The countercyclical capital buffer and the composition of bank lending

Raphael Auer and Steven Ongena

No 593, BIS Working Papers from Bank for International Settlements

Abstract: Do macroprudential regulations on residential lending influence commercial lending behavior too? To answer this question, we identify the compositional changes in banks' supply of credit using the variation in their holdings of residential mortgages on which extra capital requirements were uniformly imposed by the countercyclical capital buffer (CCB) introduced in Switzerland in 2012. We find that the CCB's introduction led to higher growth in commercial lending, in particular to small firms, although this was unrelated to conditions in regional housing markets. The interest rates and fees charged to these firms concurrently increased. We rationalize these findings in a model featuring both private and firm-specific collateral. The corresponding imperfect substitutability between private and commercial credit for the entrepreneur's relationship bank is then shown to give rise to the compositional patterns we empirically document.

Keywords: macroprudential policy; spillovers; credit; bank capital; systemic risk (search for similar items in EconPapers)
Pages: 45 pages
Date: 2016-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Related works:
Journal Article: The countercyclical capital buffer and the composition of bank lending (2022)
Working Paper: The countercyclical capital buffer and the composition of bank lending (2021)
Working Paper: The Countercyclical Capital Buffer and the Composition of Bank Lending (2019)
Working Paper: The countercyclical capital buffer and the composition of bank lending (2019)
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