## Reducing Risks in Asia with Macroprudential Policies _IMF Blog, April 30, 2014_ ## Source details **Canonical URL:** [Reducing Risks in Asia with Macroprudential Policies](https://www.imf.org/en/blogs/articles/2014/04/30/reducing-risks-in-asia-with-macroprudential-policies) ## Other formats - [Markdown version](/en/blogs/articles/2014/04/30/reducing-risks-in-asia-with-macroprudential-policies/index.md) - [Structured JSON version](/en/blogs/articles/2014/04/30/reducing-risks-in-asia-with-macroprudential-policies/index.json) - [Bundle manifest](/en/blogs/articles/2014/04/30/reducing-risks-in-asia-with-macroprudential-policies/bundle-manifest.json) ## Bibliographic details - Authors: Edda Zoli - Published: April 30, 2014 --- ### Context and challenges - Booming real estate markets, rapid credit growth and—at least before the Fed’s tapering announcement last year—sustained capital inflows have raised financial stability challenges across many parts of Asia. - Policymakers have increasingly used macroprudential policies that address the stability of the financial system as a whole rather than that of individual institutions. - In some cases policymakers have also resorted to capital flow management measures to counter large capital inflows. ### Use of macroprudential policies in Asia - Asia stands out for more extensive use of macroprudential measures than elsewhere, particularly housing-related measures. - Many economies in the region have been heavy users of caps on loan-to-value ratios (the ratio between the size of the mortgage loan and the value of the house being purchased). - Since 2000 tightening of loan-to-value ratios has occurred more than twice as often in Asia as it has in Central and Eastern Europe/Community of Independent States, advanced Europe, and North America. - Macroprudential policies were most heavily tightened in the pre‑crisis boom period during 2006–07, and then again after the crisis as capital flowed back into the region and asset prices soared. - Economies that experienced large capital inflows or housing and credit booms (Hong Kong SAR, Korea, Singapore, and Thailand) were the heaviest users. - Asian economies with relatively less open financial accounts have taken a smaller number of residency-based capital flow measures or actions to discourage transactions in foreign currency than countries in Central and Eastern Europe and Latin America. ### Empirical evidence and impacts - New empirical evidence on 13 Asian economies since 2000 indicates the following effects of housing-related macroprudential instruments: - Caps on loan-to-value ratios and the taxation of housing transactions have helped lower credit growth. - These measures have slowed house price inflation. - These measures have dampened bank leverage (although the latter effect is fairly small). - No such effects are found for non-housing related macroprudential policies and capital flow measures in the empirical analysis presented; however, some non-housing measures may still have boosted resilience to shocks. - Example: Measures introduced in Korea in 2010 to discourage foreign currency transactions have been followed by a decline in banks’ short-term foreign currency borrowing, thus reducing their vulnerability to foreign funding shocks. - Overall assessment: while macroprudential policies are no substitute for warranted macroeconomic policy adjustment, they seem to have served the region well. ### Recalibrating macroprudential policies — considerations and recommendations - Macroprudential policies were loosened in a counter-cyclical fashion during the 2008–09 global financial crisis. - More experience is needed on whether and how these instruments should be recalibrated as the financial cycle turns. - The main policymaker challenge: strike the right balance between preserving future resilience to shocks and averting asset price collapses and excessive deleveraging. - The rolling back of policies may depend on factors such as: - how acute is the downturn in the financial cycle, and - how strong are local balance sheets, - and may vary across different measures. - Specific policy implications suggested: - Accumulated capital buffers would typically be used to avoid a procyclical contraction in loan supply. - Widespread adoption across Asia of countercyclical capital requirements and dynamic provisioning in the future could be helpful to foster the buildup of buffers in the upward phase of the cycle. - In a downswing of the financial cycle, reserve requirements could also be lowered to release additional liquidity. - Whether policymakers should ease housing-related tools and measures to discourage foreign currency transactions is more controversial. - Where regulation is currently very tight, there may be a case for relaxing these instruments after assessing the soundness of banks’ and households’ balance sheets. *Source: Reducing Risks in Asia with Macroprudential Policies, Edda Zoli, April 30, 2014.* --- ## Content in this bundle - **亚洲运用宏观审慎政策降低风险; iMFDirect博客; Edda Zoli** - [亚洲运用宏观审慎政策降低风险; iMFDirect博客; Edda Zoli (Markdown version)](/external/chinese/np/blog/2014/043014c.pdf.md){rel="alternate" type="text/markdown"} - [亚洲运用宏观审慎政策降低风险; iMFDirect博客; Edda Zoli (PDF)](/external/chinese/np/blog/2014/043014c.pdf){rel="external" type="application/pdf"} - **マクロ・プルーデンス政策でアジアにおけるリスクを軽減; エッダ・ゾリ, iMFdirect ブログ 2014年4月30日掲載** - [マクロ・プルーデンス政策でアジアにおけるリスクを軽減; エッダ・ゾリ, iMFdirect ブログ 2014年4月30日掲載 (Markdown version)](/external/japanese/np/blog/2014/043014j.pdf.md){rel="alternate" type="text/markdown"} - [マクロ・プルーデンス政策でアジアにおけるリスクを軽減; エッダ・ゾリ, iMFdirect ブログ 2014年4月30日掲載 (PDF)](/external/japanese/np/blog/2014/043014j.pdf){rel="external" type="application/pdf"} - **Regional Economic Outlook: Asia and Pacific — Executive Summary** - [Regional Economic Outlook: Asia and Pacific — Executive Summary (Markdown version)](/external/pubs/ft/reo/2014/apd/eng/areo0414.pdf.md){rel="alternate" type="text/markdown"} - [Regional Economic Outlook: Asia and Pacific — Executive Summary (PDF)](/external/pubs/ft/reo/2014/apd/eng/areo0414.pdf){rel="external" type="application/pdf"} --- ## References - [https://www.imf.org/wp-content/uploads/2014/04/figure-one.jpg](https://www.imf.org/wp-content/uploads/2014/04/figure-one.jpg) _Source: https://www.imf.org/en/blogs/articles/2014/04/30/reducing-risks-in-asia-with-macroprudential-policies_