Macroprudential Regulation and Sector-Specific Default Risk

By Mohamed Belkhir, Sami Ben Naceur, Bertrand Candelon, Jean-Charles Wijnandts

July 15, 2022

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Format: Chicago

Mohamed Belkhir, Sami Ben Naceur, Bertrand Candelon, and Jean-Charles Wijnandts. Macroprudential Regulation and Sector-Specific Default Risk, (USA: International Monetary Fund, 2022) accessed October 6, 2024

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.

Summary

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.

Subject: Debt default, Economic sectors, External debt, Financial Sector, Financial sector policy and analysis, Financial sector stability, Macroprudential policy

Keywords: Balance sheet com position, Bank bail-in, Capital requirements, Credit supply, Debt default, Default horizon, Default probability, Default risk, Descriptive statistics, EA country, Europe, Financial sector, Financial sector stability, Global, Impact of the INTRODUCTION, INTRODUCTION of BRRD, Macroprudential policies evaluation database, Macroprudential policy, Macroprudential regulation, Subsamples of euro area

Publication Details

Pages:

36
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2022/141
Stock No:

WPIEA2022141
ISBN:

9798400215421
ISSN:

1018-5941

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