Supervisory Shocks to Banks’ Credit Standards and Their Macro Impact

33 Pages Posted: 20 Feb 2020 Last revised: 14 Dec 2020

See all articles by Francesco Simone Lucidi

Francesco Simone Lucidi

Sapienza University of Rome

Willi Semmler

The New School - Department of Economics; Universitaet Bielefeld; IIASA

Date Written: January 20, 2020


Credit standards reported in the Bank Lending Surveys (BLS) of the ECB summarize banks' sentiment about credit market tightness and they strongly co-move with credit growth. This paper builds a new external instrument which captures an exogenous source of variation in credit standards, in order to identify a structural shock stemming exclusively from the banking system. The instrument accounts for mandatory rotations of external auditors within the biggest banking institutions of nine euro-area countries. By estimating IV-local projections, this paper finds a significant dynamic causal impact of the shock to credit standards on both real and financial variables. The results suggest that such a structural shock may represent the effects of an unexpected supervisory measure at banking-system level which resemble the implementation of a macroprudential measure.

Keywords: credit standards, credit shocks, banks management, IV-local projection

JEL Classification: E37, C36, G28

Suggested Citation

Lucidi, Francesco Simone and Semmler, Willi, Supervisory Shocks to Banks’ Credit Standards and Their Macro Impact (January 20, 2020). Available at SSRN: or

Francesco Simone Lucidi (Contact Author)

Sapienza University of Rome ( email )

Piazzale Aldo Moro, 5
Rome, 00185

Willi Semmler

The New School - Department of Economics ( email )

65 Fifth Avenue
New York, NY 10003
United States


Universitaet Bielefeld ( email )

Universitätsstraße 25
Bielefeld, NRW

IIASA ( email )

Schlossplatz 1
Laxenburg/Austria, A-2361

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