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The effect of macroprudential policy on risks of U.S. bank holding companies

Author

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  • Dzhagityan, E.

    (HSE University, Moscow, Russia)

  • Alekseeva, M.

    (HSE University, Moscow, Russia)

Abstract

Amid increasing uncertainty in the global financial markets, the accumulation of risks in the banking sector highlights the lack of alternatives to macroprudential policy (MPP), including bankruptcy of several leading U.S. banks. The paper investigates the impact of macroprudential policy on the risks of large U.S. bank holding companies with total consolidated assets exceeding $100 billion which are classified as systemically important financial institutions. We study the extent to which macroprudential policy may influence dynamic market-based CoVaR (Conditional Value at Risk) risk measure of large U.S. banks supported by the two-step generalized method of moments. The results confirm the downward impact of macroprudential tightening policy on risks, which is especially pronounced in the case of increased loan loss provision requirements, stricter lending standards, leverage requirements and measures targeting at systemically important banks. The research results show that macroprudential policy measures have a heterogeneous effect on different types of banks selected by the principal component analysis method. We also found the asymmetric impact of tightening and loosening macroprudential policy measures on risks for large U.S. banks. Our findings provide a better understanding of the macroprudential policy toolkit in the United States and may have practical implications for banking sector regulators.

Suggested Citation

  • Dzhagityan, E. & Alekseeva, M., 2024. "The effect of macroprudential policy on risks of U.S. bank holding companies," Journal of the New Economic Association, New Economic Association, vol. 63(2), pages 168-191.
    • Handle: RePEc:nea:journl:y:2024:i:63:p:168-191
    DOI: 10.31737/22212264_2024_2_168-191
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    More about this item

    Keywords

    macroprudential policy; banking risks; systemically important banks; USA;
    All these keywords.

    JEL classification:

    • 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; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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