We provide new estimates of the impact of shocks to bank capital requirements on lending supply and macroeconomic activity based on a Bayesian VAR estimated on Italian data and identified combining sign and narrative restrictions. Narrative restrictions are based on the EBA 2011 Stress Test (ST) and the ECB 2014 Comprehensive Assessment (CA) and are corroborated by evidence from the Euro Area Bank Lending Survey. IRFs show that shocks to required capital persistently reduce R.W.A. and loan supply and lead to a temporary decline in GDP. Based on historical decomposition, the ST and the CA increased banks’ Tier 1 ratio by 40 bps and determined a contraction in loan supply and GDP after two years of up to 1.5% and 0.5%, respectively. Results are robust to using alternative narrative restrictions and hold also when controlling for market pressure during the sovereign debt crisis and for global shocks to bank capitalization. •New estimates of the impact of bank capital requirement shocks on lending supply and economic activity.•Bayesian VAR models identified with narrative sign restrictions.•Narrative restrictions based on the EBA 2011 Stress Test and the ECB 2014 Comprehensive Assessment for Italian banks.•The shocks increased the Tier 1 ratio by 40 bps and lowered loan supply and GDP of up to 1.5% and 0.7%, respectively.•Results are robust to controlling for market pressure and for global developments in bank capital.