Economics at your fingertips  

Cross-Border Macroprudential Policy Spillovers and Bank Risk-Taking

Fergal McCann () and Conor O'Toole ()

International Journal of Central Banking, 2019, vol. 15, issue 4, 267-311

Abstract: We test whether there was a change in risk-taking by Irish banks in the U.K. mortgage market following the introduction of macroprudential limits on loan-to-value (LTV) and loan-toincome (LTI) ratios in Ireland in early 2015. Using confidential loan-level data on lending in the Irish and U.K. mortgage markets, we provide evidence of risk spillovers whereby Irish banks increased their LTV and LTI ratios on lending abroad in response to the regulatory macroprudential tightening at home. We find heterogeneous effects across groups of borrowers, with LTVs and LTIs increasing most for first-time homebuyers (FTBs). We estimate that, relative to a control group of local lenders, the probability of a high-risk loan being issued by an Irish bank in the U.K. mortgage market increased by 16 percent overall, and by 28 percent in the FTB segment, after the policy introduction.

JEL-codes: G21 (search for similar items in EconPapers)
Date: 2019
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf) (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

International Journal of Central Banking is currently edited by Loretta J. Mester

More articles in International Journal of Central Banking from International Journal of Central Banking
Bibliographic data for series maintained by Bank for International Settlements ().

Page updated 2020-07-29
Handle: RePEc:ijc:ijcjou:y:2019:q:4:a:8