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Higher Bank Capital Requirements and Mortgage Pricing: Evidence from the Countercyclical Capital Buffer (CCB)

Christoph Basten and Catherine Koch ()

No 26, HIT-REFINED Working Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: We examine how the CCB affects mortgage pricing after Switzerland was first to activate this macroprudential tool of Basel III. Observing multiple offers per request, we obtain three core findings. First, the CCB changes the composition of mortgage supply, as capital-constrained and mortgage-specialized banks raise prices relatively more. Second, risk-weighting schemes do not amplify the CCB effect. Third, CCB-subjected banks and CCB-exempt insurers both raise mortgage rates. To conclude, changes in the supply composition hint at the CCB’s success in shifting mortgages from less to more resilient banks, but stricter capital requirements do not discourage banks from risky mortgage lending.

Keywords: macroprudential policy; capital requirement; mortgage pricing (search for similar items in EconPapers)
JEL-codes: G21 E51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac, nep-rmg and nep-ure
Date: 2015-06
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Citations: View citations in EconPapers (26) Track citations by RSS feed

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http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/27311/1/wp026.pdf

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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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