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Higher bank capital requirements and mortgage pricing: evidence from the Countercyclical Capital Buffer (CCB)

Christoph Basten and Catherine Koch ()

No 511, BIS Working Papers from Bank for International Settlements

Abstract: How has the CCB affected mortgage pricing after Switzerland became the first country to activate this Basel III macroprudential tool? By analyzing a database with several offers per mortgage request, we construct a picture of mortgage supply and demand. We find, first, that the CCB changes the composition of mortgage supply, as relatively capital-constrained and mortgage-specialized banks raise prices more than their competitors do. Second, risk-weighting schemes linked to borrower risk do not amplify the CCB's effect. To conclude, changes in the supply composition suggest that the CCB has achieved its intended effect in shifting mortgages from less resilient to more resilient banks, but stricter capital requirements do not appear to have discouraged less resilient banks from risky mortgage lending.

Keywords: banks; macroprudential policy; capital requirements; mortgage pricing (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-mac, nep-rmg and nep-ure
Date: 2015-09
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Working Paper: Higher Bank Capital Requirements and Mortgage Pricing: Evidence from the Countercyclical Capital Buffer (CCB) (2015) Downloads
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