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Author: Chunsoo Jung Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This dissertation aims to examine the effectiveness of the Loan-to-Value (LTV) and Debt-to-Income (DTI) regulations as well as the regulatory arbitrage associated with their implementation. This study is motivated by the fact that our understanding of the regulations is still in its infancy despite the increasing importance of their role in financial stability. To that end, the Korean regulatory experience is employed as it offers a suitable setting from an empirical perspective, thanks to the geographical-differentiated levels of the regulations and the fact of their relatively long history. In this study, we find that the regulations are effective to curb the growth of mortgages; however, their impact could be significantly offset by regulatory arbitrage. Related to this, two possible leakages are newly explored: i) the migration of mortgages into less-regulated areas and ii) complementing the shortage of mortgage loans with non-regulated loans. On the other hand, we reveal that the regulations could negatively impact the credit risk of household loans rather than improve it. This unexpected result might be due to their impact extending even to the non-regulated loans: the regulations could have unintended negative effects on the credit risk of non-regulated loans, which is transmitted through the change in the housing auction market; moreover it seems to dominate the intended positive outcome derived from the regulated loans. This study also confirms that non-bank lending could be a loophole in the presence of regulation gaps between the banking and non-banking sectors. Furthermore, to close the loophole by eliminating the regulation gap between sectors turns out to be effective in tackling the regulatory arbitrage therein. However, it is certainly not the definitive solution considering that a "cat-and-mouse game" between regulators and the regulated can continue to happen each time in a different way.
Author: Chunsoo Jung Publisher: ISBN: Category : Languages : en Pages : 0
Book Description
This dissertation aims to examine the effectiveness of the Loan-to-Value (LTV) and Debt-to-Income (DTI) regulations as well as the regulatory arbitrage associated with their implementation. This study is motivated by the fact that our understanding of the regulations is still in its infancy despite the increasing importance of their role in financial stability. To that end, the Korean regulatory experience is employed as it offers a suitable setting from an empirical perspective, thanks to the geographical-differentiated levels of the regulations and the fact of their relatively long history. In this study, we find that the regulations are effective to curb the growth of mortgages; however, their impact could be significantly offset by regulatory arbitrage. Related to this, two possible leakages are newly explored: i) the migration of mortgages into less-regulated areas and ii) complementing the shortage of mortgage loans with non-regulated loans. On the other hand, we reveal that the regulations could negatively impact the credit risk of household loans rather than improve it. This unexpected result might be due to their impact extending even to the non-regulated loans: the regulations could have unintended negative effects on the credit risk of non-regulated loans, which is transmitted through the change in the housing auction market; moreover it seems to dominate the intended positive outcome derived from the regulated loans. This study also confirms that non-bank lending could be a loophole in the presence of regulation gaps between the banking and non-banking sectors. Furthermore, to close the loophole by eliminating the regulation gap between sectors turns out to be effective in tackling the regulatory arbitrage therein. However, it is certainly not the definitive solution considering that a "cat-and-mouse game" between regulators and the regulated can continue to happen each time in a different way.
Author: Juliana Dutra Araujo Publisher: International Monetary Fund ISBN: 151354540X Category : Business & Economics Languages : en Pages : 53
Book Description
This paper builds a novel database on the effects of macroprudential policy drawing from 58 empirical studies, comprising over 6,000 results on a wide range of instruments and outcome variables. It encompasses information on statistical significance, standardized magnitudes, and other characteristics of the estimates. Using meta-analysis techniques, the paper estimates average effects to find i) statistically significant effects on credit, but with considerable heterogeneity across instruments; ii) weaker and more imprecise effects on house prices; iii) quantitatively stronger effects in emerging markets and among studies using micro-level data; and iii) statistically significant evidence of leakages and spillovers. Other findings include relatively stronger impacts for tightening than loosening actions and negative effects on economic activity in the near term.
Author: International Monetary Fund. Monetary and Capital Markets Department Publisher: International Monetary Fund ISBN: 1498339174 Category : Business & Economics Languages : en Pages : 33
Book Description
MCM conducted a survey in December 2010 to take stock of international experiences with financial stability and the evolving macroprudential policy framework. The survey was designed to seek information in three broad areas: the institutional setup for macroprudential policy, the analytical approach to systemic risk monitoring, and the macroprudential policy toolkit. The survey was sent to 63 countries and the European Central Bank (ECB), including all countries in the G-20 and those subject to mandatory Financial Sector Assessment Programs (FSAPs). The target list is designed to cover a broad range of jurisdictions in all regions, but more weight is given to economies that are systemically important (see Annex for details). The response rate is 80 percent. This note provides a summary of the survey’s main findings.
Author: International Monetary Fund Publisher: International Monetary Fund ISBN: 1498342620 Category : Business & Economics Languages : en Pages : 45
Book Description
This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries
Author: Ms.Aleksandra Zdzienicka Publisher: International Monetary Fund ISBN: 1513519158 Category : Business & Economics Languages : en Pages : 29
Book Description
The Global Financial Crisis has reopened discussions on the role of the monetary policy in preserving financial stability. Determining whether monetary policy affects financial variables domestically—especially compared to the effects of macroprudential policies— and across borders, is crucial in this context. This paper looks into these issues using U.S. exogenous monetary policy shocks and macroprudential policy measures. Estimates indicate that monetary policy shocks have significant and persistent effects on financial conditions and can attenuate long-term financial instability. In contrast, the impact of macroprudential policy measures is generally more immediate but shorter-lasting. Also, while an exogenous increase in U.S. monetary policy rates tends to reduce credit and house prices in other countries—with the effects varying with country-specific characteristics—an increase driven by improved U.S. economic conditions tends to have the opposite effect. Finally, we do not find evidence of cross-border spillover effects associated with U.S. macroprudential policies.
Author: Meghana Ayyagari Publisher: International Monetary Fund ISBN: 1484390504 Category : Business & Economics Languages : en Pages : 65
Book Description
Combining balance sheet data on 900,000 firms from 48 countries with information on the adoption of macroprudential policies during 2003-2011, we find that these policies are associated with lower credit growth. These effects are especially significant for micro, small and medium enterprises (MSMEs) and young firms that, according to the literature, are more financially constrained and bank dependent. Among MSMEs and young firms, those with weaker balance sheets exhibit lower credit growth in conjunction with the adoption of macroprudential policies, suggesting that these policies can enhance financial stability. Finally, our results show that macroprudential policies have real effects, as they are associated with lower investment and sales growth.
Author: Mr.Nicolas Arregui Publisher: International Monetary Fund ISBN: 1484335724 Category : Business & Economics Languages : en Pages : 73
Book Description
The paper proposes a simple, new, analytical framework for assessing the cost and benefits of macroprudential policies. It proposes a measure of net benefits in terms of parameters that can be estimated: the probability of crisis, the loss in output given crisis, policy effectiveness in bringing down both the probability and damage during crisis, and the output-cost of a policy decision. It discusses three types of policy leakages and identifies instruments that could best minimize the leakages. Some rules of thumb for policymakers are provided.
Author: International Monetary Fund. Fiscal Affairs Dept. Publisher: International Monetary Fund ISBN: 1498341713 Category : Business & Economics Languages : en Pages : 64
Book Description
The countercyclical capital buffer (CCB) was proposed by the Basel committee to increase the resilience of the banking sector to negative shocks. The interactions between banking sector losses and the real economy highlight the importance of building a capital buffer in periods when systemic risks are rising. Basel III introduces a framework for a time-varying capital buffer on top of the minimum capital requirement and another time-invariant buffer (the conservation buffer). The CCB aims to make banks more resilient against imbalances in credit markets and thereby enhance medium-term prospects of the economy—in good times when system-wide risks are growing, the regulators could impose the CCB which would help the banks to withstand losses in bad times.
Author: Mr.Stijn Claessens Publisher: International Monetary Fund ISBN: 1498357601 Category : Business & Economics Languages : en Pages : 36
Book Description
Macro-prudential policies aimed at mitigating systemic financial risks have become part of the policy toolkit in many emerging markets and some advanced countries. Their effectiveness and efficacy are not well-known, however. Using panel data regressions, we analyze how changes in balance sheets of some 2,800 banks in 48 countries over 2000–2010 respond to specific macro-prudential policies. Controlling for endogeneity, we find that measures aimed at borrowers––caps on debt-to-income and loan-to-value ratios––and at financial institutions––limits on credit growth and foreign currency lending––are effective in reducing asset growth. Countercyclical buffers are little effective through the cycle, and some measures are even counterproductive during downswings, serving to aggravate declines, consistent with the ex-ante nature of macro-prudential tools.
Author: Mr.Stijn Claessens Publisher: International Monetary Fund ISBN: 1498340938 Category : Business & Economics Languages : en Pages : 38
Book Description
Macroprudential policies – caps on loan to value ratios, limits on credit growth and other balance sheets restrictions, (countercyclical) capital and reserve requirements and surcharges, and Pigouvian levies – have become part of the policy paradigm in emerging markets and advanced countries alike. But knowledge is still limited on these tools. Macroprudential policies ought to be motivated by market failures and externalities, but these can be hard to identify. They can also interact with various other policies, such as monetary and microprudential, raising coordination issues. Some countries, especially emerging markets, have used these tools and analyses suggest that some can reduce procyclicality and crisis risks. Yet, much remains to be studied, including tools’ costs ? by adversely affecting resource allocations; how to best adapt tools to country circumstances; and preferred institutional designs, including how to address political economy risks. As such, policy makers should move carefully in adopting tools.
Author: Chunsoo Jung
Author: Chunsoo Jung
Author: Juliana Dutra Araujo
Author: International Monetary Fund. Monetary and Capital Markets Department
Author: International Monetary Fund
Author: Ms.Aleksandra Zdzienicka
Author: Meghana Ayyagari
Author: Mr.Nicolas Arregui
Author: International Monetary Fund. Fiscal Affairs Dept.
Author: Mr.Stijn Claessens
Author: Mr.Stijn Claessens