Abstract

http://ssrn.com/abstract=2049284
 
 

References (81)



 
 

Citations (3)



 


 



Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments


Gabriel Jiménez


Bank of Spain

Steven Ongena


University of Zurich and SFI

Jose-Luis Peydro


Universitat Pompeu Fabra - Faculty of Economic and Business Sciences; Barcelona Graduate School of Economics (Barcelona GSE); Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI); Centre for Economic Policy Research (CEPR)

Jesus Saurina Salas


Bank of Spain

September 22, 2014

European Banking Center Discussion Paper No. 2012-011

Abstract:     
To analyze the impact of macroprudential policy on the cyclicality of the supply of credit and associated spillovers to the real economy, we study dynamic provisioning. This policy mandates provisioning unrelated to specific loan losses to build up bank capital in good times to be used in bad times, thereby creating countercyclical buffers. It was introduced in Spain in 2000, revised four times and tested in its countercyclical nature during the crisis, always affecting individual banks differentially. The resultant time-varying bank-specific shocks that occur during a full credit cycle combined with comprehensive loan-, bank-, firm-level data until 2013 allow for identification. Robust estimates show that dynamic provisioning smooths credit supply cycles and, in bad times, critically upholds firm financing and performance. A policy-induced additional percentage point (pp) in bank capital buffer extends the supply of credit to firms (by 9 pp), thereby increasing firm employment (by 6 pp) and survival (by 1 pp). Moreover, a tightening of requirements in crisis times results in a severe credit crunch with associated firm death. Results suggest that building up capital buffers before the crisis is superior in terms of maintaining real activity and avoiding risk-shifting than changing requirements (for lowly capitalized banks) during the crisis. However, a capital tightening in good times induces both risk-taking by regulated banks (that supply more credit to firms with higher yield and leverage) and regulatory arbitrage by non-regulated and regulated-but-less-affected banks. In sum, results show that understanding the heterogeneity of the impact of a macroprudential policy across banks, firms, loans and over the entire cycle is crucial.

Number of Pages in PDF File: 44

Keywords: bank capital, dynamic provisioning, credit availability, financial crisis

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

working papers series





Download This Paper

Date posted: May 1, 2012 ; Last revised: September 23, 2014

Suggested Citation

Jiménez, Gabriel and Ongena, Steven and Peydro , Jose-Luis and Saurina Salas, Jesus, Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments (September 22, 2014). European Banking Center Discussion Paper No. 2012-011. Available at SSRN: http://ssrn.com/abstract=2049284 or http://dx.doi.org/10.2139/ssrn.2049284

Contact Information

Gabriel Jimenez (Contact Author)
Bank of Spain ( email )
Alcala 50
Madrid 28014
Spain
Steven R. G. Ongena
University of Zurich and SFI ( email )
Plattenstrasse 14
Zürich, 8032
Switzerland
Jose-Luis Peydro
Universitat Pompeu Fabra - Faculty of Economic and Business Sciences ( email )
Ramon Trias Fargas 25-27
Barcelona, Barcelona 08005
Spain
(+34) 93 542 1756 (Phone)
(+34) 93 542 1746 (Fax)
HOME PAGE: http://https://sites.google.com/site/joseluispeydroswebpage/
Barcelona Graduate School of Economics (Barcelona GSE) ( email )
Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain
HOME PAGE: http://www.barcelonagse.eu/Faculty.php?id=432
Universitat Pompeu Fabra - Centre de Recerca en Economia Internacional (CREI) ( email )
Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Jesus Saurina Salas
Bank of Spain ( email )
Madrid 28014
Spain
Feedback to SSRN


Paper statistics
Abstract Views: 3,595
Downloads: 598
Download Rank: 20,125
References:  81
Citations:  3

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo8 in 0.297 seconds