Working Paper: CEPR ID: DP13942
Authors: Raphael Auer; Steven Ongena
Abstract: Do macroprudential regulations on residential lending influence commercial lending behavior too? To answer this question, we identify the compositional changes in banks’ supply of credit using the variation in their holdings of residential mortgages on which extra capital requirements were uniformly imposed by the countercyclical capital buffer (CCyB) introduced in Switzerland in 2012. We find that the CCyB’s introduction led to higher growth in commercial lending although this was unrelated to conditions in regional housing markets. Interest rates and fees charged to the firms concurrently increased. We rationalize these findings in a model featuring both private and firm-specific collateral.
Keywords: macroprudential policy; spillovers; credit; bank capital; systemic risk
JEL Codes: E51; E58; E60; G01; G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Countercyclical Capital Buffer (CCyB) (G28) | higher growth in commercial lending (G21) |
| higher share of residential risk-weighted assets (RRWAs) (G51) | higher growth in commercial lending (G21) |
| Countercyclical Capital Buffer (CCyB) (G28) | reduced residential mortgage granting (G21) |
| reduced residential mortgage granting (G21) | overall lending composition shift (G51) |
| Countercyclical Capital Buffer (CCyB) (G28) | raised interest rates on corporate loans (G21) |
| Countercyclical Capital Buffer (CCyB) (G28) | raised commissions on corporate loans (G24) |
| Countercyclical Capital Buffer (CCyB) (G28) | influenced quantity of credit supplied to commercial sectors (E51) |
| Countercyclical Capital Buffer (CCyB) (G28) | altered pricing of corporate loans (G21) |
| higher exposure to CCyB (F65) | increased commercial lending (G21) |