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The Economic Impact of Measures Aimed at Strengthening Bank Resilience – Estimates for Austria

Author

Listed:
  • Emanuel Kopp

    (Oesterreichische Nationalbank)

  • Christian Ragacs

    (Oesterreichische Nationalbank, Economic Analysis Division)

  • Stefan W. Schmitz

    (Oesterreichische Nationalbank)

Abstract

This paper proposes a conceptual framework for analyzing the effects that proposals to strengthen the resilience of the banking sector may have on the Austrian economy. We use this framework to quantify the macroeconomic costs of the following regulatory reform measures: Requiring banks to raise the quality of the regulatory capital base, with or without requiring them to hold additional common equity buffers; introducing a global liquidity standard based on a net stable funding ratio; implementing a contingent capital regime to address the risks created by systemically important banks; abolishing implicit government guarantees for senior bank bonds; and reforming EU rules on deposit guarantee schemes. We estimate the macroeconomic costs for different scenarios on a cumulative three-year basis, comparing medium- and long-term effects on the one hand and direct effects (generated in the domestic economy) and indirect effects (including spillover effects from other euro area countries) on the other hand. The results differ significantly depending on the individual measures, but the macroeconomic costs appear to be within reasonable limits and are comparable with those established for other countries by the Basel Committee on Banking Supervision. In any case, the costs are substantially below the results published by individual banks and interest groups.

Suggested Citation

  • Emanuel Kopp & Christian Ragacs & Stefan W. Schmitz, 2010. "The Economic Impact of Measures Aimed at Strengthening Bank Resilience – Estimates for Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 20, pages 86-114.
  • Handle: RePEc:onb:oenbfs:y:2010:i:20:b:3
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    References listed on IDEAS

    as
    1. Stefan Kerbl & Michael Sigmund, 2009. "Quantifying the Cyclicality of Regulatory Capital – First Evidence from Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 18, pages 93-103.
    2. Mr. Luc Laeven & Mr. Fabian Valencia, 2010. "Resolution of Banking Crises: The Good, the Bad, and the Ugly," IMF Working Papers 2010/146, International Monetary Fund.
    3. Markus Leibrecht & Martin Schneider, 2006. "AQM-06: The Macro economic Model of the OeNB," Working Papers 132, Oesterreichische Nationalbank (Austrian Central Bank).
    4. repec:onb:oenbwp:y::i:132:b:1 is not listed on IDEAS
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    Citations

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    Cited by:

    1. Sophia Döme & Stefan W. Schmitz & Katharina Steiner & Eva Ubl, 2016. "The changing role of macroprudential policy in Austria after World War II," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 163-189.
    2. Schmitt, Matthias & Schmaltz, Christian, 2016. "Potential implications of a NSFR on German banks' credit supply and profitability," Discussion Papers 37/2016, Deutsche Bundesbank.
    3. M. Birn & M. Dietsch & D. Durant, 2017. "How to reach all Basel requirements at the same time?," Débats économiques et financiers 28, Banque de France.
    4. Judith Eidenberger & David Liebeg & Stefan W. Schmitz & Reinhardt Seliger & Michael Sigmund & Katharina Steiner & Peter Strobl & Eva Ubl, 2014. "Macroprudential Supervision: A Key Lesson from the Financial Crisis," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 27, pages 83-94.
    5. Wald Nowotny, 2013. "The Economics of Financial Regulation," Chapters, in: Andreas Dombret & Otto Lucius (ed.), Stability of the Financial System, chapter 15, Edward Elgar Publishing.
    6. Douglas Elliott & Mr. Andre O Santos, 2012. "Assessing the Cost of Financial Regulation," IMF Working Papers 2012/233, International Monetary Fund.
    7. Schmaltz, Christian & Pokutta, Sebastian & Heidorn, Thomas & Andrae, Silvio, 2014. "How to make regulators and shareholders happy under Basel III," Journal of Banking & Finance, Elsevier, vol. 46(C), pages 311-325.
    8. Torchiani, Ingo & Heidorn, Thomas & Schmaltz, Christian, 2017. "An integrated shortfall measure for Basel III," Discussion Papers 26/2017, Deutsche Bundesbank.
    9. Antonio Scalia & Sergio Longoni & Tiziana Rosolin, 2013. "The Net Stable Funding Ratio and banks� participation in monetary policy operations: some evidence for the euro area," Questioni di Economia e Finanza (Occasional Papers) 195, Bank of Italy, Economic Research and International Relations Area.

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    More about this item

    Keywords

    Bank regulation; economic growth;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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