 The impact of macroprudential policy fragmentation on corporate lending – evidence from a novel indicatorMarkus Behn, Marco Forletta and Alessio Reghezza No 3287, Working Paper Series from European Central Bank Abstract: We construct a novel bank-level index that quantifies fragmentation in the capital buffer framework faced by euro area banks. Defined at quarterly frequency, it measures fragmentation by looking at the number of simultaneously active buffers, their geographical dispersion, and the frequency of buffer rate changes within the preceding year. The index is orthogonalised with respect to the level of capital requirements, bank size, and the financial cycle, thus controlling for these factors when measuring fragmentation as defined above. We then show that a one standard deviation increase in the index is associated with about 36 basis points higher capital headroom and around 50 basis points lower corporate lending growth within existing bank-firm relationships. We interpret these results as suggestive evidence that banks facing more fragmented buffer requirements retain extra capital and adjust lending more cautiously to account for higher uncertainty with respect to future adjustments in buffer requirements. JEL Classification: E5, E51, G18, G21, G28 Keywords: banking; capital buffers; credit supply; financial regulation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20263287 Access Statistics for this paper More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC. |
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