Compositional effects of bank capital buffers and interactions with monetary policy

Giuseppe Cappelletti, Alessio Reghezza (), Costanza Rodríguez d'Acri and Martina Spaggiari

Journal of Banking & Finance, 2022, vol. 140, issue C

Abstract: We investigate the impact of capital requirements on bank lending across institutional sectors, focusing on their transmission channel and the interaction with monetary policy. By employing confidential loan-level data for the euro area, we find that the reaction of banks to capital surcharges for Other Systemically Important Institutions (O-SII) depends on the level of the required buffer and the institutional sector of the borrowing counterpart. Tighter requirements correspond to stronger lending contractions with targeted banks curtailing their lending mostly towards credit institutions. Loan supply to non-financial corporations is almost unchanged, mainly as a result of the incentives embedded in the ECB's targeted long-term refinancing operations. Our results provide evidence on the interaction between macroprudential and monetary policy, and the positive effects of combining two different sets of incentives to support the resilience of the banking system and credit supply to the real economy.

Keywords: Macroprudential policy; Unconventional monetary policy; Credit supply; Loan-level data; Large exposure (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0378426622001248
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:140:y:2022:i:c:s0378426622001248

DOI: 10.1016/j.jbankfin.2022.106530

Access Statistics for this article

Journal of Banking & Finance is currently edited by Ike Mathur

More articles in Journal of Banking & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().