The Relation between Macroprudential and Microprudential Policy: An Example of Regulatorily Bank Capital

Blahová, Naďa

doi:10.1016/s2212-5671(15)00754-6

Cited by 5 publications

(6 citation statements)

References 2 publications

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“…This implies that when microprudential regulation improves by one unit, CA improves by 0.97 units. This outcome is consistent with Blahova (2015). Further, the regression weight of microprudential regulation in predicting AQ is approximately 0.76 suggesting that when microprudential regulation improves by one unit, AQ improves by 0.76 units.…”

Section: Empirical Findingssupporting

confidence: 78%

“…Osinki et al (2013) confirm that in some instances macro prudential policies are not so much effective in alleviating systemic risks and therefore it is reinforced by micro prudential policies. Complementarities exist between micro and macro prudential policies because they may not utilize their common instruments with similar level of intensity (Blahova, 2015). To prevent hasty liquidation of banks because of bank runs, regulatory authorities under their micro prudential policy mandate establish deposit insurance schemes to enhance financial stability (Andrew, 2013).…”

Section: Previous Evidencementioning

confidence: 99%

“…This implies that macro and micro prudential regulations complement each other in ensuring financial system stability. Financial institutions regulatory authorities are charged with the mandate of not only guaranteeing the soundness of individual institutions but also ensuring stability of the entire financial system (Blahova, 2015). To strengthen complementarities between micro and macro prudential regulation, central bank should share information and jointly evaluate systemic risks.…”

Section: Empirical Findingsmentioning

confidence: 99%

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Do bank regulations matter for financial stability? Evidence from a developing economy

Atellu

Muriu

Odhiambo

2021

JFRC

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Purpose This paper aims to establish the effect of bank regulations on financial stability in Kenya. Specifically, the study seeks to uncover the effect of micro and macro prudential regulations on financial stability and their trade-offs or complementarities. Design/methodology/approach Using annual time series data over the period 1990–2017, the study uses structural equation model (SEM) estimation technique. This solves the problem of approximating measurement errors, using both latent constructs and indicator constructs. Findings Study findings reveal that macro and micro prudential regulations are significant drivers of financial stability. Further, prudential regulations are more effective when they complement each other. Research limitations/implications This study centers on how bank regulations affect financial stability. Future research could be carried out on the effect of Non-Bank Financial Institutions regulations on financial system stability. Practical implications Complementing macro and micro prudential regulation is more effective and efficient in ensuring stability of the financial system other than letting the two policy objectives operate independently. Social implications Regulatory authorities should introduce prudential regulations that would encourage innovations in the banking sector. This ensures easy deposit mobilization that enhances financial inclusion. Prudential regulations that ensure financial stability will be effective when low income earners are included in the financial system. Originality/value To the best of the authors’ knowledge, this study is the first to investigate the role of banking regulations on financial stability. This study is also pioneering in the use of SEM estimation technique, in examining how prudential regulations affect financial stability. Previous cross-country studies have focused on macro prudential regulations ignoring the importance of micro prudential regulations.

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Section: Empirical Findingssupporting

confidence: 78%

Section: Previous Evidencementioning

confidence: 99%

Section: Empirical Findingsmentioning

confidence: 99%

See 1 more Smart Citation

Do bank regulations matter for financial stability? Evidence from a developing economy

Atellu

Muriu

Odhiambo

2021

JFRC

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“…Lze odhadovat, že se ČNB chová velmi konzervativně a těžiště problému vidí v trhu hypotečních úvěrů, k čemuž by se ovšem dal potenciálně využít sektorový kapitálový požadavek. Alternativy k proticyklické rezervě lze také vidět v potenciálně využitelných mikroobezřetnostních nástrojích (Blahová, 2015). Konkrétně v přizpůsobení parametrů PD (pravděpodobnost selhání) a LGD (míra ztráty při selhání) v propočtu kapitálového požadavku k úvěrovému riziku odhadu fáze finančního cyklu, resp.…”

Section: Závěrunclassified

Analysis of macroprudential policy approaches in the practice of the Czech Republic

Blahová¹

2020

ČFÚČ

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“…[13]. A healthy financial system requires a balance between micro and macro prudential approaches [14]. Despite differences in scope, objectives, approach and type of risks covered several similarities and complementarities exist between them (Table-4).…”

Section: Economic Policies For Financial Stabilitymentioning

confidence: 99%

Policy Supports for Financial Stability

Peddada¹

2020

SJEF

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The global financial crisis of 2008 has exposed numerous shortcomings in the traditional safeguards for financial stability in terms of different economic policies adopted so far. A system level perspective focusing on systemic risks with suitable policies and instruments was the felt need to combat vulnerabilities at their origin before spreading. The present study has analyzed the various policy options, indicators of systemic vulnerabilities, choice of tools and instruments for the regulatory and supervisory bodies for a granular approach in different settings. Macroprudential policy and its tools were found to be a suitable solution, either alone or in conjunction with other economic policies.

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The Relation between Macroprudential and Microprudential Policy: An Example of Regulatorily Bank Capital

Cited by 5 publications

References 2 publications

Do bank regulations matter for financial stability? Evidence from a developing economy

Do bank regulations matter for financial stability? Evidence from a developing economy

Analysis of macroprudential policy approaches in the practice of the Czech Republic

Policy Supports for Financial Stability

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