## Leakages from Macroprudential Regulations: The Case of Household-Specific Tools and Corporate Credit

_IMF Working Papers, April 29, 2021_

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## Bibliographic details
- Authors: Lucyna Gornicka, Peichu Xie
- Published: April 29, 2021
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513573731.001

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### Key findings
- Sector-specific macroprudential regulations increase the riskiness of credit to other sectors.
- Using firm-level data for 29 advanced and emerging economies, the paper computes measures of the riskiness of corporate credit allocation.
- During credit expansions, an unexpected tightening of household-specific macroprudential tools is followed by a rise in riskier corporate lending.
- Quantitatively, such unexpected tightening during a period of rapid credit growth increases the riskiness of corporate credit by around 10 percent of the historical standard deviation.
- Leakage effects are stronger for larger firms compared to SMEs, consistent with evidence on the use of personal real estate as loan collateral by small firms.

### Data and measurement
- Coverage: firm-level data across 29 advanced and emerging economies.
- Risk measure: computed measures of the riskiness of corporate credit allocation (details in the paper).

### Interpretation and policy implications
- The observed leakages imply that sectoral macroprudential tightening can shift risk to other sectors, raising aggregate financial stability concerns.
- Early policy interventions, when credit vulnerabilities are still low, are supported because sectoral leakages will be less important at that stage.
- Monitoring cross-sectoral effects is important when designing household-specific macroprudential tools to limit unintended increases in corporate credit risk.

### Supporting evidence
- Evidence from bank lending standards surveys corroborates the finding that leakage effects disproportionately affect larger firms relative to SMEs.

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_Source: https://www.imf.org/en/publications/wp/issues/2021/04/29/leakages-from-macroprudential-regulations-the-case-of-household-specific-tools-and-corporate-50246_