BIS paper tests impact of macro-pru on non-banks

Macro-prudential policies have different impacts on non-banks depending on whether the policies are imposed domestically or abroad, research published by the Bank for International Settlements finds.

In the working paper, Stijn Claessens et al study how macro-prudential polices affect the share of financial assets held by the non-bank sector. They test the impact of policies across 24 jurisdictions on the “narrow measure” of non-bank financial intermediation (NBFI), as defined by the Financial Stability Board.

The results highlight the importance of spillovers for financial stability, the authors say. They find that a net tightening of domestic macro-prudential policy causes NBFI assets to grow and bank assets to shrink. The opposite is true when foreign countries tighten macro-prudential policies – NBFI assets shrink and bank assets grow.

The authors note the effect of macro-prudential policies is “economically and statistically significant” for all five of the FSB’s categories of non-banks in the narrow measure.

“The spillovers thus appear relevant for financial stability, in particular for collective investment vehicles, such as money market funds and fixed income funds, with features that make them susceptible to runs,” the authors say.