q1 and find that the effect of capital ratio on loan growth declines dramatically after the financial crisis while the effect of liquidity increases compared to the pre-crisis period. Our results suggest that after the financial crisis, lending behavior may be restricted by the banks themselves and by the stricter regulations.

Keywords: 2008 financial crisis, Loan growth, Lending behavior, Capital adequacy, Liquidity, Dodd–Frank Act, Basel III