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Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking

Author

Listed:
  • Alin-Marius Andries

    () (Alexandru Ioan Cuza University of Iasi, Romania)

  • Florentina Melnic

    () (Alexandru Ioan Cuza University of Iasi, Romania)

  • Simona Nistor

    () (Babes - Bolyai University of Cluj Napoca, Romania)

Abstract

Using an international sample of 95 banks from 21 European and North American countries spanning from 2008 to 2014, this paper assesses the effectiveness of a large set of general and housing macro-prudential policies in controlling banks’ systemic importance and risk-taking incentives. Empirical findings indicate that tightening the general capital requirements, sector specific capital buffers, along with housing countercyclical capital requirements and Debt-Service-to-Income lending criteria significantly reduce banks’ contribution to systemic risk and their individual risk-taking. A similar effect has been obtained for loosening real estate loans loss provisioning. Furthermore, the nexus between macroprudential policies and banks’ risk is shaped through several channels like bank size, the share of foreign bank assets, banking sector competition and the independence of supervisory authority.

Suggested Citation

  • Alin-Marius Andries & Florentina Melnic & Simona Nistor, 2018. "Effects of Macroprudential Policy on Systemic Risk and Bank Risk Taking," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 68(3), pages 202-244, July.
  • Handle: RePEc:fau:fauart:v:68:y:2018:i:3:p:202-244
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    File URL: http://journal.fsv.cuni.cz/storage/1408_202_244_andries_final_issue_3_2018.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    systemic risk; macroprudential policies; banks; risk taking;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts

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