Shadow banking and macroprudential policy

Transcription

1 Sinaia, October 23 rd, 2015 Shadow banking and macroprudential policy Matei Kubinschi, National Bank of Romania The opinions expressed in this paper/presentation are those of the author and do not necessarily reflect the views of the National Bank of Romania.

2 Presentation outline 1. Brief overview of shadow banking in Romania 2. Case study: calibrating macroprudential tools for: 2.1 Non-Banking Financial Institutions (NBFIs) 2.2 Investments Funds (IFs) 3. Conclusions

3 1. Shadow Banking sector in Romania

4 Shadow banking sector Multiple definitions of shadow banking sector: FSB (2011): credit intermediation involving entities and activities (fully or partially) outside the regular banking system IMF (2013): [ ] financial institutions that act like banks are not supervised like banks Main functions of shadow banking Maturity and liquidity transformation Leverage Credit risk transfer

5 MFIs total assets-to-gdp ratio Shadow banking sector in Romania 100 Structure of the Romanian financial system (assets-to-gdp ratio) % Relative sizes of banking and non-bank financial sectors in CEE countries 170% 160% 150% 140% 130% Hungary Czech Rep. Slovenia Croatia R = Estonia investment funds private pension funds insurance companies non-bank financial institutions credit institutions 120% Slovakia 110% Poland 100% 90% Romania Lithuania 80% 15% 25% 35% 45% 55% OFIs total assets to GDP ratio Source: NBR, FSA Source: ECB, national financial accounts

6 Shadow banking sector in Romania Institutional sector classification by relative asset size Insurance Companies 3.5% NBFI 5.9% Investment Funds 7.9% Pension Funds 3.7% OFIs 1% Under the broad FSB (2011) definition NBFIs Investment Funds Money Market Funds Source: NBR Credit Institutions 77.9% 15.5% of financial sector assets

7 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 iun.15 Non-Banking Financial Institutions NBFIs lending and economic growth Supervised by the NBR (law 93/2009) Grant loans to NFCs (75%), households (23%) and OFIs (2%) Higher NPL rate (22.5 %) compared to the banking sector annual change, percent Rely heavily on external financing (Austria, France, The Netherlands and others) real GDP (rhs) loans granted by NBFIs loans granted by credit institutions Source: NBR

8 Investment Funds Shares/units issued by investment funds Sustained growth after 2009 Cyprus 1% Luxemburg 1.5% Great Britain 2% USA 14.8% Others 4.4% Romania 76.3% 52.7% 5.1% 8.4% 4.4% 3 main categories: closed-end stock, open-end bond and other open-end funds Invest in domestic stocks (45%), bonds (36%), deposits (13%) and fund units (5%) Households Non-financial corporations Monetary funds Others Source: NBR Other financial intermediaries Investment funds Credit institutions High participation of domestic investors, mainly households

9 2. Case study: Calibrating macroprudential tools for NBFIs and investment funds

10 Macroprudential tools for NBFIs 1. What are the main drivers of NBFIs credit growth? 2. How does NBFI credit demand respond to interest rate shocks? 3. What is the degree of synchronization between NBFI and MFI financial cycles?

11 1. Drivers of NBFI credit growth Estimated elasticity coefficients of NBFI credit growth Variable Coefficient t-statistic Prob. GDP growth (-1) MFI credit growth MFI interest rate EURRON exchange rate NPL rate of NBFIs (+2) R-squared GDP growth EURRON exchange rate MFI credit growth MFI interest rate NPL rate of NBFIs Multivariate regression analysis NBFIs complementary role in financial intermediation NPL volume significant impact on NBFI sector activity Source: own estimation

12 2.1. NBFI credit demand response to interest rate shocks Bayesian SVAR model with sign restrictions (Blake and Mumtaz, 2012) Small model of the Romanian economy Variable Sign Real GDP growth - HICP - Credit growth - EURRON - ROBOR 3M + Y = Economic Growth Inflation Credit Growth Exchange Rate Interest Rate Table 1. Sign restrictions applied in the SBVAR model

13 2.2 Impulse-response analysis IRFs to a monetary policy shock on the variables included in the SBVAR model % 0.3 % real GDP growth response inflation response -0.4 confidence interval confidence interval -0.5 % 0.6 % credit growth response exchange rate response -0.8 confidence interval confidence interval -1 Source: own estimation

14 2.2 Impulse-response analysis Accumulated IRFs to an interest rate shock (households sector) Accumulated IRFs to an interest rate shock (NFC sector) 0 pp pp NBFI credit growth accumulated response MFI credit growth accumulated response -6 NBFI credit growth accumulated response MFI credit growth accumulated response Source: own estimation

15 3. Financial cycle synchronization Estimate credit-to- GDP gap for MFIs and NBFIs One-sided HP filter via Kalman Filter methodology Lead/lag correlations and Granger causality testing 10% 5% 0% -5% -10% -15% -20% Credit-to-GDP gap results MFI credit-to-gdp gap NBFI credit-to-gdp gap Source: own estimation

16 3. Financial cycle synchronization Lead/lag correlations between MFI and NBFI credit-to-gdp ratio Granger causality tests results 0.6 Lag Null Hypothesis F-Statistic Prob MFI NBFI NBFI MFI MFI NBFI NBFI MFI MFI NBFI NBFI MFI MFI NBFI NBFI MFI Source: own estimation 5 MFI NBFI NBFI MFI

17 dec.08 iun.09 dec.09 iun.10 dec.10 iun.11 dec.11 iun.12 dec.12 iun.13 dec.13 iun.14 dec.14 iun.15 Macroprudential tools for Investment Funds Supervised by the Romanian FSA (Financial Supervisory Authority) Generate systemic risk through Direct contagion financing other sectors Indirect contagion short-term redemption risk (fire sales) and reputational risk (investment funds from large financial groups) lei bn Total assets of investment funds closed-end equity funds open-end bond funds others Source: NBR

18 Macroprudential tools for Investment Funds Network analysis of the financial sector, based on FNA and aggregated balance sheet data. Main financing channels, growing importance of NBFIs and IFs for the real economy. Romanian financial system 2009

19 Macroprudential tools for Investment Funds Network analysis of the financial sector, based on FNA and aggregated balance sheet data. Main financing channels, growing importance of NBFIs and IFs for the real economy. Romanian financial system 2015

20 3. Conclusions

21 Conclusions Growing importance of shadow banking sector increased transparency and regulatory requirements Calibration of macroprudential tools take into account NBFIs financial cycle stance and reaction to economic and financial conditions Rapid development of investment fund sector close supervision of interconnectivity and common exposures Romanian shadow banking sector low degree of systemic risk and positive effects on financial sector development (under financial stability principles)

22 Thank you for your attention!

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