TY - JOUR
T1 - Countercyclical capital buffers and credit supply
T2 - evidence from the COVID-19 crisis
AU - Dursun-de Neef, H. Özlem
AU - Schandlbauer, Alexander
AU - Wittig, Colin
N1 - Funding Information:
We are grateful for valuable comments from Ozan Güler and Loriana Pelizzon. We also would like to thank the participants at the 28th Annual Meeting of the German Finance Association for helpful comments. Dursun-de Neef gratefully acknowledges funding by the Deutsche Forschungsgemeinschaft (DFG, German Research Foundation) – 448659867 . The paper was written during Dursun-de Neef's time at Goethe University Frankfurt.
Publisher Copyright:
© 2023 The Author(s)
PY - 2023/9
Y1 - 2023/9
N2 - This paper examines how European banks adjusted their lending subsequent to the release of the countercyclical capital buffers (CCyB) during the COVID-19 pandemic. At its onset in 2020Q1, being exposed to a higher ex-ante countercyclical capital buffer led to a reduction in banks’ lending. Yet the relief of the CCyBs removed this negative effect from 2020Q2 onwards. We find that the reduction in CCyBs led to a significant relative increase in the average bank's lending by about 5.6 percentage points of their total assets. This increase happened mainly in retail mortgage loans and was stronger for poorly-capitalized banks. These results imply that the release of the CCyBs was effective in promoting bank lending during the pandemic.
AB - This paper examines how European banks adjusted their lending subsequent to the release of the countercyclical capital buffers (CCyB) during the COVID-19 pandemic. At its onset in 2020Q1, being exposed to a higher ex-ante countercyclical capital buffer led to a reduction in banks’ lending. Yet the relief of the CCyBs removed this negative effect from 2020Q2 onwards. We find that the reduction in CCyBs led to a significant relative increase in the average bank's lending by about 5.6 percentage points of their total assets. This increase happened mainly in retail mortgage loans and was stronger for poorly-capitalized banks. These results imply that the release of the CCyBs was effective in promoting bank lending during the pandemic.
KW - Bank capitalization
KW - Bank lending
KW - Countercyclical capital buffers
KW - European banks
UR - http://www.scopus.com/inward/record.url?scp=85162978339&partnerID=8YFLogxK
U2 - 10.1016/j.jbankfin.2023.106930
DO - 10.1016/j.jbankfin.2023.106930
M3 - Article
C2 - 37363102
AN - SCOPUS:85162978339
SN - 0378-4266
VL - 154
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
M1 - 106930
ER -