DP13942 The countercyclical capital buffer and the composition of bank lending

Author(s): Raphael Auer, Steven Ongena
Publication Date: August 2019
Date Revised: September 2019
Keyword(s): bank capital, credit, macroprudential policy, Spillovers, systemic risk
JEL(s): E51, E58, E60, G01, G21, G28
Programme Areas: Financial Economics, International Macroeconomics and Finance, Monetary Economics and Fluctuations
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=13942

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.