Cross-border Banking and the Circumvention of Macroprudential and Capital Control Measures

Cerutti, Eugenio; Zhou, Haonan

doi:10.5089/9781484378328.001

Cited by 21 publications

(34 citation statements)

References 20 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Focusing on bank flows, Avdjiev et al (2016) find that changes in macroprudential tools have a significant effect on international bank lending, while Beirne and Friedrich (2017) show that these spillovers are a function of banking sector conditions both at home and abroad. More recently, Cerutti and Zhou (2018) analyse the joint effect of capital controls and macroprudential policies on cross-border bank flows; they find a strong association of lenders' capital outflow restrictions with local affiliate lending, primarily through affiliates in advanced economies. Using a similar set of financial policy measures, Pasricha et.…”

Section: Introductionmentioning

confidence: 99%

Capital flow deflection under the magnifying glass

Gori¹,

Lepers²,

Mehigan³

2020

OECD Economics Department Working Papers

View full text Add to dashboard Cite

This document, as well as any data and map included herein, are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. 2 | ECO/WKP(2020)21 CAPITAL FLOW DEFLECTION UNDER THE MAGNIFYING GLASS Unclassified OECD Working Papers should not be reported as representing the official views of the OECD or of its member countries. The opinions expressed and arguments employed are those of the author(s). Working Papers describe preliminary results or research in progress by the author(s) and are published to stimulate discussion on a broad range of issues on which the OECD works.

show abstract

Section: Introductionmentioning

confidence: 99%

Capital flow deflection under the magnifying glass

Gori¹,

Lepers²,

Mehigan³

2020

OECD Economics Department Working Papers

View full text Add to dashboard Cite

show abstract

“…As noted by Goodhart (), “the more effective regulation is, the greater the incentive to find ways around it.” This concern also applies to MaPs. Several papers have already estimated the intended effects of MaPs on variables such as banking credit and housing prices (e.g., Morgan, Regis, and Salike , Cerutti, Claessens, and Laeven , Akinci and Olmstead‐Rumsey ), and whether measures “leak” through foreign banks (Aiyar, Calomiris, and Wieladek , Reinhardt and Sowerbutts , Frost, van Horen, and de Haan , Cerutti and Zhou ). Such substitution effects across sectors have not yet been tested empirically in a cross‐country setting.…”

mentioning

confidence: 99%

Effective Macroprudential Policy: Cross‐Sector Substitution from Price and Quantity Measures

Cizel¹,

Frost²,

Houben

et al. 2019

J of Money Credit Banking

View full text Add to dashboard Cite

Macroprudential policy is increasingly being implemented worldwide, and is mostly applied to banks. A key question is whether this prompts substitution toward nonbank credit. Using two different global data sets on macroprudential measures and different methodologies, including detrended series, panel estimations, and propensity score matching, we find evidence of such substitution. Substitution toward nonbank credit appears to be stronger when policy measures are binding and are implemented in economies with well‐developed nonbank credit markets. This substitution partially offsets the fall in bank credit, thus dampening the policies’ effect on total credit.

show abstract

“…This evidence, however, largely comes from detailed UK bank data, which allows cleaner identification of country-specific loan demand and supply effects than most work, but may not generalize to other experiences. Other work focusing on a cross-section of countries generally finds that tighter macroprudential regulations cause banks to increase lending abroad, primarily through affiliates (Cerutti and Zhou, 2018). Banks also appear to respond by increasing foreign lending more in countries with fewer regulations and weaker standards, leading to weaker overall lending standards (Ongena et al, 2013;McCann and O'Toole, 2019;Houston et al, 2012).…”

Section: C Empirical Effects: International Lending Borrowing Andmentioning

confidence: 99%

The International Aspects of Macroprudential Policy

Forbes

2020

View full text Add to dashboard Cite

Countries are using macroprudential tools more actively with the goal of improving the resilience of their broader financial systems. A growing body of evidence suggests that these tools can accomplish specific domestic goals and should reduce country vulnerability to many domestic and international shocks. The evidence also suggests, however, that these policies are not an elixir. They will not insulate economies from volatility and they generate leakages to the nonbank financial system and spillovers through international borrowing, lending and other crossborder exposures. Some of these unintended consequences can mitigate the effectiveness of macroprudential policies and generate new vulnerabilities and risks. The "Corona Crisis" provides a lens to evaluate the effectiveness of current macroprudential regulations during a period of extreme market volatility and economic stress. Experience to date suggests that macroprudential tools provide some benefits and can help achieve certain macroeconomic goals, but they have limitations and expectations of what they can accomplish must be realistic.

show abstract

Cross-border Banking and the Circumvention of Macroprudential and Capital Control Measures

Cited by 21 publications

References 20 publications

Capital flow deflection under the magnifying glass

Capital flow deflection under the magnifying glass

Effective Macroprudential Policy: Cross‐Sector Substitution from Price and Quantity Measures

The International Aspects of Macroprudential Policy

Contact Info

Product

Resources

About