Banking on resilience: EU macroprudential policy and systemic risk

Ashleigh Neill

International Review of Economics & Finance, 2024, vol. 93, issue PA, 678-699

Abstract: This study examines the effectiveness of macroprudential policies on banking systemic risk for 172 European banks across 20 EU countries from 2000 to 2017. Using a dynamic panel framework, it assesses the effectiveness of policy on two dimensions of systemic risk: banks' contribution to aggregate systemic risk (ΔCoVaR) and their vulnerability in stressed markets (Exposure-ΔCoVaR). Results show policy actions reduce bank systemic risk, especially in terms of Exposure-ΔCoVaR. However, this effect varies between tightening and loosening measures. Interestingly, the analysis indicates that policies don't significantly affect banks' contribution to systemic risk as measured by ΔCoVaR. Borrower-based policies and exposure limits in particular enhance bank resilience. This study has important implications for policymakers regarding the calibration and evaluation of macroprudential measures.

Keywords: Systemic risk; Macroprudential policy; European banks (search for similar items in EconPapers)
JEL-codes: C23 E61 E65 G10 G2 G21 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:93:y:2024:i:pa:p:678-699

DOI: 10.1016/j.iref.2024.03.058

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