Capital Buffer and Risk-Taking : An empirical study of the effect that capital buffer has on Swedish banks risk-taking

This thesis employs a quantile regression to study the heterogenous effects of capital buffer on Swedish banks risk-taking throughout the risk-taking distribution. By applying a quantile regression method on a panel data gathered from 32 Swedish banks annual reports and from Statistics Sweden over the period 2009-2019 I find that the effect of capital buffer on Swedish banks risk-taking is negative. Moreover, the result suggests that this effect is different for high-risk banks compared to low-risk banks, with an about 7 times more negative effect for high risk-banks (banks in the 90th percentile of the conditional distribution) than for low-risk banks (banks in the 10th percentile of the conditional distribution). These results could have important implications for policy makers and regulators in Sweden, implying that regulating high-risk banks and low-risk banks the same could have unintended effects