Minimum Capital Requirements for Banks and the Financing of the Economies of the Economic and Monetary Community of Central Africa¹

Abstract This article analyses the impact of minimum bank capital on the financing of economies of the Economic and Monetary Community of Central Africa over the period 1998-2020, based on data from the Bank of Central African States and the annual reports and bulletins of the Banking Commission of Central Africa. To do this, we analysed the impact of minimum bank capital requirements on the real cost of credit, the term structure of credit and on economic agents with financing needs. We used a panel VAR specification estimated using the Generalised Method of Moments and impulse response function analysis based on Monte Carlo simulations to arrive at two main results: minimum bank capital reduces the cost of credit and increases the economy’s credit level. The conclusion is that regulators would benefit from encouraging credit institutions to increase the current level of bank capital in order to benefit from the positive effects of minimum bank capital.