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Max Lampe

21 May 2021
OCCASIONAL PAPER SERIES - No. 257
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Abstract
This paper looks at the impact of mitigation policies implemented by supervisory and macroprudential authorities as well as national governments in the euro area during the coronavirus (COVID-19) pandemic to support lending to the real economy. The impact assessment concerns joint, and individual, effect of supervisory measures introduced by the ECB Banking Supervision, a reduction in macroprudential buffers put forward by national macroprudential authorities, and public moratoria and guarantee schemes. The analysis has been conducted in the first half of 2020, in a situation of high uncertainty about how the crisis will develop in the future. Against this backdrop, it proposes a method of addressing such uncertainty by assessing the impact of policies across a full range of scenarios. We find that the supervisory, macroprudential and government policies should have helped to maintain higher lending to the non-financial private sector (around 5% higher than lending in the absence of policy measures) and, in particular, to non-financial corporations (12% higher than lending in the absence of policy measures), preventing further amplification of the recession via the banking sector. The national and supervisory and macroprudential actions have reinforced each other, and have been jointly able to affect a broader share of the banking sector.
JEL Code
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
23 July 2021
OCCASIONAL PAPER SERIES - No. 258
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Abstract
This paper assesses the macroeconomic implications of the Basel III finalisation for the euro area, employing a large-scale semi-structural model encompassing over 90 banks and 19-euro area economies. The new regulatory framework will influence banks’ reactions to economic conditions and, as a result, affect the ability of the banking system to amplify or dampen economic shocks. The assessment covers the entire distribution of conditional economic predictions to measure the cost and benefit of the reforms. Looking at the means of conditional forecasts of output growth provides an indication of the costs of the reform, namely a transitory reduction in euro area gross domestic product (GDP) and in lending to the non-financial private sector. Looking at the lower percentile of output growth forecasts, i.e. growth at risk, captures the long-term benefits of the Basel III finalisation package in terms of improved resilience and the ability of the banking system to supply lending to the real economy under adverse conditions. These permanent growth-at-risk benefits ultimately outweigh the short-term costs of the reform.
JEL Code
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
26 July 2021
MACROPRUDENTIAL BULLETIN - ARTICLE - No. 14
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Abstract
This article assesses the economic costs and benefits of the Basel III finalisation package for the euro area and shows that the transitory costs of the reform are outweighed by its permanent long-term benefits. Implementing EU-specific modifications to the Basel III reform, such as the small and medium-sized enterprise (SME) supporting factor, credit valuation adjustment (CVA) exemptions and discretion with regard to the operational risk capital charge, reduce the already moderate transitory costs of the reform, although they also reduce its long-run benefits. Approaches that, in addition, modify the implementation of the output floor fail to further reduce the short-term economic costs of the reform while again decreasing its long-term benefits.
JEL Code
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation