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Debt Service And Default Calibrating Macroprudential Policy Using Micro Data
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Book Synopsis Debt Service and Default: Calibrating Macroprudential Policy Using Micro Data by : Erlend Nier
Download or read book Debt Service and Default: Calibrating Macroprudential Policy Using Micro Data written by Erlend Nier and published by International Monetary Fund. This book was released on 2019-08-22 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide empirical evidence to support the calibration of a limit on household indebtedness levels, in the form of a cap on the debt-service-to-income (DSTI) ratio, in order to reduce the probability of borrower defaults in Romania. The analysis establishes two findings that are new to the literature. First, we show that the relationship between DSTI and probability of default is non-linear, with probability of default responding to increases in DSTI only after a certain threshold. Second, we establish that consumer loan defaults occur at lower levels of DSTI compared to mortgages. Our results support the recent regulation adopted by the National Bank of Romania, limiting the household DSTI at origination to 40 percent for new mortgages and consumer loans. Our counterfactual analysis indicates that had the limit been in place for all the loans in our sample, the probability of default (PD) would have been lower by 23 percent.
Book Synopsis Macroprudential Policy Calibration for Greece by : Mr. Marco Gross
Download or read book Macroprudential Policy Calibration for Greece written by Mr. Marco Gross and published by International Monetary Fund. This book was released on 2024-02-20 with total page 20 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Greek financial system has remained resilient underpinned by strengthening banks’ balance sheets, but still faces significant challenges ahead including the re-emergence of imbalances in the real estate market. Recognizing these imbalances, the authorities have recently introduced the necessary legal framework for setting borrower-based measures (BBMs), paving the way to activate both income- and collateral-based measures in near term. Simulations, which employ a quantitative framework combining micro- and macro-level data, show that BBMs would help enhance household resilience, with synergies when caps on debt service-to-income (DSTI) and loan-to-value (LTV) ratios are jointly implemented, leading over time to the more resilient banking system against potential risks. Caps could initially be set at less binding levels and gradually tightened based on a systemic risk assessment.
Book Synopsis Stress Testing and Calibration of Macroprudential Policy Tools by : Lucyna Gornicka
Download or read book Stress Testing and Calibration of Macroprudential Policy Tools written by Lucyna Gornicka and published by . This book was released on 2020-08-14 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: We present a semi-structural model of default risk, which is a function of loan and borrower characteristics, economic conditions, and the regulatory environment. We use this model to simulate bank credit losses for stress-testing purposes and to calibrate borrower-based macroprudential tools. The proposed approach is very flexible and is particularly useful when there is limited history of crisis episodes, when crises bring unanticipated shocks where past tail events offer little guidance and when structural shocks or changes in financial regulations have altered the loan default process. We apply the model to quantify mortgage lending risk in two distinct mortgage markets. For each application, we show a range of modeling adjustments that can be made to capture country-specific institutional features. The model uses bank portfolio data broken down by risk bucket and vintage, which enables us to take explicit account of the loan life cycle and to incorporate the housing and economic cycles. This feature facilitates a timely assessment of banks' loss-absorbing capacity and the buildup of systemic risk conditional on policy. It also enables counterfactual analysis and the evaluation of macroprudential policy interventions.
Author :International Monetary Fund. Monetary and Capital Markets Department Publisher :International Monetary Fund ISBN 13 : Total Pages :54 pages Book Rating :4.4/5 (2 download)
Book Synopsis Spain by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Spain written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2024-08 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: The macroprudential policy framework in Spain has been significantly reinforced in recent years. A new macroprudential authority, Macroprudential Authority Financial Stability Council, (AMCESFI), has been established in Spain, to provide high level oversight and to strengthen internal coordination on the identification, prevention, and mitigation of systemic risks in the financial system. Techniques and approaches for systemic risk identification have been further enhanced. And gaps in the macroprudential policy toolkit identified by the previous FSAP have been closed, although to date the new tools have not been applied given the assessment of risks. The framework incorporates many areas of strength by international standards, such as the techniques for systemic risk identification and the breadth of permissible macroprudential tools.
Book Synopsis Macroprudential Policy Effects by : Nina Biljanovska
Download or read book Macroprudential Policy Effects written by Nina Biljanovska and published by International Monetary Fund. This book was released on 2023-03-31 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt: The global financial crisis (GFC) underscored the need for additional policy tools to safeguard financial stability and ultimately macroeconomic stability. Systemic financial vulnerabilities had developed under a seemingly tranquil macroeconomic surface of low inflation and small output gaps. This challenged the precrisis view that achieving these traditional policy targets was a sufficient condition for macroeconomic stability. Thus, new tools had to be deployed to target specific financial vulnerabilities and to build buffers to cushion adverse aggregate shocks, while allowing traditional policy levers, including monetary and microprudential policies to focus on their traditional roles. Macroprudential policy measures emerged as the solution to this gap. Some of these measures had been used before the GFC (mostly in emerging markets). But it was only after the crisis that they were more widely adopted, and the toolkit expanded. This spurred a growing body of empirical research on the effects and potential shortfalls of these measures, with a further deepening of this knowledge gaining importance as policymakers confront increased financial stability risks in the post-pandemic world. Recognizing that there still is much to learn, this paper takes stock of our expanding understanding about the effects (and side effects) of macroprudential measures by focusing on these questions: What have we learned about the effects of macroprudential policy in containing the buildup of vulnerabilities? What do we know about the effects on economic activity and resilience? How do policy effects vary with conditions and over time? How important are leakages and circumvention? How do the effects on credit depend on other policies?
Book Synopsis Borrower-Based Macroprudential Instruments in Germany by : Galen Sher
Download or read book Borrower-Based Macroprudential Instruments in Germany written by Galen Sher and published by International Monetary Fund. This book was released on 2023-07-24 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Germany’s macroprudential policy toolkit is well-developed, but its key missing piece is a set of instruments related to a borrower’s income. In addition, existing powers to adopt LTV limits have not yet been deployed. Against this background, this paper advances the discussion of borrower-based macroprudential policy in Germany by explaining how borrower-based measures could strengthen financial stability, macroeconomic stability, and consumer protection; explaining how potential concerns about these instruments could be addressed; offering approaches to initial calibrations of instruments for further analysis; and hinting at their likely effects based on other countries’ experiences. The paper also uses a microsimulation model to show that activating borrower-based measures could provide as much capital to the banking system as the capital buffer requirements that were activated in 2022.
Author :International Monetary Fund. European Dept. Publisher :International Monetary Fund ISBN 13 : Total Pages :42 pages Book Rating :4.4/5 (2 download)
Book Synopsis Germany by : International Monetary Fund. European Dept.
Download or read book Germany written by International Monetary Fund. European Dept. and published by International Monetary Fund. This book was released on 2023-07-17 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Germany: Selected Issues
Author :International Monetary Fund. Monetary and Capital Markets Department Publisher :International Monetary Fund ISBN 13 : Total Pages :26 pages Book Rating :4.4/5 (2 download)
Book Synopsis Maldives by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Maldives written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2024-01-19 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Maldives Monetary Authority (MMA) is the entity responsible for maintaining financial stability. The Board of the monetary authority has decision-making powers over MMA’s three mandates (in order of priority): maintain price stability, maintain financial stability, provide assistance to the government in attaining economic development and stability. To maintain financial stability, MMA regulates and supervises the financial institutions and oversees the payments and settlements system. It also houses a Credit Information Bureau (CIB), a key element for both micro and macroprudential supervision. The securities market, outside of the scope of MMA, is regulated by the Capital Market Development Authority (CMDA).
Book Synopsis Staff Guidance Note on Macroprudential Policy by : International Monetary Fund
Download or read book Staff Guidance Note on Macroprudential Policy written by International Monetary Fund and published by International Monetary Fund. This book was released on 2014-06-11 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries
Book Synopsis Household Debt and Borrower-Based Measures in Finland: Insights from a Heterogeneous Agent Model by : Fumitaka Nakamura
Download or read book Household Debt and Borrower-Based Measures in Finland: Insights from a Heterogeneous Agent Model written by Fumitaka Nakamura and published by International Monetary Fund. This book was released on 2023-12-15 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze the effects of borrower-based macroprudential tools in Finland. To evaluate the efficiency of the tools, we construct a heterogeneous agent model in which households endogenously determine their housing size and liquid asset levels under two types of borrowing constraints: (i) a loan-to-value (LTV) limit and (ii) a debt-to-income (DTI) limit. When an unexpected negative income shock hits the economy, we find that a larger and more persistent drop in consumption is observed under the LTV limit compared to the DTI limit. Our results indicate that although DTI caps tend to be unpopular with lower income households because they limit the amount they can borrow, DTI caps are beneficial even on distributional grounds in stabilizing consumption. Specifically, DTI caps mitigate the consumption decline in recessions by restricting high leverage, and thus, they can usefully complement LTV caps.
Book Synopsis Stress Testing at the IMF by : Mr.Tobias Adrian
Download or read book Stress Testing at the IMF written by Mr.Tobias Adrian and published by International Monetary Fund. This book was released on 2020-02-05 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper explains specifics of stress testing at the IMF. After a brief section on the evolution of stress tests at the IMF, the paper presents the key steps of an IMF staff stress test. They are followed by a discussion on how IMF staff uses stress tests results for policy advice. The paper concludes by identifying remaining challenges to make stress tests more useful for the monitoring of financial stability and an overview of IMF staff work program in that direction. Stress tests help assess the resilience of financial systems in IMF member countries and underpin policy advice to preserve or restore financial stability. This assessment and advice are mainly provided through the Financial Sector Assessment Program (FSAP). IMF staff also provide technical assistance in stress testing to many its member countries. An IMF macroprudential stress test is a methodology to assess financial vulnerabilities that can trigger systemic risk and the need of systemwide mitigating measures. The definition of systemic risk as used by the IMF is relevant to understanding the role of its stress tests as tools for financial surveillance and the IMF’s current work program. IMF stress tests primarily apply to depository intermediaries, and, systemically important banks.
Book Synopsis Key Aspects of Macroprudential Policy - Background Paper by : International Monetary Fund. Fiscal Affairs Dept.
Download or read book Key Aspects of Macroprudential Policy - Background Paper written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2013-10-06 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: The countercyclical capital buffer (CCB) was proposed by the Basel committee to increase the resilience of the banking sector to negative shocks. The interactions between banking sector losses and the real economy highlight the importance of building a capital buffer in periods when systemic risks are rising. Basel III introduces a framework for a time-varying capital buffer on top of the minimum capital requirement and another time-invariant buffer (the conservation buffer). The CCB aims to make banks more resilient against imbalances in credit markets and thereby enhance medium-term prospects of the economy—in good times when system-wide risks are growing, the regulators could impose the CCB which would help the banks to withstand losses in bad times.
Book Synopsis Regulation of Finance and Accounting by : David Procházka
Download or read book Regulation of Finance and Accounting written by David Procházka and published by Springer Nature. This book was released on 2022-10-27 with total page 462 pages. Available in PDF, EPUB and Kindle. Book excerpt: This edition provides a mix of research perspectives to examine the economic and non-economic outcomes of global developments in financial regulation, monetary and fiscal measures, or sustainable development, with a tailored focus on specifics in emerging and transitioning countries. The volume combines a mix of approaches to investigate relevant newly emerged topics (e.g., economics of emissions, corporate social responsibility reporting) as well as traditional issues requiring new approaches (e.g., exchange rate mechanisms, investment strategies, the impact of corporate reporting on economic fundamentals). Such a comprehensive view of contemporary economic phenomena makes the volume attractive not only to academia, but also to regulators and policymakers, when deliberating on the potential outcomes of competing regulatory mechanisms.
Book Synopsis Spain by : International Monetary Fund
Download or read book Spain written by International Monetary Fund and published by International Monetary Fund. This book was released on 2012-06-08 with total page 77 pages. Available in PDF, EPUB and Kindle. Book excerpt: This report summarizes the findings of the Financial Sector Assessment Program (FSAP) Update for Spain. Although there is a core of strong banks that are well managed and appear resilient to further shocks, vulnerabilities remain. Substantial progress has been made in reforming the former savings banks, and the most vulnerable institutions have either been resolved or are being restructured. Recent measures address the most problematic part of banks’ portfolios. Moving ahead, a further restructuring and recapitalization of some of the remaining weaker banks may be needed as a result of deteriorating economic conditions.
Book Synopsis Macroprudential Policy by : International Monetary Fund
Download or read book Macroprudential Policy written by International Monetary Fund and published by International Monetary Fund. This book was released on 2011-10-01 with total page 85 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper provides the most comprehensive empirical study of the effectiveness of macroprudential instruments to date. Using data from 49 countries, the paper evaluates the effectiveness of macroprudential instruments in reducing systemic risk over time and across institutions and markets. The analysis suggests that many of the most frequently used instruments are effective in reducing pro-cyclicality and the effectiveness is sensitive to the type of shock facing the financial sector. Based on these findings, the paper identifies conditions under which macroprudential policy is most likely to be effective, as well as conditions under which it may have little impact.
Book Synopsis Tax Policy, Leverage and Macroeconomic Stability by : International Monetary Fund. Fiscal Affairs Dept.
Download or read book Tax Policy, Leverage and Macroeconomic Stability written by International Monetary Fund. Fiscal Affairs Dept. and published by International Monetary Fund. This book was released on 2016-12-10 with total page 78 pages. Available in PDF, EPUB and Kindle. Book excerpt: Risks to macroeconomic stability posed by excessive private leverage are significantly amplified by tax distortions. ‘Debt bias’ (tax provisions favoring finance by debt rather than equity) has increased leverage in both the household and corporate sectors, and is now widely recognized as a significant macroeconomic concern. This paper presents new evidence of the extent of debt bias, including estimates for banks and non-bank financial institutions both before and after the global financial crisis. It presents policy options to alleviate debt bias, and assesses their effectiveness. The paper finds that thin capitalization rules restricting interest deductibility have only partially been able to address debt bias, but that an allowance for corporate equity has generally proved effective. The paper concludes that debt bias should feature prominently in countries’ tax reform plans in the coming years.
Book Synopsis Macroprudential Solvency Stress Testing of the Insurance Sector by : Mr.Andreas A. Jobst
Download or read book Macroprudential Solvency Stress Testing of the Insurance Sector written by Mr.Andreas A. Jobst and published by International Monetary Fund. This book was released on 2014-07-22 with total page 84 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the last decade, stress testing has become a central aspect of the Fund’s bilateral and multilateral surveillance work. Recently, more emphasis has also been placed on the role of insurance for financial stability analysis. This paper reviews the current state of system-wide solvency stress tests for insurance based on a comparative review of national practices and the experiences from Fund’s FSAP program with the aim of providing practical guidelines for the coherent and consistent implementation of such exercises. The paper also offers recommendations on improving the current insurance stress testing approaches and presentation of results.
