Discussion Paper Details

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Title: The countercyclical capital buffer and the composition of bank lending

Author(s): Raphael Auer and Steven Ongena

Publication Date: August 2019

Keyword(s): bank capital, credit, macroprudential policy, Spillovers and systemic risk

Programme Area(s): Financial Economics, International Macroeconomics and Finance and Monetary Economics and Fluctuations

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.

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Bibliographic Reference

Auer, R and Ongena, S. 2019. 'The countercyclical capital buffer and the composition of bank lending'. London, Centre for Economic Policy Research.