Currency-based measures targeting banks - Balancing national regulation of risk and financial openness

Crescenzio, Annamaria de; Golin, Marta; Ott, Anne-Christelle

doi:10.1787/5jrp0z9lp1zr-en

Cited by 4 publications

(10 citation statements)

References 11 publications

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“…6 Empirical evidence shows that investors' risk aversion, measured by the VIX index, reduces significantly following unconventional monetary policy (Gambacorta et al 2014) and a loosening of conventional monetary policy (Bekaert et al, 2013) of central banks in AEs. Using a novel dataset (De Crescenzio et al 2015), the paper tests the null hypothesis that the introduction or a tightening of CB-CFMs reduces cross-border banking flows, controlling for the effect of domestic MPMs, other CFMs, bank characteristics and a large set of push and pull factors.…”

Section: What Is the Role Of Cb-cfms In Reducing Cross-border Bankingmentioning

confidence: 99%

“…The main explanatory variables use a dataset (De Crescenzio et al, 2015) which records changes (introduction, adjustment and removal) in the use of CBMs from 2005 to 2013. The dataset includes policies affecting assets, liabilities, net positions and derivatives of banks.…”

Section: Data On Cb-cfms Are Taken From a Novel Dataset Developed By mentioning

confidence: 99%

“…The use of CBMs has increased in the post-crisis period, as this has become an active policy area. While the pre-crisis period is characterised by a large use of conventional measures, such as the regulation of the net FX position of banks, other types of CBMs were also increasingly used in the post-crisis period, ranging from taxes on FX liabilities to rules limiting FX derivatives (De Crescenzio et al, 2015). In particular, CBMs have been a common policy tool among EMEs, also within the OECD group.…”

Section: Countries Increased Their Use Of Cb-cfms In the Aftermath Ofmentioning

confidence: 99%

“…In this context, the OECD has collected new datasets of de jure CBMs directed at banks, with CBMs defined as bank regulations discriminating on the basis of the currency of an operationin other words, measures that apply a less favourable treatment to operations by banks in a particular currency, typically foreign currencies 1 (De Crescenzio et al, 2015). 2 The implementation of these currency-based measures has often been justified by the intention to limit the build-up of currency mismatches in the banking sector and the excessive accumulation of bank liabilities in foreign exchange (FX), potentially more volatile than those denominated in domestic currency and could generate external vulnerabilities following the tightening cycle of monetary policy in Advanced Economies (AEs) (see OECD, 2015).…”

Section: Introductionmentioning

confidence: 99%

“…In particular, the analysis focuses on those CBMs that not only discriminate on the basis of the currency of an operation but also extend to operations abroad with non-residents and that thus may be considered CFMs -defined as CB-CFMs. The original dataset (De Crescenzio et al, 2015) excludes those measures that are considered as common domestic prudential tools, as well as those that apply to operations with residents only.…”

Section: Introductionmentioning

confidence: 99%

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Have currency-based capital flow management measures curbed international banking flows?

Crescenzio

Golin

Molteni

2017

OECD Working Papers on International Investment

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The international investment working paper seriesincluding policies and trends and the broader implications of multinational enterpriseis designed to make available to a wide readership selected studies undertaken under the aegis of the OECD Investment Committee, by OECD staff, or by outside consultants working on OECD Investment Committee projects. The papers are generally available only in their original language English or French with a summary in the other if available. OECD WORKING PAPERS ON INTERNATIONAL INVESTMENT are published on www.oecd.org/investment/working-papers.htm.This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area. This paper analyses the impact of a specific type of banking regulation on operations in foreign currency, defined as currency-based capital flow management measures (CB-CFMs), on cross-border banking flows in a sample of 18 countries over the period 2005 to 2013. The results show that the introduction and tightening of these measures in the post-crisis period contributed to a reduction of the external debt of banks, controlling for capital flow management measures, domestic macro-prudential regulation, and a large set of push and pull factors. The examination of external debt by maturity and instruments suggests that these measures are more effective in curbing short-term debt and interbank borrowing, which are also the components that contracted more sharply in the aftermath of the 2008 crisis. Further analysis could look at the benefits these measures bring in terms of financial stability, and evaluate the costs of capital account openness against the risks that CB-CFMs aim to address.

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Section: What Is the Role Of Cb-cfms In Reducing Cross-border Bankingmentioning

confidence: 99%

Section: Data On Cb-cfms Are Taken From a Novel Dataset Developed By mentioning

confidence: 99%

Section: Countries Increased Their Use Of Cb-cfms In the Aftermath Ofmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Have currency-based capital flow management measures curbed international banking flows?

Crescenzio

Golin

Molteni

2017

OECD Working Papers on International Investment

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Capital flow deflection under the magnifying glass

Gori¹,

Lepers

Mehigan

2023

Int. J Fin Econ

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Leveraging on a new quarterly dataset of capital control adjustments, we find renewed evidence that the introduction or tightening of capital controls in one economy increases capital inflows to other similar borrowing economies, an effect often called capital flow deflection. However, not all flows are deflected alike. Capital flow deflection is primarily driven by portfolio investment and bank credit, and only controls targeting these types of flows generate this externality. Moreover, analysing bilateral capital flows in order to capture investing countries' characteristics, we find that capital controls tend to deflect flows from advanced economies' portfolio equity investors, while controls on bank‐related flows primarily deflects lending from emerging market banks.

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