Macroprudential Policies in Peru : The Effects of Dynamic Provisioning and Conditional Reserve Requirements

Over the past decade, credit has grown significantly in Peru, a small and partially dollarised economy, and the mounting credit risk attached to foreign currency credit created severe challenges for financial regulators. This paper assesses the effectiveness of two macroprudential measures implemented by regulators: dynamic provisioning, to reduce the procyclicality of credit and conditional reserve requirements, to diminish the degree of dollarisation of the economy. Using credit register data that covers the period of 2004-2014, we find evidence that dynamic provisioning has decelerated the rapid growth of commercial bank lending. Moreover, mortgage dollarisation declined significantly after the implementation of the conditional reserve requirement scheme.Paper produced as part of the BIS Consultative Council for the Americas (CCA) research project on “The Impact of Macroprudential Policies: An Empirical Analysis Using Credit Registry Data” implemented by a Working Group of the CCA Consultative Group of Directors of Financial Stability (CGDFS)