Prudential policies and their impact on credit in the United States

BIS Working Papers No 635
May 2017

Paper produced as part of the BIS Consultative Council for the Americas (CCA) research project on "The impact of macroprudential policies: an empirical analysis using credit registry data" implemented by a Working Group of the CCA Consultative Group of Directors of Financial Stability (CGDFS).

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.

JEL classification: G21, G23, G28

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