Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply

Evidence from the Spanish Dynamic Provisioning Experiments

G. Jiménez, S. Ongena, J.L. Peydro, J. Saurina

Research output: Working paperDiscussion paperOther research output

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Abstract

Abstract: We analyze the impact of the countercyclical capital buffers held by banks on the supply of credit to firms and their subsequent performance. Countercyclical ‘dynamic’ provisioning that is unrelated to specific loan losses was introduced in Spain in 2000, and modified in 2005 and 2008. These policy experiments which entailed bank-specific shocks to capital buffers, combined with the financial crisis that shocked banks according to their available pre-crisis buffers, underpin our identification strategy. Our estimates from comprehensive bank-, firm-, loan-, and loan application-level data suggest that countercyclical capital buffers help smooth credit supply cycles and in bad times have positive effects on firm credit availability, assets, employment and survival. Our findings therefore hold important implications for theory and macroprudential policy.
Original languageEnglish
Place of PublicationTilburg
PublisherEBC
Number of pages57
Volume2012-011
Publication statusPublished - 2012

Publication series

NameEBC Discussion Paper
Volume2012-011

Fingerprint

Provisioning
Bank capital
Experiment
Credit supply
Buffer
Loans
Financial crisis
Spain
Credit availability
Assets
Credit

Keywords

  • bank capital
  • dynamic provisioning
  • credit availability
  • financial crisis

Cite this

Jiménez, G., Ongena, S., Peydro, J. L., & Saurina, J. (2012). Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments. (EBC Discussion Paper; Vol. 2012-011). Tilburg: EBC.
Jiménez, G. ; Ongena, S. ; Peydro, J.L. ; Saurina, J. / Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply : Evidence from the Spanish Dynamic Provisioning Experiments. Tilburg : EBC, 2012. (EBC Discussion Paper).
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abstract = "Abstract: We analyze the impact of the countercyclical capital buffers held by banks on the supply of credit to firms and their subsequent performance. Countercyclical ‘dynamic’ provisioning that is unrelated to specific loan losses was introduced in Spain in 2000, and modified in 2005 and 2008. These policy experiments which entailed bank-specific shocks to capital buffers, combined with the financial crisis that shocked banks according to their available pre-crisis buffers, underpin our identification strategy. Our estimates from comprehensive bank-, firm-, loan-, and loan application-level data suggest that countercyclical capital buffers help smooth credit supply cycles and in bad times have positive effects on firm credit availability, assets, employment and survival. Our findings therefore hold important implications for theory and macroprudential policy.",
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Jiménez, G, Ongena, S, Peydro, JL & Saurina, J 2012 'Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply: Evidence from the Spanish Dynamic Provisioning Experiments' EBC Discussion Paper, vol. 2012-011, EBC, Tilburg.

Macroprudential Policy, Countercyclical Bank Capital Buffers and Credit Supply : Evidence from the Spanish Dynamic Provisioning Experiments. / Jiménez, G.; Ongena, S.; Peydro, J.L.; Saurina, J.

Tilburg : EBC, 2012. (EBC Discussion Paper; Vol. 2012-011).

Research output: Working paperDiscussion paperOther research output

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AB - Abstract: We analyze the impact of the countercyclical capital buffers held by banks on the supply of credit to firms and their subsequent performance. Countercyclical ‘dynamic’ provisioning that is unrelated to specific loan losses was introduced in Spain in 2000, and modified in 2005 and 2008. These policy experiments which entailed bank-specific shocks to capital buffers, combined with the financial crisis that shocked banks according to their available pre-crisis buffers, underpin our identification strategy. Our estimates from comprehensive bank-, firm-, loan-, and loan application-level data suggest that countercyclical capital buffers help smooth credit supply cycles and in bad times have positive effects on firm credit availability, assets, employment and survival. Our findings therefore hold important implications for theory and macroprudential policy.

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