Federal Reserve Board ("FRB") economists concluded that increased levels of capital and higher capital buffers "may actually spur lending across loan categories."
In an FRB staff working paper, the economists stated that the equity and cash that banks have added in order to satisfy post-crisis standards have given the banks resources to take more lending risks. The economists found that the "capital gap does not restrict bank lending," but may boost it. The economists said that the findings indicate that the "higher capital implied by the supervisory stress test . . . makes banks safer and more resilient."
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