Macroprudential policy and bank risk

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This paper investigates the effects of macroprudential policies on bank risk through a large panel of banks operating in 61 advanced and emerging market economies. There are three main findings. First, there is evidence suggesting that macroprudential tools have a significant impact on bank risk. Second, the responses to changes in macroprudential tools differ among banks, depending on their specific balance sheet characteristics. In particular, banks that are small, weakly capitalised and with a higher share of wholesale funding react more strongly to changes in macroprudential tools. Third, controlling for bank-specific characteristics, macroprudential policies are more effective in a tightening than in an easing episode.

Keywords

  • macroprudential policies, bank risk, effectiveness
Original languageEnglish
Pages (from-to)203-220
JournalJournal of International Money and Finance
Volume81
Issue numberMarch
Early online date21 Nov 2017
DOIs
Publication statusPublished - 1 Mar 2018

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