Higher bank capital requirements and mortgage pricing: evidence from the Counter-Cyclical Capital Buffer

Christoph Basten and Catherine Koch
Authors registered in the RePEc Author Service: Catherine Tahmee Casanova

No 169, ECON - Working Papers from Department of Economics - University of Zurich

Abstract: We examine mortgage pricing before and after Switzerland was the first country to activate the Counter-Cyclical Capital Buffer of Basel III. Observing multiple mortgage offers per request, we obtain three core findings. First, capitalconstrained and mortgage-specialized banks raise their rates relatively more. Second, risk-weighting schemes supposed to discriminate against more risky borrowers do not amplify the effect of higher capital requirements. Third, CCB-subjected banks and CCB-exempt insurers raise mortgage rates, but insurers raise rates by on average 8.8 bp more. To conclude, lenders welcome the opportunity to increase mortgage rates, but stricter capital requirements do not discourage banks from risky mortgage lending.

Keywords: Bank lending; mortgage market (search for similar items in EconPapers)
JEL-codes: E51 G21 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-mac, nep-rmg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Related works:
Journal Article: Higher Bank Capital Requirements and Mortgage Pricing: Evidence from the Counter-Cyclical Capital Buffer (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:zur:econwp:169

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