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The Impact of LTV policy on Bank Lending: Evidence from Disaggregate Housing Loan Data

Chantawit Tantasith, Nasha Ananchotikul, Chatlada Chotanakarn, Vorada Limjaroenrat and Runchana Pongsaparn
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Chantawit Tantasith: Bank of Thailand
Nasha Ananchotikul: Bank of Thailand
Chatlada Chotanakarn: Bank of Thailand
Vorada Limjaroenrat: Bank of Thailand
Runchana Pongsaparn: Bank of Thailand

PIER Discussion Papers from Puey Ungphakorn Institute for Economic Research

Abstract: How did the Loan-to-Value (LTV) measures aimed at increasing resilience of the banking system affect banks' lending? This paper utilizes bank-level and contract-level data of housing credit in Thailand spanning from 2004 to 2017, and applies the panel data and probit approaches in evaluating the impact of LTV measures introduced in 2009, 2011 and 2013 on the housing loans. We find that the LTV measures had an impact on banks' risk-taking behavior in ways consistent with the policy's objectives. The effects manifest in a reshaping of LTV distribution of the targeted loan sector rather than a credit growth slowdown at the bank level. In addition, the size of adjustment varies across different types of banks, with stronger response from large and small banks compared with medium banks. Overall, our results suggest that certain macroprudential policies can achieve target-specific outcome, but with differential impact across banks. Nevertheless, questions remain regarding the channels through which LTV measures impact bank lending and factors underlying diverging response among banks.

Keywords: Macroprudential Policy; Bank Lending; Thailand (search for similar items in EconPapers)
JEL-codes: E58 C55 (search for similar items in EconPapers)
Pages: 48 page
Date: 2018-07, Revised 2018-07
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Published in PIER Discussion Paper Series

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