We provide a microfounded framework for the welfare analysis of macroprudential policy within a model of rational bubbles. For this we posit an overlapping generation model where productivity and credit supply are subject to random shocks. We find that when real interest rates are lower than the...

The International Financial Reporting Standard (IFRS) 9 relates to the recognition of an entity’s financial asset/liability in its financial statement, and includes an expected credit loss (ECL) framework for recognising impairment. The quantification of ECL is often broken down into its three...

Recent empirical studies have documented two remarkable patterns shown by euro area banks in the aftermath of the Great Recession: (i) their tendency to boost capital ratios by shrinking assets (contraction of loans supply), and (ii) their reluctance to cut back on dividends (fall in retained...

The paper inspects the credit impact of policy instruments that are commonly applied to contain systemic risk. It employs detailed information on the use of capital-based, borrowerbased and liquidity-based instruments in 28 European Union countries in 1995-2017 and a macroeconomic panel setup....

The paper evaluates the impact of a phased-in introduction of capital requirements on equity, risk-taking, and probability of default for a sample of European systemically important banks. Contrary to the case of a one-off introduction of capital requirements, this study does not find evidence...