Effects of macroprudential policies on bank lending and credit risks

Dr. Stefanie Behncke

Issue
2020-06

Pages
47

JEL classification
E5, G21, G28

Keywords
Banks, countercyclical capital buffer, financial stability, loan-to-value ratio, macroprudential policy, mortgages

Year
2020

I analyse the effects of two macroprudential policy measures implemented in Switzerland: the activation of the countercyclical capital buffer (CCyB) and a cap on the loan-to-value (LTV) ratios. I use a difference-in-differences method to estimate the effects of these measures on risk indicators, such as their LTV and loan-to-income (LTI) ratios and mortgage growth rates.

I find that both the CCyB and the LTV cap led to a reduction in high LTV mortgages. The banks affected by the CCyB also reduced their mortgage growth rates. I do not find any evidence that these measures had unintended consequences on LTI risks or on non-mortgage credit growth.