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

Christoph Basten and Cathérine Koch
Authors registered in the RePEc Author Service: Catherine Tahmee Casanova

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: E51 G21 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2015-06
New Economics Papers: this item is included in nep-cba, nep-mac, nep-rmg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (46)

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Working Paper: Higher bank capital requirements and mortgage pricing: evidence from the Countercyclical Capital Buffer (CCB) (2015)
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