Do delays in expected loss recognition affect banks' willingness to lend?

► We study how loss recognition delays and capital requirements affect bank lending. ► Banks with greater delays are more pro-cyclical due to reduced recessionary lending. ► Banks with smaller delays increase their non-recessionary pre-provision equity more. ► We do not find capital ratio induced pro-cyclicality prior to capital regulation. ► Large banks are more vulnerable to capital constraints post-FDICIA/Basel.