Loan Pricing Following a Macroprudential within-Sector Capital Measure

Bruno Silva Martins and Ricardo Schechtman
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Bruno Silva Martins: Banco Central do Brasil
Ricardo Schechtman: Banco Central do Brasil

in Premio de Banca Central Rodrigo Gómez / Central Banking Award "Rodrigo Gómez" from Centro de Estudios Monetarios Latinoamericanos, CEMLA

Abstract: This paper investigates the consequences on loan spreads of a within-sector macroprudential capital measure in Brazil. Due to concerns related to a too fast and non-sustainable expansion of the auto-loan sector, regulatory capital was raised for auto-loans with specific long maturities and high LTVs. Our results show that Brazilian banks, after the regulatory measure, increased spreads charged on the same borrower for similar auto loans whose regulatory risk weights have increased. In comparison to the set of untargeted loans, the increase was at least of 13%. On the other hand, evidence on increase of spreads also for loans whose risk weights have not been altered is not robust. Finally, this paper shows that the later withdrawal of the regulatory capital measure was associated, similarly, to lower spreads charged on auto loans whose risk weights have decreased. Nevertheless, when measured relatively, this reduction in spreads was smaller than the original increase.

Keywords: Auto loans; Prudential regulation; Brazil (search for similar items in EconPapers)
JEL-codes: G21 L62 (search for similar items in EconPapers)
Date: 2013
ISBN: 978-607-7734-59-8
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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