Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments
Bank of Spain
University of Zurich - Department of Banking and Finance; Swiss Finance Institute
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
August 7, 2015
European Banking Center Discussion Paper No. 2012-011
To study the impact of macroprudential policy on credit supply cycles and real effects, we analyze dynamic provisioning, which implies pro-cyclical bank capital regulation. Introduced in Spain in 2000, revised four times and tested in its counter-cyclicality during the crisis, it affected banks differentially. Accessing an exhaustive credit register, we find that dynamic provisioning smooths credit supply cycles and, in bad times, supports firm performance. A policy-induced one-percentage point (pp) increase in capital buffers extends credit to firms by 9 pp, increasing firm employment (6 pp) and survival (1 pp). Moreover, there are important compositional effects in credit supply related to risk and regulatory arbitrage by non-regulated and regulated-but-less-affected banks.
Number of Pages in PDF File: 44
Keywords: bank capital, dynamic provisioning, credit availability, financial crisis
JEL Classification: E51, E58, E60, G21, G28
Date posted: May 1, 2012 ; Last revised: August 8, 2015
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