Coulier, L., & De Schryder, S. (2024). Assessing the effects of borrower-based macroprudential policy on credit in the EU using intensity-based indices. Journal of International Money and Finance, 142, 103022. https://doi.org/10.1016/j.jimonfin.2024.103022
Evaluating heterogeneous effects of housing-sector-specific macroprudential policy tools on Belgian house prices - with Selien De Schryder. Project presented on the NBB Colloquium on Household heterogeneity and policy relevance (October 2022) and the 5th ECB/IMF Macroprudential Policy and Research conference. Link to NBB Working Paper (Last update: October 2022). [R&R at Regional Science and Urban Economics]
This paper sheds more light on the heterogeneity of the effects of national macroprudential policy changes on local house price growth. More specifically, we employ an extensive dataset of Belgian municipalities containing a multitude of drivers of local house price dynamics and examine the potential heterogeneity of housing-related macroprudential policy changes driven by local characteristics related to financially constrained and high-risk households, the degree of local housing market activity, and changes in local household mortgage indebtedness. Our results point to more dampening effects of the common macroprudential policy tightenings on local house price growth rates in municipalities with more financially constrained and high-risk households. In addition, theseheterogeneous impacts are shown to depend in part on the degree of local housing market activity.
Are low interest rates firing back? Interest rate risk in the banking book and bank lending in a rising interest rate environment - with Cosimo Pancaro and Alessio Reghezza. Projected presented at the Inauguaral conference on Challenges for Monetary Policy Transmission in a Changing World (ChaMP). Watch the presentation here. Link to ECB Working Paper (Last update: July 2024)
We match granular supervisory and credit register data to assess the implications of banks’ exposure to interest rate risk on the monetary policy transmission to bank lending supply in the euro area. We exploit the largest and swiftest increase in interest rates since the creation of the euro and find that banks with a higher exposure to interest rate risk, i.e., with a larger duration gap after accounting for hedging, curtailed corporate lending more than their peers. Ceteris paribus, greater interest rate risk entails closer supervisory scrutiny and potential capital surcharges in the short term, and lower expected profitability and capital accumulation in the medium to long term. We then proceed to dissect banks’ credit allocation and find that banks with higher net duration reshuffled their loan portfolio away from long-term loans in an attempt to limit the increase in interest rate risk and targeted their lending contraction to small and micro firms. Firms exposed to banks with a larger exposure to interest rate risk were unable to fully rebalance their borrowing needs with other lenders, thus experiencing a relatively larger decrease in total borrowing during the monetary tightening episode.
Pushing the Limit: How Borrowers Tackle the Belgian LTV limit? - with Selien De Schryder, Milan van den Heuvel and Tobias Verlaeckt. Draft coming soon
We study the impact of Belgium’s loan-to-value limit using granular loan- and account-level data from the largest domestic bank. On the extensive margin, we find a sizable decline in new mortgage originations, with the effect varying by households’ income and liquid wealth positions and location. On the intensive margin, we observe that a substantial share of borrowers adjusted their LTV ratio. This typically involved increased downpayments and reduced loan amounts, resulting in safer mortgages. However, our findings also point to reduced liquid wealth and consumption in the first year, especially among below-median income borrowers for whom liquidity declined more.
Banking on assumptions? How banks model deposit maturities - with Cosimo Pancaro, Livia Pancotto, and Alessio Reghezza. Draft coming soon
How do banks manage the behavioural maturity of non-maturing deposits (NMDs)? Drawing on a rich and confidential dataset, we investigate how banks model deposit maturities based on internal assumptions. Although NMDs are contractually classified as floating-rate liabilities with zero maturity, banks reallocate these deposits across different maturity buckets using internal models that reflect past customer behaviour. Notably, only 20% of NMDs are treated as having zero maturity, while approximately 10% are assigned maturities exceeding seven years. We assess whether these modelling assumptions align with banks’ deposit structures. Our findings show that banks with more volatile, interest rate-sensitive, and digitalised deposit bases tend to assign shorter maturities, suggesting an appropriate reflection of underlying risks. However, during the recent monetary policy tightening, banks with more sensitive NMDs did not shorten assumed maturities or update their models accordingly. These findings underscore the critical importance of timely and accurate calibration of NMD assumptions to support effective asset-liability management and preserve financial stability.
Banking on the income gap: Its lending and real effects when interest rate rise - with Stijn Claessens, Cosimo Pancaro, and Alessio Reghezza