Effect of the countercyclical capital buffer on firm loans: Evidence from Germany

Eeva Kerola and Anni Norring

No 8/2025, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: We use confidential loan-level data from the European Central Bank to investigate how changes in the countercyclical capital buffer requirement in Germany affect lending to firms. We find evidence showing that tightening the countercyclical capital buffer leads German banks to reduce the volume of corporate loans and increase the price of new loans. These effects take place immediately after the announcement, given 12 months before the change was implemented. Importantly, we find that the reduction in credit availability notably affects small and medium-sized enterprises, which experience both a significant decrease in available credit and an increase in credit costs. In contrast, large firms are not affected.

Keywords: Macroprudential policy; Countercyclical capital buffer; Loan level data (search for similar items in EconPapers)
JEL-codes: E58 G21 G28 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-cba, nep-eec, nep-ent, nep-mon and nep-sbm
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:325482

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