Prudential Policies and Their Impact on Credit in the United States

57 Pages Posted: 19 Dec 2016  

Paul S. Calem

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Ricardo Correa

Board of Governors of the Federal Reserve System

Seung Jung Lee

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: 2016-12-13

Abstract

We analyze how two types of recently used prudential policies affected the supply of credit in the United States. First, we test whether the U.S. bank stress tests had any impact on the supply of mortgage credit. We find that the first Comprehensive Capital Analysis and Review (CCAR) stress test in 2011 had a negative effect on the share of jumbo mortgage originations and approval rates at stress-tested banks — banks with worse capital positions were impacted more negatively. Second, we analyze the impact of the 2013 Supervisory Guidance on Leveraged Lending and subsequent 2014 FAQ notice, which clarified expectations on the Guidance. We find that the share of speculative-grade term-loan originations decreased notably at regulated banks after the FAQ notice.

Keywords: Bank stress tests, CCAR, Home Mortgage Disclosure Act (HMDA) data, Jumbo mortgages, Leveraged lending, Macroprudential policy, Shared National Credit (SNC) data, Interagency Guidance on Leveraged Lending, Syndicated loan market

JEL Classification: G21, G23, G28

Suggested Citation

Calem, Paul S. and Correa, Ricardo and Lee, Seung Jung, Prudential Policies and Their Impact on Credit in the United States (2016-12-13). FRB International Finance Discussion Paper No. 1186. Available at SSRN: https://ssrn.com/abstract=2887003 or http://dx.doi.org/10.17016/IFDP.2016.1186

Paul S. Calem (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Ricardo Correa

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Seung Jung Lee

Board of Governors of the Federal Reserve System ( email )

20th and C Streets, NW
Washington, DC 20551
United States

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