Leakages from Macroprudential Regulations : The Case of Household-Specific Tools and Corporate Credit

Sector-specific macroprudential regulations can increase the riskiness of credit to other sectors. We compute alternative country-level measures of the riskiness of corporate credit allocation based on firm-level data and find that, consistently across those measures, an unexpected tightening of household-specific macroprudential tools during a credit expansion is followed by an increase in riskiness of corporate credit. These effects are quantitatively meaningful: the riskiness of corporate credit increases by around 10 percent of the historical standard deviation following an unexpected policy tightening. Further evidence from bank lending standards surveys suggests that the leakage effects are stronger for larger firms compared to SMEs, consistent with recent evidence on the use of personal real estate as loan collateral by small firms