Compositional Effects of O-Sii Capital Buffers and the Role of Monetary Policy

38 Pages Posted: 7 Jul 2020

See all articles by Giuseppe Cappelletti

Giuseppe Cappelletti

European Central Bank (ECB)

Alessio Reghezza

Bangor Business School

Costanza Rodriguez d’Acri

affiliation not provided to SSRN

Martina Spaggiari

affiliation not provided to SSRN

Date Written: July, 2020

Abstract

We investigate the impact of macroprudential capital requirements on bank lending behaviour across economic sectors, focusing on their potentially heterogenous effects and transmission channel. By employing confidential loan-level data for the euro area over 2015-18, we find that the reaction of banks to structural capital surcharges depends on the level of the required capital buffer and the economic sector of the borrowing counterpart. Although tighter buffer requirements correspond to stronger lending contractions, targeted banks curtail their lending towards credit institutions the most, while leaving loan supply to non-financial corporations almost unchanged. We find that this lending is mitigated when banks resort to central bank funding. These results have important policy implications as they provide evidence on the impact of macroprudential policy frameworks and their interaction with unconventional monetary policies.

Keywords: credit supply, large exposure, loan-level data, macroprudential policy, unconventional monetary policy

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

Suggested Citation

Cappelletti, Giuseppe and Reghezza, Alessio and d’Acri, Costanza Rodriguez and Spaggiari, Martina, Compositional Effects of O-Sii Capital Buffers and the Role of Monetary Policy (July, 2020). ECB Working Paper No. 20202440, Available at SSRN: https://ssrn.com/abstract=3644250 or http://dx.doi.org/10.2139/ssrn.3644250

Giuseppe Cappelletti (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Alessio Reghezza

Bangor Business School ( email )

Bangor Business School
College Road
Gwynedd LL57 2DG, Wales LL57 2DG
United Kingdom

Costanza Rodriguez D’Acri

affiliation not provided to SSRN

No Address Available

Martina Spaggiari

affiliation not provided to SSRN

No Address Available

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