Abstract

https://doi.org/10.52903/wp2025344

THE EFFECTIVENESS OF MACROPRUDENTIAL POLICIES IN CURBING OPERATIONAL RISK EXPOSURES

Panagiotis Konstantinou
Athens University of Economics and Business

Anastasios Rizos
Bank of Greece

Artemis Stratopoulou
Centre of Planning and Economic Research

ABSTRACT

Banks’ focus nowadays shifts to non-financial risks, since credit and market risks are now well understood and under better control. We study whether macroprudential policy, designed to enhance financial system resilience, can mitigate or magnify losses stemming from such risks. To do so, we use a panel dataset on Eurozone countries between 2009-2018 and examine the dynamic path of operational risk exposures in response to tightening and loosening events of various macroprudential policies. Our results show that the tightening of specific measures, i.e., loan loss provisions, liquidity and loan to value, increases operational losses, whereas the loosening of measures, such as conservation buffers, loan loss provisions and debt service to income leads to a reduction in operational losses. Our results remain robust when we employ the inverse probability weighted estimator.


Keywords: macroprudential policies, non-financial risks, operational losses, banks, local projections

JEL-classifications: G21, G32, E44, E58

Disclaimer: The views expressed in this paper are those of the authors and not necessarily those of the Bank of Greece or the Eurosystem.


Corresponding author:
Anastasios Rizos
Economic Analysis and Research Department
Bank of Greece
E. Venizelos 21, 102 50, Athens, Greece
Tel.: +30 2103203604
email: arizos@bankofgreece.gr


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