The Countercyclical Capital Buffer and the Composition of Bank Lending

45 Pages Posted: 15 Dec 2016

See all articles by Raphael Auer

Raphael Auer

Swiss National Bank; Bank for International Settlements (BIS)

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute; KU Leuven; NTNU Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: December 2016

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 (CCB) introduced in Switzerland in 2012. We find that the CCB's introduction led to higher growth in commercial lending, in particular to small firms, although this was unrelated to conditions in regional housing markets. The interest rates and fees charged to these firms concurrently increased. We rationalize these findings in a model featuring both private and firm-specific collateral. The corresponding imperfect substitutability between private and commercial credit for the entrepreneur's relationship bank is then shown to give rise to the compositional patterns we empirically document.

Keywords: macroprudential policy, spillovers, credit, bank capital, systemic risk

JEL Classification: E51, E58, E60, G01, G21, G28

Suggested Citation

Auer, Raphael and Ongena, Steven R. G., The Countercyclical Capital Buffer and the Composition of Bank Lending (December 2016). BIS Working Paper No. 593, Available at SSRN: https://ssrn.com/abstract=2881902

Raphael Auer (Contact Author)

Swiss National Bank ( email )

Fraumuensterstr. 8
Zurich, 8022
Switzerland

Bank for International Settlements (BIS)

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

Steven R. G. Ongena

University of Zurich - Department of Banking and Finance ( email )

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute

c/o University of Geneva
40, Bd du Pont-d'Arve
CH-1211 Geneva 4
Switzerland

KU Leuven ( email )

Oude Markt 13
Leuven, Vlaams-Brabant 3000
Belgium

NTNU Business School ( email )

Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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