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

44 Pages Posted: 1 May 2012 Last revised: 8 Aug 2015

Gabriel Jiménez

Banco de España

Steven Ongena

University of Zurich - Department of Banking and Finance; Swiss Finance Institute

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

Banco de España

Multiple version iconThere are 2 versions of this paper

Date Written: August 7, 2015

Abstract

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.

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

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

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 (August 7, 2015). European Banking Center Discussion Paper No. 2012-011. Available at SSRN: https://ssrn.com/abstract=2049284 or http://dx.doi.org/10.2139/ssrn.2049284

Gabriel Jimenez (Contact Author)

Banco de España ( email )

Alcala 50
Madrid 28014
Spain

Steven R. G. Ongena

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

Schönberggasse 1
Zürich, 8001
Switzerland

Swiss Finance Institute ( email )

Quartier UNIL-Dorigny, Bâtiment Extranef, # 211
40, Bd du Pont-d'Arve
CH-1015 Lausanne, CH-6900
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

Banco de España ( email )

Madrid 28014
Spain

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