Macroprudential policies and the growth of bank credit

Abstract:

New bank regulations include macroprudential policies to control bank loan growth. Justified by theory, it is unclear whether these policies will work in practice. We estimate the relationship between macroprudential capital and liquidity controls, supervisory intensity, and loan growth using U.S. bank data while controlling for loan demand and other factors that affect loan growth. We find bank funding costs and supervisory monitoring intensity to be the most important determinants of loan growth followed by loan portfolio performance and bank profitability. Bank capital and liquidity ratios have limited impacts, suggesting that macroprudential regulations are unlikely to be effective.

 

Macroprudential policies and the growth of bank credit by American Enterprise Institute

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About the Author

 

Paul H.
Kupiec
  • Paul H. Kupiec is a resident scholar at the American Enterprise Institute (AEI), where he studies systemic risk and the management and regulations of banks and financial markets. He also follows the work of financial regulators such as the Federal Reserve and examines the impact of financial regulations on the US economy.

    Before joining AEI, Kupiec was an associate director of the Division of Insurance and Research within the Center for Financial Research at the Federal Deposit Insurance Corporation (FDIC), where he oversaw research on bank risk measurement and the development of regulatory policies such as Basel III. Kupiec was also director of the Center for Financial Research at the FDIC and chairman of the Research Task Force of the Basel Committee on Banking Supervision. He has previously worked at the International Monetary Fund (IMF), Freddie Mac, J.P. Morgan, and for the Division of Research and Statistics at the Board of Governors of the Federal Reserve System.

    Kupiec has edited many professional journals, including the Journal of Financial Services Research, Journal of Risk, and Journal of Investment Management.

    He has a bachelor of science degree in economics from George Washington University and a doctorate in economics — with a specialization in finance, theory, and econometrics — from the University of Pennsylvania.

  • Phone: 202.862.7167
    Email: paul.kupiec@aei.org
  • Assistant Info

    Name: Brian C. Marein
    Phone: 202.862.5890
    Email: brian.marein@aei.org

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