The pass-through of bank capital requirements to corporate lending spreads

Robert Bichsel, Luisa Lambertini, Abhik Mukherjee and Dan Wunderli

Journal of Financial Stability, 2022, vol. 58, issue C

Abstract: We study the impact of higher bank capital requirements on corporate lending spreads using granular bank- and loan-level data. Our empirical strategy employs the heterogeneity in capital requirements across banks and time of implementation in Switzerland. We find that changes in the capital deviation from the regulatory minimum affect lending spreads asymmetrically. In response to a reduction in the capital deviation, banks with deficits with respect to their risk-weighted capital requirement raise spreads relative to banks with surpluses and de-leverage. Banks respond to higher requirements by raising spreads and, for deficit banks, by cutting lending.

Keywords: Bank capital requirements; Lending spreads; Bank regulation (search for similar items in EconPapers)
JEL-codes: E44 G21 G28 (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finsta:v:58:y:2022:i:c:s1572308921000693

DOI: 10.1016/j.jfs.2021.100910

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