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RSS FeedsSustainability, Vol. 10, Pages 3620: Macroprudential Policy, Credit Cycle, and Bank Risk-Taking (Sustainability)

 
 

13 october 2018 15:00:05

 
Sustainability, Vol. 10, Pages 3620: Macroprudential Policy, Credit Cycle, and Bank Risk-Taking (Sustainability)
 




This paper constructs a theoretical model to analyze the effect of macroprudential policies (MPPs) on bank risk-taking. We collect a data set of 231 commercial banks in China to empirically test whether macroprudential tools, including countercyclical capital buffers, reserve requirements, and caps on loan-to-value, can affect bank risk-taking behaviors by using the dynamic unbalanced panel system generalized method of moment (SYS-GMM). The results provide further evidence on the important role of MPPs in maintaining financial stability, which helps mitigate financial system vulnerabilities. Bank risk-taking will be decreased with the strengthening of macroprudential supervision, which greatly benefits the resilience and the sustainability of bank sector. Moreover, the credit cycle has a magnifying role on MPPs` effect on bank risk-taking. Reducing risks in bank loans requires a further slowing of credit growth, which is necessary to ensure sustainable growth in a bank system, or more ambitiously, to smooth financial booms and busts. The results survive robustness checks under alternative estimation methods and alternative proxies of bank risk-taking and MPPs.


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12 viewsCategory: Ecology
 
Sustainability, Vol. 10, Pages 3621: Analyzing the Social Lead-Up to a Human-Induced Disaster: The Gas Extraction-Earthquake Nexus in Groningen, The Netherlands (Sustainability)
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