Discussion of Regulation and structural change in financial systems by Stijn Claessens

Transcription

1 Discussion of Regulation and structural change in financial systems by Stijn Claessens Hyun Song Shin* Bank for International Settlements ECB Forum on Central Banking Sintra, 29 June 2016 * The views expressed here are mine, not necessarily those of the Bank for International Settlements.

2 Comprehensive and yet compact review with two key messages Financial structure matters for efficiency and risks Banks versus markets - Wholesale versus deposit funding - Extent of procyclicality depends on financial structure Functional taxonomy of financial systems - Types of financial services - Complementarity across functions Regulation should take account of financial structure Dealing with procyclicality Meeting risks from non-banks Macroprudential regulation 2

3 Direct and intermediated finance Ultimate Borrowers Intermediated Credit Banks Claim Ultimate Creditors Directly granted credit 3

4 Bank credit is more procyclical: credit to the US non-financial corporate business sector Millions 120 Bond change Loan change Q2 2009Q4 2008Q2 2006Q4 2005Q2 2003Q4 2002Q2 2000Q4 1999Q2 1997Q4 1996Q2 1994Q4 1993Q2 1991Q4 1990Q2 Source: Federal Reserve Flow of Funds, Table L102 4

5 Financial intermediation before expansion 5

6 Financial intermediation during credit boom 6

7 Spain: total banking sector domestic credit Trillion Euros Dec trillion IE_8.9.12,13,14 Other loans to households and nonprofits IE_8_9.11 Credit for purchase of consumer durables IE_8_9.10 Credit for homeownership billion Dec _9.9-9_9.10 Home improvement credit IE_8_9.7 Loans for real estate financing IE_8_9.5 Credit for construction funding 8_9.6-8_9.7 Credit financing services (non real estate) IE_8_9.4 Credit financing industry (excluding construction) IE_8_9.3 Credit for financing agriculture, hunting, forestry and fishing Source: Bank of Spain 7

8 Spain: core domestic liabilities of banking sector Trillion Euros Dec 1998 IE_8_2.5 Other bank liabilities (deposits > 3m, securities and repos) held by households, nonfinancial corporations and non-profits billion IE_8_2.1 Cash and deposits (<3m) held by households, nonfinancial firms and non-profits Dec-11 Dec-10 Dec-09 Dec-08 Dec-07 Dec-06 Dec-05 Dec-04 Dec-03 Dec-02 Dec-01 Dec-00 Dec-99 Dec-98 Dec-97 Dec-96 Dec-95 Source: Bank of Spain 8

9 Spain: core and non-core liabilities of banking sector Trillion Euros Private crossborder liabilities (total credit - core liabilties - Eurosystem LTRO Eurosystem Long term refinancing operations Core Liabilities to residents Dec-11 Dec-10 Dec-09 Dec-08 Dec-07 Dec-06 Dec-05 Dec-04 Dec-03 Dec-02 Dec-01 Dec-00 Dec-99 Source: Bank of Spain 9

10 A taxonomy of macroprudential tools Asset side tools (LTV, DTI, ) Capital-based tools (Countercyclical capital buffer, leverage cap, ) Liabilities side tools (Levy, caps ) 10

11 Monetary policy has similar impact to macroprudential policy Bring spending forward, or postpone Operate on measured risks; influence leverage Determine funding cost 11

12 Monetary policy and macroprudential policy: similarities Demand for credit Monetary policy brings spending forward (by borrowing more) or postpones spending (by borrowing less) Macroprudential policy postpones spending by curbing credit Intermediary risk-taking Risk-taking channel of monetary policy impacts leverage Macropru does the same through binding equity constraint Funding cost Monetary policy influences net interest margin Macropru is another way to influence funding costs 12

13 Two differences Sectoral disparities Monetary policy gets into all the cracks (Jeremy Stein) Macropru can be aimed at particular sectors/practices Constraints imposed by global liquidity conditions Floating exchange rate does not insulate an economy to pursue autonomous monetary policy (Hélène Rey) Macroprudential policies are less susceptible to global liquidity conditions 13

14 FX swap spread vis-à-vis EUR, five-years FX swap spread, five-years Basis points Basis points Japanese yen Norwegian krone Danish krone 90 Q4 14 Q2 15 Q4 15 Q2 16 Swedish krona 60 Source: Bloomberg. 14

15 Euro denominated bond issuance by Swedish banks 15

16 Issues for discussion on macroprudential policy Taxonomy Effectiveness Interaction with monetary policy 16

17 Circling back to key points Financial structure matters for efficiency and risks Banks versus markets - Wholesale versus deposit funding - Extent of procyclicality depends on financial structure Functional taxonomy of financial systems - Types of financial services - Complementarity across functions Regulation should take account of financial structure Dealing with procyclicality Meeting risks from non-banks Macroprudential regulation 17