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Macroprudential policy and intra-group dynamics: The effects of reserve requirements in Brazil

Chris Becker, Matias Ossandon Busch () and Lena Tonzer ()

No 21/2017, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: This paper examines whether intra-group dynamics matter for the transmission of macroprudential policy. Using novel bank-level data on the Brazilian banking system, we investigate the effect of reserve requirements targeting headquarter banks' deposit share on credit supply by their municipal bank branches. For identification purposes, we exploit that reserve requirements are adjusted following global economic cycles. Our results reveal a lending channel of reserve requirements for branches whose parent banks are more exposed to targeted deposits. Branch ownership and exposure to internal liquidity are central in explaining the results. Our findings reveal limitations in current macroprudential policy frameworks.

Keywords: macroprudential regulation; financial intermediation; intra-group dynamics (search for similar items in EconPapers)
JEL-codes: F30 F65 G21 G28 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:212017

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