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Macroeconomic Effects of Introducing a Capital Conservation Buffer in the Ukrainian Banking Sector

Author

Listed:
  • Pervin Dadashova

    (National Bank of Ukraine, National University of “Kyiv-Mohyla Academy”)

  • Magnus Jonsson

    (Sveriges Riksbank)

  • Hanna Onyshchenko

    (National Bank of Ukraine)

Abstract

The National Bank of Ukraine (NBU) is planning to introduce a capital conservation buffer in the Ukrainian banking sector over a four-year period starting in 2020. This new regulation will yield long-term benefits by strengthening the resilience of the banks, which will reduce the likelihood and costs of financial crises. However, higher capital requirements in the form of a capital conservation buffer can also result in short-term costs by temporarily lowering output. In this study, we use a dynamic general equilibrium model calibrated to fit some long-term features of the Ukrainian economy to evaluate how different implementation strategies affect the short-term output loss. We show that the output loss can be reduced by preannouncing and gradually implementing the buffer, along the lines that have already been advanced by the NBU.

Suggested Citation

  • Pervin Dadashova & Magnus Jonsson & Hanna Onyshchenko, 2018. "Macroeconomic Effects of Introducing a Capital Conservation Buffer in the Ukrainian Banking Sector," Visnyk of the National Bank of Ukraine, National Bank of Ukraine, issue 243, pages 33-42.
    • Handle: RePEc:ukb:journl:y:2018:i:243:p:33-42
    DOI: 10.26531/vnbu2018.243.031
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    File URL: https://journal.bank.gov.ua/en/article/2018/243/03
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    References listed on IDEAS

    as
    1. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    2. Jihad Dagher & Giovanni Dell'Ariccia & Luc Laeven & Lev Ratnovski & Hui Tong, 2016. "Benefits and Costs of Bank Capital," IMF Staff Discussion Notes 16/04, International Monetary Fund.
    3. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Capital buffers; DSGE models; banks; macroeconomic costs; macroprudential policy; Ukraine;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - 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; Other Depository Institutions; Micro Finance Institutions; Mortgages

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