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CESEE’s macroprudential policy response in the wake of the COVID-19 crisis

Author

Listed:
  • Markus Eller

    (Oesterreichische Nationalbank, Foreign Research Division)

  • Reiner Martin

    (Joint Vienna Institute (JVI))

  • Lukas Vashold

    (Vienna University of Economics and Business)

Abstract

The COVID-19 crisis represents a major shock to the global economy with severe repercussions on financial markets. However, compared to the situation at the start of the global financial crisis (GFC), the banking system is better prepared to withstand the shock. Banks are better capitalized and the regulatory framework, including the macroprudential one, was substantially reinforced in the aftermath of the GFC in many countries across the globe. Hence, national authorities have increased leeway to respond to the recession and market instability caused by the pandemic. In this paper, we assess how EU member states in Central, Eastern and Southeastern Europe (CESEE) have adjusted their macroprudential policies in response to the COVID-19 crisis. To this end, we utilize a recently developed, intensity-adjusted index that tracks a broad set of macroprudential policy instruments. We find that countries responded quickly to the outbreak of the crisis by relaxing capital buffer and liquidity requirements, or at least refraining from previously planned tightening. At the same time, we observe that borrower-based measures and minimum reserve requirements were only rarely relaxed and risk weights were not changed at all.

Suggested Citation

  • Markus Eller & Reiner Martin & Lukas Vashold, 2021. "CESEE’s macroprudential policy response in the wake of the COVID-19 crisis," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue Q1/21, pages 55-69.
    • Handle: RePEc:onb:oenbfi:y:2021:i:q1/21:b:3
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    References listed on IDEAS

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    More about this item

    Keywords

    macroprudential policies; CESEE; COVID-19; financial stability;
    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
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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