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Bank liquidity regulation and the growth of private credit

Author

Listed:
  • Sebastian Doerr
  • Gaston Gelos
  • Vesa Pursiainen

Abstract

We study the role of bank liquidity regulation in the growth of private credit. Following the introduction of the liquidity coverage ratio (LCR), private credit increases significantly more in U.S. counties with a larger footprint of banks subject to the LCR or of LCR banks with greater initial liquidity shortfalls. Our estimated effect of the LCR on private credit growth is comparable in economic magnitude to that of the increased capital requirements from the 2012 CCAR stress tests. Consistent with loan supply effects, the relationship between banks’ LCR footprint and private credit is stronger in industries that are more reliant on credit.

Suggested Citation

  • Sebastian Doerr & Gaston Gelos & Vesa Pursiainen, 2026. "Bank liquidity regulation and the growth of private credit," BIS Working Papers 1388, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1388
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    Keywords

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    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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