Prudential Policies and Their Impact on Credit in the United States

58 Pages Posted: 7 Jun 2017

See all articles by Paul S. Calem

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: March 31, 2017

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.

Paper produced as part of the BIS Consultative Council for the Americas (CCA) research project on "The impact of macroprudential policies: an empirical analysis using credit registry data" implemented by a Working Group of the CCA Consultative Group of Directors of Financial Stability (CGDFS).

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 (March 31, 2017). BIS Working Paper No. 635. Available at SSRN: https://ssrn.com/abstract=2967129

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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