The Joint Effect of Borrower Targeted Macroprudential Instruments and Capital Regulations on Procyclicality of Loan-Loss Provisions

• Autorzy: Małgorzata Olszak , Sylwia Roszkowska , Iwona Kowalska
• Języki publikacji: EN

Abstrakty

EN

We analyze the effects of macroprudential policy and micro-prudential capital regulations on the procyclicality of loan-loss provisions, using individual bank information from over 65 countries. In this study we test whether the interaction between borrower targeted macroprudential policy instruments and restrictive micro- -prudential capital regulations tends to adjust the countercyclical effect of borrower targeted instruments and capital regulations. To this end we apply the two-step GMM estimator with robust standards errors. Our analysis implies that merging restrictive borrower targeted instruments and capital regulations tends to weaken the countercyclical effect of borrower targeted macroprudential policy instruments and restrictive capital adequacy regulations. This effect depends on size, and is stronger in large banks. (original abstract)

Słowa kluczowe

EN

Prudential policy; Bank regulations; Bank reserves; Procyclicality; Business cycles; Macroprudential policy

PL

Polityka ostrożnościowa; Regulacje bankowe; Rezerwy bankowe; Procykliczność; Cykl koniunkturalny; Polityka makroostrożnościowa

• Czasopismo: Copernican Journal of Finance & Accounting
• Rocznik: 2018
• Tom: 7
• Numer: nr 3
• Strony: 29--53

Twórcy

autor

Małgorzata Olszak

• University of Warsaw, Poland

autor

Sylwia Roszkowska

• University of Lodz, Poland

autor

Iwona Kowalska

• University of Warsaw, Poland

Bibliografia

• Alper, K., Binici, M., Demiralp, S., Kara, H., & Ozlu, P. (2014). Reserve Requirements, Liquidity Risk, and Credit Growth. Working Paper, No. 14/24. Central Bank of the Republic of Turkey. http://www.econ.itu.edu.tr/documents/activity20142015/Reserve-10-10-14.pdf (accessed: ).
• Anderson, R.C., & Fraser, D.R. (2000). Corporate control, bank risk-taking and the health of banking industry. Journal of Banking & Finance, 24(8), 1383-1398. http:// dx.doi.org/10.1016/S0378-4266(99)00088-6.
• Baker, M., & Wurgler, J. (2012). Behavioral Corporate Finance: A Current Survey. In G.M. Constantinides, M. Harris, R.M. Stulz (Eds.). Handbook of the Economics of Finance: Vol. 2. New York: Handbooks in Economics.
• Bank of England (BoE) (2009). The role of macroprudencial policy, Discussion paper. Barberis N., & Thaler, R.H. (2003). A Survey of Behavioral Finance. NBER Working Paper, No. 9222. http://www.nber.org/papers/w9222 (accessed: 17.08.2015).
• Barth, J.R, Caprio, G.Jr., & Levine, R. (2013). Measure it, improve it. Bank Regulation and Supervision in 180 Countries from 1999 to 2011. Journal of Financial Economic Policy, 5(2), 111-219. http://dx.doi.org/10.1108/17576381311329661.
• Bikker, J.A., & Metzemakers, P. (2005). Bank provisioning behavior and procyclicality. Journal of International Financial Markets, Institutions and Money, 15, 141-157. http://dx.doi.org/10.1016/j.intfin.2004.03.004.
• Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data model. Journal of Econometrics, 87(1), 115-143. http://dx.doi. org/10.1016/S0304-4076(98)00009-8.
• Borio, C., Furfine, C., & Lowe, P. (2001). Procyclicality of the financial system and financial stability: issues and policy options. BIS Papers, No. 1. Bank for International Settlements. http://www.bis.org/publ/bppdf/bispap01a.pdf (accessed:).
• Borio, C., & Zhu, V.H. (2012). Capital regulation, risk-taking, and monetary policy: a missing link in the transmission mechanism? Journal of Financial Stability, 8(4), 236-251. http://dx.doi.org/10.1016/j.jfs.2011.12.003.
• Bouvatier, V., & Lepetit, L., (2008). Banks' procyclical behavior: does provisioning matter? Journal of International Financial Markets, Institutions and Money, 18(5), 513-526. http://dx.doi.org/10.1016/j.intfin.2007.07.004.
• Bushman, R., & Williams, C.D. (2012). Accounting discretion, loan-loss provisioning, and discipline of banks' risk-taking. Journal of Accounting and Economics, 54(1), 1-18. http://dx.doi.org/10.1016/j.jacceco.2012.04.002.
• Cerutti, E., Claessens, S., & Laeven, L. (2015). The Use and Effectiveness of Macroprudential Policies: New Evidence. IMF Working Paper, WP/15/61. http://www.imf.org/ external/pubs/ft/wp/2015/wp1561.pdf (accessed:).
• Claessens, S., Ghosh, S., & Mihet, R. (2013). Macro-Prudential Policies to Mitigate Financial System Vulnerabilities. Journal of International Money and Finance, 39, 153-185, http://dx.doi.org/10.1016/j.jimonfin.2013.06.023.
• Claessens, S. (2014). An Overview of Macroprudential Policy Tools. IMF Working Paper, WP/14/214. https://www.imf.org/external/pubs/ft/wp/2014/wp14214.pdf (accessed:).
• Claessens, S., Ghosh, S.R., & Mihet, R. (2014). Macro-Prudential Policies to Mitigate Financial System Vulnerabilities. IMF Working Paper, WP/14/155. http://www.imf. org/external/pubs/ft/wp/2014/wp14155.pdf (accessed:).
• De Haan, J., & Poghosyan, T. (2012). Bank size, market concentration and bank earnings volatility in the US. Journal of International Financial Markets, Institutions and Money, 22(1), 35-54.http://dx.doi.org/10.1016/j.intfin.2011.07.002.
• Fonseca, A.R., & González, F. (2008). Cross-country determinants of bank income smoothing by managing loan-loss provisions. Journal of Banking & Finance, 32(2), 217-228. http://dx.doi.org/10.1016/j.jbankfin.2007.02.012.
• Freixas, X., Loranth, G., & Morrison, A.D. (2007). Regulating financial conglomerates. Journal of Financial Intermediation, 16(4), 479-514. http://dx.doi.org/10.1016/j. jfi.2007.03.004.
• Godlewski, C., Skała, D., & Weill, L. (2018). Is Lending by Polish Cooperative Banks Procyclical? Working Papers of LaRGE Research Center, 2018-09. Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
• Herring, R. (1999). Credit risk and financial instability. Oxford Review of Economic Policy, 15(3), 63-79.
• Kahneman, D., & Tversky, A. (1974). Judgment under uncertainty: Heuristics and biases. Science, 185(4157), 1124-1131.
• Laeven, L., & Majnoni, G. (2003). Loan-loss provisioning and economic slowdowns: too much, too late? Journal of Financial Intermediation, 12(2), 178-197. http://dx.doi. org/10.1016/S1042-9573(03)00016-0.
• Liu, Ch.-Ch., & Ryan, G.S. (2006). Income Smoothing over the Business Cycle: Changes in Banks' Coordinated Management of Provisions for Loan Losses and Loan ChargeOffs from the Pre-1990 bust to the 1990s Boom. The Accounting Review, 81(2), 421- -441. http://dx.doi.org/10.2308/accr.2006.81.2.421.
• Olszak, M., Pipień, M., Kowalska, I., & Roszkowska, S. (2017). What drives heterogeneity of cyclicality of loan-loss provisions in the EU? Journal of Financial Services Research, 51(1), 55-96. http://dx.doi.org/10.1007/s10693-015-0238-6.
• Olszak, M., Kowalska, I., & Roszkowska, S. (2018). Macroprudential policy instruments and procyclicality of loan-loss provisions - cross-country evidence. International Journal of Financial Institutions, Markets and Money, Elsevier, 54(C), 228-257. http://dx.doi.org/10.1016/j.intfin.2018.01.001.
• Ozili, P.K., & Outa, E.R (2018). Bank Earnings Smoothing During Mandatory IFRS adoption in Nigeria, MPRA Paper, 89690. University Library of Munich, Germany.
• Ozili, P.K., & Thankom, A.G. (2018). Income smoothing among European systemic and non-systemic banks. The British Accounting Review, Elsevier, 50(5), 539-558. http:// dx.doi.org/10.1016/j.bar.2018.03.001.
• Roodman, D. (2009). Practitioners Corner: A Note on the Theme of Too Many Instruments. Oxford Bulletin of Economics and Statistics, 71, 135-156. http://dx.doi. org/10.1111/j.1468-0084.2008.00542.x.
• Shrieves, R.E., & Dahl, D. (2003). Discretionary accounting and the behavior of Japanese banks under financial duress. Journal of Banking & Finance, 27, 1219-1243. http:// dx.doi.org/10.1016/S0378-4266(02)00252-2.
• Skała, D. (2015). Saving on a Rainy Day? Income Smoothing and Procyclicality of LoanLoss Provisions in Central European Banks. International Finance, 18(1), 25-46. http://dx.doi.org/10.1111/1468-2362.12058.
• Skała D., & Weill, L. (2018). Does CEO gender matter for bank risk? Economic Systems, 42(1), 64-74. http://doi.org/10.1016/j.ecosys.2017.08.005.
• Slovic, P., Fischhoff, B., & Lichtenstein, S. (1977). Preference for Insuring Against Probable Small Losses: Insurance Implications. Journal of Risk & Insurance, 44(2), 237- -258. http://dx.doi.org/10.2307/252136.
• Vandenbussche, J., Vogel, U., & Detragiache, E. (2015). Macroprudential Policies and Housing Prices: A New Database and Empirical Evidence for Central, Eastern, and Southeastern Europe. Journal of Money, Credit and Banking, 47(S1), 343-377. http://dxdx.doi.org/10.1111/jmcb.12206.

Identyfikatory

DOI

http:// 10.12775/CJFA.2018.013