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Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking

Alin-Marius Andries (), Florentina Melnic () and Simona Nistor ()
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Alin-Marius Andries: Alexandru Ioan Cuza University of Iasi, Romania
Florentina Melnic: Alexandru Ioan Cuza University of Iasi, Romania

Authors registered in the RePEc Author Service: Alin Marius Andrieș ()

Czech Journal of Economics and Finance (Finance a uver), 2018, vol. 68, issue 3, 202-244

Abstract: Using an international sample of 95 banks from 21 European and North American countries spanning from 2008 to 2014, this paper assesses the effectiveness of a large set of general and housing macro-prudential policies in controlling banks’ systemic importance and risk-taking incentives. Empirical findings indicate that tightening the general capital requirements, sector specific capital buffers, along with housing countercyclical capital requirements and Debt-Service-to-Income lending criteria significantly reduce banks’ contribution to systemic risk and their individual risk-taking. A similar effect has been obtained for loosening real estate loans loss provisioning. Furthermore, the nexus between macroprudential policies and banks’ risk is shaped through several channels like bank size, the share of foreign bank assets, banking sector competition and the independence of supervisory authority.

Keywords: systemic risk; macroprudential policies; banks; risk taking (search for similar items in EconPapers)
JEL-codes: E58 G01 G21 G28 H81 (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:fau:fauart:v:68:y:2018:i:3:p:202-244