Capital Adequacy Regulations in Hungary: Did it Really Matter?

§ University of Debrecen University of Debrecen

Send Message

To: Author

Capital Adequacy Regulations in Hungary: Did it Really Matter?

Article Fingerprint

ReserarchID

5829O

Capital Adequacy Regulations in Hungary: Did it Really Matter? Banner

Key Research Insights

Synthesized scholarly intelligence & interactive research assistant
  • English
  • Afrikaans
  • Albanian
  • Amharic
  • Arabic
  • Armenian
  • Azerbaijani
  • Basque
  • Belarusian
  • Bengali
  • Bosnian
  • Bulgarian
  • Catalan
  • Cebuano
  • Chichewa
  • Chinese (Simplified)
  • Chinese (Traditional)
  • Corsican
  • Croatian
  • Czech
  • Danish
  • Dutch
  • Esperanto
  • Estonian
  • Filipino
  • Finnish
  • French
  • Frisian
  • Galician
  • Georgian
  • German
  • Greek
  • Gujarati
  • Haitian Creole
  • Hausa
  • Hawaiian
  • Hebrew
  • Hindi
  • Hmong
  • Hungarian
  • Icelandic
  • Igbo
  • Indonesian
  • Irish
  • Italian
  • Japanese
  • Javanese
  • Kannada
  • Kazakh
  • Khmer
  • Korean
  • Kurdish (Kurmanji)
  • Kyrgyz
  • Lao
  • Latin
  • Latvian
  • Lithuanian
  • Luxembourgish
  • Macedonian
  • Malagasy
  • Malay
  • Malayalam
  • Maltese
  • Maori
  • Marathi
  • Mongolian
  • Myanmar (Burmese)
  • Nepali
  • Norwegian
  • Pashto
  • Persian
  • Polish
  • Portuguese
  • Punjabi
  • Romanian
  • Russian
  • Samoan
  • Scots Gaelic
  • Serbian
  • Sesotho
  • Shona
  • Sindhi
  • Sinhala
  • Slovak
  • Slovenian
  • Somali
  • Spanish
  • Sundanese
  • Swahili
  • Swedish
  • Tajik
  • Tamil
  • Telugu
  • Thai
  • Turkish
  • Ukrainian
  • Urdu
  • Uzbek
  • Vietnamese
  • Welsh
  • Xhosa
  • Yiddish
  • Yoruba
  • Zulu
Reading Preferences
Font Size
Line Spacing
Background
This converted HTML version may contain rendering inconsistencies. Please refer to the PDF for the authoritative version, or click here to provide feedback.

Abstract

The main purpose of this paper is twofold. First, it aims to estimate the effect of the tightening of regulatory capital requirements on the real economy during credit upswing. Second, it intends to show whether applying a countercyclical capital buffer measure, as per the Basel III rules,could have helped decelerate FX lending growth in Hungary, mitigating the build-up of vulnerabilities in the run-up to the global financial crisis. To answer these questions, we use a Vector Autoregression-based approach to understand how shocks affected to capital adequacy in the pre-crisis period.Our results suggest that regulatory authorities could have slowed the increase in lending temporarily.They would not, however, have been able to avoid the upswing in FX lending by requiring countercyclical capital buffers even if such a tool had been available and they had reacted quickly to accelerating credit growth. Our results also suggest that a more pronounced tightening might have reduced FX lending substantially, but at the expense of real GDP growth. The reason is that an unsustainable fiscal policy led to a trade-off between economic growth and the build-up of new vulnerabilities in the form of FX lending.

References

29 Cites in Article
  1. 1. A Admati,M Hellwig (2013). The Bankers' New Clothes. The Bankers' New Clothes
  2. 2. Jose Berrospide,Rochelle Edge (2010). The Effects of Bank Capital on Lending: What Do We Know, and What Does it Mean?. SSRN Electronic Journal
  3. 3. A Bethlendi,T Czeti,J -Krekó,M Nagy,D Palotai (2005). A magánszektordevizahitelezésé nekmozgatórugói. A magánszektordevizahitelezésé nekmozgatórugói
  4. 4. (2010). Assessing the macroeconomic impact of the transition to stronger capital and liquidity requirements. Bank for International Settlements
  5. 5. K Bodnár (2006). A hazaikis-ésközépvállalatoká rfolyamkitettsége, devizahitelezésükpénzügyistabili tásikockázatai -Egykérdőívesfelméréseredményei. Magyar Nemzeti Bank, MNB-tanulmányok, 53
  6. 6. Jonathan Bridges,David Gregory,Mette Nielsen,Silvia Pezzini,Amar Radia,Marco Spaltro (2014). The Impact of Capital Requirements on Bank Lending. SSRN Electronic Journal, 486.
  7. 7. M Brun,H -Fraisse,D -Thesmar (2014). The Real Effects of Bank Capital Requirements. The Real Effects of Bank Capital Requirements
  8. 8. (2009). Report on Financial Stability. Report on Financial Stability
  9. 9. (2010). Report on Financial Stability. Report on Financial Stability
  10. 10. (2012). Report on Financial Stability. Report on Financial Stability
  11. 11. (2014). Improving Hungary's Debt Profile, Background material. Improving Hungary's Debt Profile, Background material
  12. 12. Stijn Claessens (2014). An Overview of Macroprudential Policy Tools. IMF Working Papers, 14(214), 1.
  13. 13. A Csajbók,A Hudecz,B Tamási (2010). Foreign currency borrowing of households in new EU member states, Central Bank of Hungary. MNB Occasional Papers
  14. 14. W Enders (2010). Applied Econometric Time Series. Applied Econometric Time Series
  15. 15. R Fry,A -Pagan (2007). Some Issues in Using Sign Restrictions for Identifying Structural VARs. NCER Working Paper Series
  16. 16. R Fry,A -Pagan (2011). Sign Restrictions in Structural Vector Autoregressions: A Critical Review. Journal of Economic Literature, 49(4), 938-960.
  17. 17. D Holló (2012). Identifying imbalances in the Hungarian banking system ('early warning' system). Central Bank of Hungary, MNB Bulletin
  18. 18. Zs Hosszú,Gy Körmendi,B Tamási,B Világi (2013). Impact of the credit supply on the Hungarian economy, Central Bank of Hungary. MNB Bulletin
  19. 19. Zs Hosszú,Gy Körmendi,B Mérő (2015). Univariate and multivariate filters to measure the credit gap, Central Bank of Hungary. MNB Occasional Papers, 118.
  20. 20. Imf (2000). Macroprudential Indicators of Financial System Soundness. International Monetary Fund, 192.
  21. 21. G Kiss,M Nagy,B Vonnák (2006). Credit Growth in Central and Eastern Europe: Convergence or Boom?. Central Bank of Hungary, MNB Working Papers
  22. 22. F Modigliani,M Miller (1958). The Cost of Capital, Corporation Finance and the Theory of Investment. The American Economic Review, 48
  23. 23. S Myers,N Majluf (1396). Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have. Corporate Financing and Investment Decisions When Firms Have Information That Investors Do Not Have
  24. 24. J. -P Noss,Toffano (2014). Estimating the impact of changes in aggregate bank capital requirements during an upswing. Bank of England Working Paper, 494.
  25. 25. J Páles,D Homolya (2011). Developments in the costs of external funds of the Hungarian banking sector,Central Bank of Hungary. MNB Bulletin
  26. 26. C Rosenberg,M -Tirpák (2008). Determinants of Foreign Currency Borrowing in the New Member States of the EU. IMF
  27. 27. A Szombati (2010). Systemic level impacts of Basel III on Hungary and Europe, Central Bank of Hungary. MNB Bulletin
  28. 28. B Tamási,B Világi (2011). Identification of credit supply shocks in a Bayesian SVAR model of the Hungarian Economy, Central Bank of Hungary. MNB Working Papers
  29. 29. B Zsámboki (2007). Bank capital requirements and the control of bank failure. Financial Stability and Central Banks, 162-183.

Funding

No external funding was declared for this work.

Conflict of Interest

The authors declare no conflict of interest.

Ethical Approval

No ethics committee approval was required for this article type.

Data Availability

Not applicable for this article.

How to Cite This Article

Dora Siklos. 2016. "Capital Adequacy Regulations in Hungary: Did it Really Matter?". Global Journal of Human-Social Science - E: Economics GJHSS-E Volume 16 (GJHSS Volume 16 Issue E3).

Download Citation

Journal Specifications

Crossref Journal DOI 10.17406/GJHSS

Print ISSN 0975-587X

e-ISSN 2249-460X

Keywords
Classification
GJHSS-E Classification JEL Code: E58
G01
G21
G28
Version of record

v1.2

Issue date
December 15, 2016

Language
English
Order Article Reprint
Experiance in AR

Explore published articles in an immersive Augmented Reality environment. Our platform converts research papers into interactive 3D books, allowing readers to view and interact with content using AR and VR compatible devices.

Read in 3D

Your published article is automatically converted into a realistic 3D book. Flip through pages and read research papers in a more engaging and interactive format.

Article Matrices
Total Views: 1.1K
Total Downloads: 74
All Trends

Request Access

Please fill out the form below to request access to this research paper. Your request will be reviewed by the editorial or author team.
X

This is the heading

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Ut elit tellus, luctus nec ullamcorper mattis, pulvinar dapibus leo.

High-quality academic research articles on global topics and journals.

Capital Adequacy Regulations in Hungary: Did it Really Matter?

Dora Siklos
Dora Siklos University of Debrecen