GSIB Surcharges and Bank Lending: Evidence from U.S. Corporate Loan Data

52 Pages Posted: 18 Sep 2020 Last revised: 5 Jan 2021

See all articles by Giovanni Favara

Giovanni Favara

Board of Governors of the Federal Reserve System

Ivan Ivanov

Board of Governors of the Federal Reserve System

Marcelo Rezende

Board of Governors of the Federal Reserve System

Date Written: January 4, 2021

Abstract

Capital surcharges on global systemically important banks (GSIBs) decrease lending to firms but do not have any real effects. Banks subject to higher surcharges reduce loan commitments relative to other banks. In response to surcharges, GSIBs also lower their estimates of firm risk. Firms’ total borrowing, however, does not fall, as firms switch to other banks. We establish these results using supervisory data on corporate loans and variation in surcharges in the United States. These results contribute to the debate on the costs and benefits of surcharges and regulatory tailoring and their effects on the reallocation of credit supply across financial institutions.

Keywords: GSIB surcharges, Basel III regulation, Bank capital requirements, Bank lending

JEL Classification: G21, G28

Suggested Citation

Favara, Giovanni and Ivanov, Ivan and Rezende, Marcelo, GSIB Surcharges and Bank Lending: Evidence from U.S. Corporate Loan Data (January 4, 2021). Journal of Financial Economics (JFE), Forthcoming , Available at SSRN: https://ssrn.com/abstract=3676674 or http://dx.doi.org/10.2139/ssrn.3676674

Giovanni Favara

Board of Governors of the Federal Reserve System ( email )

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

HOME PAGE: http://www.giovannifavara.com

Ivan Ivanov

Board of Governors of the Federal Reserve System ( email )

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

Marcelo Rezende (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

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