The effectiveness of macroprudential policies in curbing operational risk exposures

Panagiotis Konstantinou, Anastasios Rizos and Artemis Stratopoulou
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Panagiotis Konstantinou: Athens University of Economics and Business
Artemis Stratopoulou: Centre of Planning and Economic Research

No 344, Working Papers from Bank of Greece

Abstract: Banks’ focus nowadays shifts to non-financial risks, since credit and market risks are now well understood and under better control. We study whether macroprudential policy, designed to enhance financial system resilience, can mitigate or magnify losses stemming from such risks. To do so, we use a panel dataset on Eurozone countries between 2009-2018 and examine the dynamic path of operational risk exposures in response to tightening and loosening events of various macroprudential policies. Our results show that the tightening of specific measures, i.e., loan loss provisions, liquidity and loan to value, increases operational losses, whereas the loosening of measures, such as conservation buffers, loan loss provisions and debt service to income leads to a reduction in operational losses. Our results remain robust when we employ the inverse probability weighted estimator.

Keywords: macroprudential policies; non-financial risks; operational losses; banks; local projections (search for similar items in EconPapers)
JEL-codes: E44 E58 G21 G32 (search for similar items in EconPapers)
Pages: 35
Date: 2025-07
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