Prudential regulation and bank solvency based on flexible distributions
An example for evaluating the impact of monetary policy
Bibliographic Data
| ID | 21543638 |
|---|---|
| Authors | Juan F Rendón (0000-0002-5173-7980, Department of Finance, Faculty of Economic and Administrative Sciences Instituto Tecnológico Metropolitano (ITM) Medellin Colombia), Lina M Cortés (0000-0002-2520-446X, Department of Finance, School of Finance, Economics, and Government Universidad EAFIT Medellin Colombia, corresponding author), Javier Perote (0000-0002-9122-4370, Department of Economics and Economic History and IME University of Salamanca Salamanca Spain) |
| Year | 2023 |
| Volume | 46 |
| Issue | 9 |
| Pages | 2780-2807 |
| Publication date | 2023-09-01 |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | World Economy (JOURNAL) |
| Journal identifiers | ISSN: 0378-5920 • E-ISSN: 1467-9701 |
| Publisher | Wiley (PUBLISHER • GB) |
| DOI | 10.1111/twec.13455 |
| OpenAlex | W4384299734 |
| Language | EN |
| References cited | 42 |
This paper proposes new risk measures by accurately estimating the components of solvency risk and focusing on prudential policy implementation. We use semi‐nonparametric statistics to model the stylised facts of the probability density functions, particularly the higher‐order moments of three variables: the solvency decline rate, the tier decline rate and the portfolio growth rate. The proposed measures allow the evaluation of the impact of expansionary monetary policy on the risk‐taking transmission channel and implementation of the minimum solvency ratios required by banking regulators based on the estimation of quantile risk metrics. Using a database of Colombian solvency indicators, we show that the liquidity injection measures employed in response to the COVID‐19 pandemic led to a significant increase in portfolio risk in the banking system. The proposed methodology is suitable for micro‐ and macroprudential regulation at different levels of portfolio risk aggregation
Actuarial science · Basel III · Capital requirement · Econometrics · Economics · Estimation · Financial economics · Market liquidity · Microeconomics · Monetary economics · Monetary policy · Nonparametric statistics · Portfolio · Quantile · Solvency · Solvency ratio · Banking stability, regulation, efficiency · Credit Risk and Financial Regulations · Monetary Policy and Economic Impact · Finance
| Highly cited | No |
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