This research proposal is on the effect of the lending of bank capital and the link between the actual financial condition and the real activities that has been going around. This has succeeded in gaining a lot of attention in past few times because of the financial crisis the world has seen. The techniques of panel-regression can be used to study the lending techniques of bank’s large holdings and companies and the effects small or big of capital on lending (Pelosky, 1991). Then the effect of the capital ratios will be concluded using a variant model, and again the researcher will look for the results that are in marked contrast to estimate obtained by using simple practical relations between the aggregate commercial-bank assets and leverage growth, this has recently been very powerful which was kind of influential for policy maker’s as a result point of views regarding how the loan growth is affected by the bank capital. The models which have been estimated will be used to understand the recent developments in bank lending

1. qwertyuiopasdfghjklzxcvbnmqwertyui
opasdfghjklzxcvbnmqwertyuiopasdfgh
jklzxcvbnmqwertyuiopasdfghjklzxcvb
nmqwertyuiopasdfghjklzxcvbnmqwer
tyuiopasdfghjklzxcvbnmqwertyuiopas
dfghjklzxcvbnmqwertyuiopasdfghjklzx
cvbnmqwertyuiopasdfghjklzxcvbnmq
wertyuiopasdfghjklzxcvbnmqwertyuio
pasdfghjklzxcvbnmqwertyuiopasdfghj
klzxcvbnmqwertyuiopasdfghjklzxcvbn
mqwertyuiopasdfghjklzxcvbnmqwerty
uiopasdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghjklzxc
vbnmqwertyuiopasdfghjklzxcvbnmrty
uiopasdfghjklzxcvbnmqwertyuiopasdf
ghjklzxcvbnmqwertyuiopasdfghjklzxc
US COMMERCIAL BANKS CAPITAL
RATIO AND HOW IT AFFECTS
LENDING
6/11/2014

2. Table of Contents
Abstract.........................................................................................................................................................3
Introduction...................................................................................................................................................3
Aims and Objectives of the Thesis ...............................................................................................................4
Research Questions.......................................................................................................................................4
Rationale .......................................................................................................................................................5
Literature Review..........................................................................................................................................5
Research Methodology .................................................................................................................................7
Hypothesis ....................................................................................................................................................8
Data Testing..................................................................................................................................................9
Finding..........................................................................................................................................................9
Conclusion ..................................................................................................................................................11
Bibliography ................................................................................................................................................12

3. Abstract
This research proposal is on the effect of the lending of bank capital and the link between the
actual financial condition and the real activities that has been going around. This has succeeded
in gaining a lot of attention in past few times because of the financial crisis the world has seen.
The techniques of panel-regression can be used to study the lending techniques of bank‟s large
holdings and companies and the effects small or big of capital on lending (Pelosky, 1991). Then
the effect of the capital ratios will be concluded using a variant model, and again the researcher
will look for the results that are in marked contrast to estimate obtained by using simple practical
relations between the aggregate commercial-bank assets and leverage growth, this has recently
been very powerful which was kind of influential for policy maker‟s as a result point of views
regarding how the loan growth is affected by the bank capital. The models which have been
estimated will be used to understand the recent developments in bank lending.
Introduction
The effect of changing the entire capital from bank and bank lends has built a new rich new data
set with the help of economy on capital requirements to observe the capital ratio in US (Huizinga
and Sachs, 1992). This paper will investigate the bank‟s balance sheet with so much pressure on
the structure of nonfinancial industries. More especially the investigation is motivated by the
recent financial crisis to adjust the capital ratio of the banks in US. Bank‟s adjustments have
totally adjusted with stricter lending terms and loan volumes to the potential effects from
manufacturing industries.

4. Aims and Objectives of the Thesis
The primary aim of the research is to determine and examine the overall impact of the bank
capital ratio and its effect on lending in United States. The local factors are also involved in the
research which uses the MSA. The research is done on the basis of the financial crisis which is
dependent on the data commencing from 2001 to 2009 as the relation between the capital ratio
and the bank lending is not useful. The research paper also highlights on the effects of the capital
ratios which can be changed according to the nature of the loan given.
Research Questions
The research questions are developed for the analysis of the data and the findings of the data so
that the possible outcomes can be evaluated and the research can be successfully conducted.
 How the capital ratios affect the bank lending rates?
 What should be the impacts on the community for the increase in the capital ratios?
 How the supply and demand is getting separated for the increase in the growth rates of
the loan?
 What are new innovative methods to be adopted to relate supply and demand?
 How the data is collected to match with the data of the neighboring banks?

5. Rationale
The effect of the capital on the bank lending has a huge effect on the US market. The huge loss
at the banks reduces the capital ratio of the banks and limits their lending of money for the banks
as the banks have increased their capital. A challenge for the study is that the impact on the
growth of the loan divides the supply from demand. The changes in the economic environment
reduce the demand for the loans as a result the capital is reduced so that the capital ratios come
closer to match with the neighboring banks. The main significance of this research is to find out
why and how the capital ratios are reduced and it affects the lending for the loan and some of the
approaches need to be undertaken to differentiate effects of supply on bank lending from the
effects of demand.
Literature Review
The research will describe the bank‟s loan by which they are totally related to the study of the
dissertation. A standard policy papers in this research model has already focused to the capital
regulation and bank‟s balance sheet with so much pressure. This will affect the capital ratios,
loans, deposits and main risks of banks (Thakor, 1996). There are various theories by which all
the information are seeking to better search about bank‟s lend and loan in US. Finally capital
banks have adjusted higher capital ratios to the estimate target affects. The main capital have
approach the study in details to evaluate each and every sub topic. In the literature review first it
is needed to separate supply from the demand so that the growth of the loan can be controlled.
The primary concern is that the market scenario shows that the bank capital is decreased as there
is an economic crisis which reduces the demand for the bank loans which makes an
interconnection between the bank assets and the bank lending. The most common method is that
to identify the economic conditions of the market which has a connection with the demand for
the loan such as the rate of unemployment and the GDP growth.

6. The effect of bank capital ratio on lending, the journal help to provide a clear and precise idea
about what do we know about the capital ratio and its effect of lending. The effect of bank
capital on lending is a one of the critical determinant of the linkage between the financial
condition and real activity and has received critical attention in the recent financial crisis. With
the help of panel regression techniques which help to provide a clear understanding on the
lending of large bank holding companies and find the small effect of capital on lending.
Estimation of the effect of bank capital ratio on loan growth, one of the most critical problems
with lending is the target capital to asset ratio equation could be mis-specified. Several
alternative approaches to investigate the link between the bank capital and bank lending that does
not suffer from this issue consist of targeting or focusing on the overall relationship between the
capital ratio and bank loan growth.
A positive relationship between credit development and slacked capital measures could
additionally emerge if banks preemptively expand their capital levels in expectation of a build in
advance volumes (Francis and Osborne, 2009). This reaction of bank capital levels to expected
changes in advance volumes raises the likelihood of an endogeneity issue in the Bernanke and
Lown credit development comparisons. Notwithstanding, this endogeneity issue is not so much a
staggering concern in the event that we essentially wish to figure out if the consistent power
presumption misrepresents the assessed reaction of credit development to an expand in capital
degrees, in light of the fact that this wellspring of endogeneity would instigate an upward
predisposition in our evaluations of ψ. In any case, to analyze this further we considered an
option specification that additionally incorporates the proportion of the BHC's money profits to
its net pay.
Banks normally work above least administrative capital necessities keeping in mind the end goal
to minimize the likelihood of arriving at the administrative furthest reaches of dissolvability
degrees if they confront unfriendly advancements (Beyer and Farmer, 2006). Together with the
administrative dissolvability capital banks' voluntary capital cradle structures banks' inner capital
focus on that differs about whether, reflecting part of the way their response to market weights
and appraisals of the dangers in the benefits, including advances and security portfolio. The
system decisions of banks' administration halfway go for acclimating to the inner target, having
therefore suggestions on banks' benefit creation.

7. A resurgence of enthusiasm toward the part of banks in the transmission of financial arrangement
has brought about a spate of hypothetical and experimental studies. These studies have made
that, under specific conditions, the conventional transmission system for fiscal strategy ("the
cash perspective") may be expanded through progressions in the supply of bank advances ("the
giving perspective"). Since both the cash perspective and the loaning perspective work through
the managing an account area, the strength of the saving money framework, insofar as it
influences bank conduct, is an essential component in the transmission of financial approach. It
influences both the nature and the measure of bank reactions to movements in fiscal
arrangement, with specific pertinence for the bank giving chance.
A lasting test when testing the effect of capital on advance development is dividing supply from
interest. For instance the changes in the financial environment that influence bank capital
likewise likely influence the interest for advances (Bernanke and Lown, 1991). Decay in the
budgetary environment can cause misfortunes for banks that lessening bank capital; decreases in
bank capital may bring about the administrative capital proportions getting tying, or nearing
closer to tying than the bank may lean toward, and brief the bank to abridge loaning. In the
meantime, disintegration in investment action might likewise diminish the amount of borrowers
looking for credits. Thus the research question undertaken in this study proves its importance and
it needs to be embedded into marketing management.
Research Methodology
The research methodology help to provide a clear and precise idea about the method which will
be undertaken to come to a outcome which help to determined the how bank typically react to a
change in the capital ratio and lending in the United States. The analysis of the research paper is
done by the use of various methods and the application of new ideas which helps in the
development of the research (Ashcraft, 2008). The research experts try to find out the research
techniques by which the research can be completed on the given topic. The research findings
should be of better quality so that the study on the research can be made appropriate. With the

8. help of the STATA software the data is collected and from the primary and the secondary
sources of data the analysis on the research paper is done. The research methods adopted by the
banks can be the development of the balance sheet and the data sheet for the collection of the
data from each and every bank so that a clear view over the condition of the banks can be
evaluated. The data on the balance sheet have the information about the various types of loans
provided by the banks and have a statistics about the capital resources available for the bank, the
structure of liabilities of the bank and the mechanism of the dictatorial bank capital ratios. The
dependent variable on the regression analysis is the growth of the loan. The calculations are done
annually over the loan growths (Albertazzi and Marchetti, 2010). It includes the unused
commitments when identifying the nature of the loan. The information is also collected on the
delinquent loans. The other banks are compared with the bank facing the economic crisis by
seeing the data given by the Call report with the outline of deposits from the FDIC.
Hypothesis
In order to achieve the reply to the research question, and from the literature research identified
above, the following hypothesis is undertaken which will be analyzed further
US commercial banks capital ratio and how it affects lending
This hypothesis will help us to lead to discuss the several dimensions in which the United State
commercial bank capital ratio and it overall impact on the lending of the money. The study will
also undertake many important factors which affect the overall company marketing strategy and
also investigate into each one of the them,
Investigation of the hypothesis
1) Sources o data collection
2) Method of Data Analysis

9. Data Testing
Testing of data is a very important tool for the analysis of the data extracted from the different
sources which are involved in the research. This step is essential for making the research
successful. In this module the data from the primary and the secondary sources are extracted and
after that the analysis is done (Stein, 1998). The review of the respondents is evaluated so that
the practical observation is analyzed so that the study on the research can be effectively done.
The link between the loan growth and the capital ratio can be developed by the formula which is
log ( loan it+1/loan it) = α + β* C * Rit + IIZit + Dit + Єit
CRit is the regulatory capital ratio of the bank assumed as I at the year t- the ratio of leverage,
the risk adjusted tier 1 capital ratio or the total risk adjusted capital ratio and β is the main
attribute. Zit is a vector of the exogenous variables which has an impact on the loan growth. Dit
holds the demand for the loans where the bank is situated. The CRit is interrelated with the
economic factors which affect the demand for the loans.
Finding
The results are the actual findings after doing the research on the given topic which helps in
analyzing the data and the best possible outcomes which is useful for the research topic. By the
analysis of the results the US banks get an overall view of the capital ratio and how it affects the
lending in the US commercial banks. The results can be found out with the help of the STATA
software used in the research and the collection of the data from the primary and the secondary
resources (Thakor, 1996). The results are necessary for an organization to have a clear picture so
that the research is successfully completed.
CONTRIBUTIONS TO THE FIELD
Primary contribution will be to enhance the understanding of capital ratio of the United States
and its impact on several financial institutions during Lending. Secondary contribution will be
towards academic purposes and latest research findings.

10. TIME SCALE
Tasks March April May June July Aug Sept
Request ethics approval
Background reading,
review literature
Develop research design
and method
Qualitative data
collection and analysis
Developing a
dissertation draft
Draft Completion with
supervisor
Revise Dissertation
Submit

11. Conclusion
The conclusion part given an overall view on the analysis of the data and how the findings of the
data can be evaluated which is relevant for the research topic given. The research paper achieves
the objectives of the research and does a brief analysis of the research. The outcome of the
research topic is evaluated to have the research effectively completed and do some of the
findings to improve the results of the findings.

12. Bibliography
Puri, Maju, Jörg Rochell, Sascha Steffen (2011), “Global Retail Lending in the Aftermath of the
US Financial Crisis: Distinguishing Between Supply and Demand Effects,” Journal of Financial
Economics, 100: 556-578.
Rice, Tara and Jonathan Rose (2010), “When Good Intestments Go Bad: The Contraction in
Community Bank Lending After the 2008 GSE Takeover,” mimeo.
Stein, Jeremy (1998), “An Adverse-Selection Model of Bank Asset and Liability Management
with Implications for the Transmission of Monetary Policy,” The RAND Journal of Economics,
29(3): 466-486.
Thakor, Anjan (1996), “Capital Requirements, Monetary Policy, and Aggregate Bank Lending:
Theory and Empirical Evidence,” Journal of Finance, 51(1): 279-324.
Aiyar, S, Calomiris, C W and Wieladek, T (2014), „Does Macropru Leak? Evidence from a UK
Policy Experiment‟, Journal of Money, Credit and Banking, forthcoming.
Albertazzi, U and Marchetti, D J (2010), „Credit supply, flight to quality and evergreening: an
analysis of bank-firm relationships after Lehman‟, Banca d‟Italia Working Paper 756.
Alfon, I, Argimón and Bascuñana-Ambrós, P (2005), „How individual capital requirements
affect capital ratios in UK banks and building societies‟, Banco de Espana Working Paper 515.
Ashcraft, A B (2008), „Are Bank Holding Companies a Source of Strength to Their Banking
Subsidiaries?‟, Journal of Money, Credit and Banking, 40:2-3, pp. 273-294.
Bernanke, B S and Lown, C S (1991), „The Credit Crunch‟, Brookings Papers on Economic
Activity, no. 2, pp. 205-39.
Beyer, A and Farmer, R E A (2006), „A method to generate structural impulse-responses for
measuring the effects of shocks in structural macro models‟, ECB Working Paper Series 586.
Den Haan, W J, Sumner, S W and Yamashiro, G M (2007), „Bank loan portfolios and the
monetary transmission mechanism‟, Journal of Monetary Economics, 54:3, pp. 904-924.
Elliott, D J, Feldberg, G and Lehnert, A (2013), „The History of Cyclical Macroprudential
Policy in the United States‟, Finance and Economics Discussion Series, 2013-29.
Fonseca, A R, Gonzalez, F and Pereira da Silva, L (2010), „Cyclical Effects of Bank Capital
Buffers with Imperfect Credit Markets: International Evidence‟, Banco Central Do Brasil
Working Paper Series, 216.
Francis, W and Osborne, M (2009), „Bank regulation, capital and credit supply: Measuring the
impact of Prudential Standards‟, FSA Occasional Paper Series, 36.

13. Friedman, B (1991), „Comments and discussion‟, Brookings Panel on Economic Activity.
Furfine, C (2000), „Evidence on the Response of US Banks to Changes in Capital
Requirements‟, Bank of International Settlements Working Paper, No. 88.