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Prudential policies and their impact on credit in the United States

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  • Paul Calem
  • Ricardo Correa
  • Seung Jung Lee

Abstract

We analyze how two types of recently used prudential policies affected the supply of credit in the United States. First, we test whether the U.S. bank stress tests had any impact on the supply of mortgage credit. We find that the first Comprehensive Capital Analysis and Review (CCAR) stress test in 2011 had a negative effect on the share of jumbo mortgage originations and approval rates at stress-tested banks-banks with worse capital positions were impacted more negatively. Second, we analyze the impact of the 2013 Supervisory Guidance on Leveraged Lending and subsequent 2014 FAQ notice, which clarified expectations on the Guidance. We find that the share of speculative-grade term-loan originations decreased notably at regulated banks after the FAQ notice.

Suggested Citation

  • Paul Calem & Ricardo Correa & Seung Jung Lee, 2017. "Prudential policies and their impact on credit in the United States," BIS Working Papers 635, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:635
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    References listed on IDEAS

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    Cited by:

    1. Kristle Romero Cortes & Yuliya Demyanyk & Lei Li & Elena Loutskina & Philip E. Strahan, 2018. "Stress Tests and Small Business Lending," Working Papers (Old Series) 1802, Federal Reserve Bank of Cleveland, revised 01 Mar 2018.
    2. Carlos Garriga & Athena Tsouderou & Pedro Gete, 2019. "Housing Dynamics without Homeowners. The Role of I," 2019 Meeting Papers 1407, Society for Economic Dynamics.
    3. Acharya, Viral V. & Berger, Allen N. & Roman, Raluca A., 2018. "Lending implications of U.S. bank stress tests: Costs or benefits?," Journal of Financial Intermediation, Elsevier, vol. 34(C), pages 58-90.
    4. Kim, Sooji & Plosser, Matthew C. & Santos, João A.C., 2018. "Macroprudential policy and the revolving door of risk: Lessons from leveraged lending guidance," Journal of Financial Intermediation, Elsevier, vol. 34(C), pages 17-31.
    5. Niepmann, Friederike & Stebunovs, Viktors, 2018. "Modeling Your Stress Away," CEPR Discussion Papers 12624, C.E.P.R. Discussion Papers.
    6. Leonardo Gambacorta & Andrés Murcia, 2019. "The impact of macroprudential policies and their interaction with monetary policy: an empirical analysis using credit registry data," IFC Bulletins chapters, in: Bank for International Settlements (ed.),Are post-crisis statistical initiatives completed?, volume 49, Bank for International Settlements.
    7. Ivan Marinovic & Martin Szydlowski, 2019. "Monitor Reputation and Transparency," 2019 Meeting Papers 125, Society for Economic Dynamics.
    8. Shapiro, Joel & Zeng, Jing, 2019. "Stress Testing and Bank Lending," CEPR Discussion Papers 13907, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    bank stress tests; CCAR; Home Mortgage Disclosure Act (HMDA) data; jumbo mortgages; leveraged lending; macroprudential policy; Shared National Credit (SNC) data; Interagency Guidance on Leveraged Lending; syndicated loan market;

    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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