GSIB surcharges and bank lending: Evidence from US corporate loan data

Capital surcharges on global systemically important banks (GSIBs) decrease lending to firms but do not have any real effects. Banks subject to higher surcharges reduce loan commitments relative to other banks and also lower their estimates of firm risk. Firms' total borrowing, however, does not fall, as firms switch to other banks. We establish these results using supervisory data on corporate loans and variation in surcharges in the United States. These results contribute to the debate on the costs and benefits of surcharges and regulatory tailoring and their effects on the reallocation of credit supply across financial institutions. Published by Elsevier B.V.

Automated summary

Capital surcharges on GSIBs reduce lending to firms without any real effects. Banks subject to higher surcharges decrease loan commitments and estimates of firm risk, but firms' total borrowing does not decline as they switch to other banks. The study contributes to the debate on the costs and benefits of surcharges and regulatory tailoring, and their effects on credit supply reallocation across financial institutions.