We use bank-firm matched data to study how the capital buffers that large U.S. banks must satisfy to “pass” the Federal Reserve’s stress tests impact banks’ lending and firms’ loan volumes, overall debt, investment, and employment. We find that larger stress-test capital buffers lead...

Did banks curb lending to creditworthy small and mid-sized enterprises (SME) during the COVID-19 pandemic? Sitting on top of minimum capital requirements, regulatory capital buffers introduced after the 2008 global financial crisis (GFC) are costly regions of "rainy day" equity capital designed...

We investigate one channel through which the annual bank stress tests, as part of the Federal Reserve’s Comprehensive Capital Analysis and Review (CCAR) review, could unexpectedly affect the provision of bank credit. To quantify the impact of the stress tests on lending, we compare the...