Measuring the restrictiveness of (macro)prudential policy: the case of bank capital regulation in Poland

Marcin Czaplicki ()
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Marcin Czaplicki: Warsaw School of Economics

Journal of Banking Regulation, 2022, vol. 23, issue 3, No 6, 322-338

Abstract: Abstract The heterogeneity of the banking sector is a vital problem both in case of the conduct of macroprudential policy, as well as the assessment of its effectiveness. To address this issue, we construct a new measure of macroprudential policy restrictiveness, the bank’s free lending capacity ratio (the quotient of a new lending a bank can extend given its capital surplus above capital requirement, and its current volume of loans). We describe its advantages over the measures used in the previous research. Finally, employing first difference GMM method on (dynamic) panel data series, we explain the drivers of changes in lending growth of stock-listed banks in Poland between 2010 and 2020. We show that the free lending capacity ratio displays the most convincing results among the examined variables, pointing at its usefulness both in explaining and evaluating the impact of prudential regulation on banking activity, as well as in understanding potential issues in the transmission of monetary policy via the banking sector, resulting from its heterogeneity. Finally, we draw practical and policy-related conclusions, as regards the measurement of macroprudential policy restrictiveness.

Keywords: Macroprudential policy; Macroprudential regulation; Loan supply; Capital adequacy; Lending capacity; Poland (search for similar items in EconPapers)
JEL-codes: E51 G18 G21 G28 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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DOI: 10.1057/s41261-021-00164-2

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