Skip to:
  1. Main navigation
  2. Main content
  3. Footer
Working Paper

How Cyclical Is Bank Capital?

The alleged pro-cyclicality of bank capital (high in good times, low in bad) has received some blame for the recent financial crisis. Others blame the countercyclicality of capital regulations: too low in high times and too high in bad. To address this problem, Basel III has introduced countercyclical capital buffers for large banks. But just how cyclical is bank capital? We look at the question from several vantage points, using both detailed recent data on risk-weighted assets and several sources of annual data going back to 1834. To help understand the historical data, we provide a short summary of capital concepts and regulation from early America to the present.

Suggested Citation

Haubrich, Joseph G. 2015. “How Cyclical Is Bank Capital?” Federal Reserve Bank of Cleveland, Working Paper No. 15-04.