... decisions, i.e., supply-side effects, and demand-side effects working through loan demand. As loan demand is known to fluctuate procyclically over the business cycle, demand-side effects may also lead ... CAPi,t and RISKi,t are the regulatory capital and risk-weighted assets of bank i at time t. The error terms vi,t and wi,t are again assumed to consist of a bank-specific component and white ... reserves (LLOSS), and a higher standard deviation of the returns on assets (ROA) and the returns on equity (ROE). However, they are not rewarded by higher returns on assets (ROA) and higher returns...