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Macroprudential Regulation and Sector-Specific Default Risk
Author:
Mohamed Belkhirnull

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Sami Ben Naceur
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Bertrand Candelonnull

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Jean-Charles Wijnandtsnull

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Series:
IMF Working Papers
Volume/Issue:
Volume 2022: Issue 141
Language:
English
Publication Date:
15 Jul 2022
DOI:
https://doi.org/10.5089/9798400215421.001
ISBN:
9798400215421
ISSN:
1018-5941
Pages:
36
Keywords:
Macroprudential regulation; Default risk; Capital requirements; Bank bail-in; Macroprudential policies evaluation database; impact of the INTRODUCTION; credit supply; INTRODUCTION of BRRD; balance sheet com position; Debt default; Macroprudential policy; Financial sector; Financial sector stability; Global; Europe; EA country; default probability; default horizon; descriptive statistics; subsamples of euro area
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper studies the transmission of macroprudential policies across both financial and non financial sectors of the economy. It first documents that tighter macroprudential regulations implemented in Europe over the period 2008–2017 lowered default risk not only in the financial, but also in non-financial sectors. Second, the paper analyzes the impact of two reforms in the macroprudential framework. Higher capital requirements improve the long-run resilience of the financial sector but at the cost of raising long-term default risk in non-financial sectors. Strengthening the resolution framework for failing banks has beneficial long-run effects on the default risks of the financial and non-financial sectors. Our results concur with the literature documenting how banks adjust their balance sheet composition and credit supply in reaction to changes in their regulatory environment.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2022: Issue 141