NDLI: Capital Adequacy Regulations in Hungary: Did It Really Matter?

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Capital Adequacy Regulations in Hungary: Did It Really Matter?

Content Provider	Scilit
Author	Siklos, Dora
Copyright Year	2016
Description	Journal: SSRN Electronic Journal The main purpose of this paper is twofold. First, it aims to estimate the effect of the tightening of regulatory capital requirements on the real economy during a credit upswing. Second, it intends to show whether applying a counter-cyclical capital buffer measure, as per the Basel III rules, could have helped decelerate FX lending growth in Hungary, mitigating the build-up of vulnerabilities in the run-up to the global financial crisis. To answer these questions, we use a Vector Autoregression-based approach to understand how shocks affected to capital adequacy in the pre-crisis period. Our results suggest that regulatory authorities could have slowed the increase in lending temporarily. They would not, however, have been able to avoid the upswing in FX lending by requiring counter-cyclical capital buffers even if such a tool had been available and they had reacted quickly to accelerating credit growth. Our results also suggest that a more pronounced tightening might have reduced FX lending substantially, but at the expense of real GDP growth. The reason is that an unsustainable fiscal policy led to a trade-off between economic growth and the build-up of new vulnerabilities in the form of FX lending.
Related Links	https://www.esm.europa.eu/sites/default/files/esmdp820200316.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=3139103
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.3139103
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2016-04-01
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal Social Sciences, Interdisciplinary Fx Lending Capital Adequacy Bank Regulation Counterfactual Analysis
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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