Capital and currency-based macroprudential policies: an evaluation using credit registry data

BIS Working Papers No 672
November 2017

Paper produced as part of the BIS Consultative Council for the Americas (CCA) research project on "The impact of macroprudential policies: an empirical analysis using credit registry data" implemented by a Working Group of the CCA Consultative Group of Directors of Financial Stability (CGDFS).



This paper studies the effect of two macroprudential policies on firms' credit growth in Argentina for the period 2009-2014. The first policy required banks to reinvest part of their profits to increase their capital. The second policy set limits on the amount of assets and liabilities that financial institutions could hold in foreign currency. We analyse the effect of both the introduction and tightening of these policies.


Emerging markets are a natural starting place for studies on the effectiveness of macroprudential policies: they have implemented a wide variety of such measures; and these policies have been in place for a longer period than in advanced economies. In this sense, the study of the Argentine experience is worthwhile for policy design.  Moreover, most studies on the effects of macroprudential policies use data at the macro level. Our study is different in that it uses credit data available at the firm level. This allows the study of the impact of regulation on how banks grant credit to borrowers. Finally, most studies focus on measures that affect banks' capital, while we also look at those that affect their foreign currency position. This is relevant as currency-based measures are usual in emerging economies.


The paper finds that the implementation and tightening of both macroprudential policies were effective in reducing credit growth. Second, the limit on the foreign currency position of financial institutions appears to have had a more important impact. Third, these policies appear to have increased the quality of credit. Finally, bank characteristics such as the amount of assets and capital affect how financial institutions react to the policy change.



We aim to assess the impact of capital- and currency-based macroprudential policy measures on credit growth at the bank-firm level, using credit registry data from Argentina. We examine the impact of the introduction and tightening of a capital buffer and a limit on the foreign currency position of financial institutions on credit growth of firms, estimating fixed effects and difference-in-difference models for the period 2009-2014; we control for macroeconomic, financial institutions and firms' variables, both observable and unobservable. We find that: the capital buffer and the limits on foreign currency positions generally contribute to moderating the credit cycle, both when introduced and when tightened; the currency-based measure appears to have a quantitatively more important impact; both measures operate on the extensive and the intensive margins, and have an impact on credit supply. Macroprudential policies also have an effect on ex post credit quality: growth of non-performing loans is reduced after their implementation. In general, credit granted by banks with more capital and assets evidences a higher impact of the introduction of the capital buffer, while this measure also acts more strongly during economic activity expansions.

JEL classification: E58, G28, C33

Keywords: Macroprudential policy, credit registry data, panel data models