Effect of Macroprudential Policy on Banks’ Profitability in ASEAN Before and During Covid-19

Wina Febrianti Tarigan, Dwi Nastiti Danarsari

Abstract


Regulators introduced macroprudential policies to ensure financial stability, but during the Covid-19 pandemic, many countries relaxed these policies to boost credit growth and the economy. This research examines the impact of these policies on bank profitability in six ASEAN countries from 2018 to 2021 using panel data regression. Before the pandemic, tightening policies like capital buffers, taxes, liquidity requirements, and foreign exchange limits reduced bank profitability. During the pandemic, loosening loan loss provisions and loan-to-value ratios increased profitability, while relaxing reserve requirements decreased it.

 

DOI: 10.26905/jkdp.v27i3.10283


Full Text:

PDF

References


Abdelaziz, H., Rim, B., & Helmi, H. (2022). The Interactional Relationships Between Credit Risk, Liquidity Risk and Bank Profitability in MENA Region. Global Business Review, 23(3), 561–583. https://doi.org/10.1177/0972150919879304

Adelopo, I., Lloydking, R., & Tauringana, V. (2018). Determinants of bank profitability before, during, and after the financial crisis. International Journal of Managerial Finance, 14(4), 378–398. https://doi.org/10.1108/IJMF-07-2017-0148

Akinci, O., & Olmstead-Rumsey, J. (2018). How effective are macroprudential policies? An empirical investigation. Journal of Financial Intermediation, 33, 33–57. https://doi.org/10.1016/j.jfi.2017.04.001

Alam, Z., Alter, A., Eiseman, J., Gelos, G., Kang, H., Narita, M., Nier, E., & Wang, N. (2019). Digging Deeper—Evidence on the Effects of Macroprudential Policies from a New Database. Journal of Money, Credit and Banking. https://doi.org/10.1111/jmcb.13130

Amare, A. (2021). Capital structure and profitability: Panel data evidence of private banks in Ethiopia. Cogent Economics and Finance, 9(1). https://doi.org/10.1080/23322039.2021.1953736

Araujo, J., Patnam, Ma., Popescu, A., Valencia, F., & Yao, W. (2020). Effects of Macroprudential Policy: Evidence from Over 6,000 Estimates.

Bolarinwa, S. T., Obembe, O. B., & Olaniyi, C. (2019). Re-examining the determinants of bank profitability in Nigeria. Journal of Economic Studies, 46(3), 633–651. https://doi.org/10.1108/JES-09-2017-0246

Buallay, A., Fadel, S. M., Al-Ajmi, J. Y., & Saudagaran, S. (2020). Sustainability reporting and performance of MENA banks: is there a trade-off? Measuring Business Excellence, 24(2), 197–221. https://doi.org/10.1108/MBE-09-2018-0078

Ćehajić, A., & Košak, M. (2021). Macroprudential measures and developments in bank funding costs. International Review of Financial Analysis, 78. https://doi.org/10.1016/j.irfa.2021.101943

Cerutti, E., Claessens, S., & Laeven, L. (2017). The use and effectiveness of macroprudential policies: New evidence. Journal of Financial Stability, 28, 203–224. https://doi.org/10.1016/j.jfs.2015.10.004

Chan, K. K., Davis, E. P., & Karim, D. (2023). Macroprudential policy, bank competition and bank risk in East Asia. In Journal of Banking Regulation (Issue 0123456789). Palgrave Macmillan UK. https://doi.org/10.1057/s41261-023-00230-x

Cristian, E., Leonarsan, W., & Kim, S. S. (2020). The impacts of competition, efficiency, and risk towards bank’s performance in Indonesia. Jurnal Keuangan Dan Perbankan, 24(4). https://doi.org/10.26905/jkdp.v24i4.4903

Dang, V. D., & Nguyen, H. C. (2022). Bank profitability under uncertainty. Quarterly Review of Economics and Finance, 83, 119–134. https://doi.org/10.1016/j.qref.2021.12.001

Davis, E. P., Karim, D., & Noel, D. (2022). The effects of macroprudential policy on banks’ profitability. International Review of Financial Analysis, 80. https://doi.org/10.1016/j.irfa.2021.101989

Dhiva, D. O., & Gunawan, J. (2023). Influence of Profitability, Sustainability Finance Disclosures, and Sustainability Report Assurance on Cost of Debt. International Journal of Contemporary Accounting, 5(1), 1–18. https://doi.org/10.25105/ijca.v5i1.16307

Duca, J. V., Muellbauer, J., & Murphy, A. (2021). What drives house price cycles? International experience and policy issues. Journal of Economic Literature, 59(3), 773–864. https://doi.org/10.1257/JEL.20201325

Eller, M., Martin, R., Schuberth, H., & Vashold, L. (2020). Macroprudential policies in CESEE – an intensity-adjusted approach. 2019, 65–81.

Forbes, K. J. (2020). The International Aspects of Macroprudential Policy. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3672386

Gaganis, C., Galariotis, E., Pasiouras, F., & Staikouras, C. (2021). Macroprudential regulations and bank profit efficiency: international evidence. Journal of Regulatory Economics, 59(2), 136–160. https://doi.org/10.1007/s11149-021-09424-5

Geng, L., Yin, W., Wu, X., Lu, X., & Zhang, C. (2023). How green credit affects corporate environmental information disclosure: evidence from new energy listed companies in China. Frontiers in Ecology and Evolution, 11(December), 1–15. https://doi.org/10.3389/fevo.2023.1301589

Gharaibeh, A. M. O., & Farooq, M. O. (2022). Determinants of bank lending rates: Empirical evidence from conventional retail banks in Bahrain. Banks and Bank Systems, 17(4), 140–153. https://doi.org/10.21511/bbs.17(4).2022.12

González, F. (2022). Macroprudential policies and bank competition: International bank-level evidence. Journal of Financial Stability, 58. https://doi.org/10.1016/j.jfs.2021.100967

Hale, T., Angrist, N., Goldszmidt, R., Kira, B., Petherick, A., Phillips, T., Webster, S., Cameron-Blake, E., Hallas, L., Majumdar, S., & Tatlow, H. (2021). A global panel database of pandemic policies (Oxford COVID-19 Government Response Tracker). Nature Human Behaviour, 5(4), 529–538. https://doi.org/10.1038/s41562-021-01079-8

Hahm, J.-H., Mishkin, F. S., Shin, H. S., & Shin, K. (2012). Macroprudential Policies in Open Emerging Economies. NBER Working Paper, 17780, 1–62. http://www.nber.org/papers/w17780.ack%5CnNBER

Herlina, H., Muyasaroh, M., & Hairunnisa, H. (2024). Improving Customer Data Quality on Pension Bank Loans in Palembang-South Sumatra. Jurnal Administrasi Bisnis, 13(1), 1–9. https://doi.org/10.14710/jab.v13i1.61724

Hunjra, A. I., Mehmood, A., Nguyen, H. P., & Tayachi, T. (2022). Do firm-specific risks affect bank performance? International Journal of Emerging Markets, 17(3), 664–682. https://doi.org/10.1108/IJOEM-04-2020-0329

Juhro, S. M., Lie, D., & Sasongko, A. (2021). MONETARY-MACROPRUDENTIAL POLICY MIX AND COVID-19 PANDEMIC IN AN ESTIMATED DSGE MODEL FOR INDONESIA.

Le, T. D., & Ngo, T. (2020). The determinants of bank profitability: A cross-country analysis. Central Bank Review, 20(2), 65–73. https://doi.org/10.1016/j.cbrev.2020.04.001

Laufer, S., & Tzur-Ilan, N. (2021). The effect of LTV-based risk weights on house prices: Evidence from an Israeli macroprudential policy. Journal of Urban Economics, 124. https://doi.org/10.1016/j.jue.2021.103349

Luo, H., & Kamarudin, F. (2024). Macroprudential policies and CO2 emissions: A comparative analysis of G7 and BRIC countries. PLoS ONE, 19(1 January), 5–7. https://doi.org/10.1371/journal.pone.0296363

Mohd Yaziz Mohd Isa, Yap Voon Choong, David Yong Gunn Fie, & Md. Zabid Haji Abdul Rashid. (2016). Financial Vulnerability, Capital Flow Reversals, and Divergence Macro-Prudential Policies Posing Challenges to the ASEAN Banking Integration Framework (ABIF). Journal of Modern Accounting and Auditing, 12(5). https://doi.org/10.17265/1548-6583/2016.05.002

Radovanov, B., Milenković, N., Kalaš, B., & Horvat, A. M. (2023). Do the Same Determinants Affect Banks’ Profitability and Liquidity? Evidence from West Balkan Countries Using a Panel Data Regression Analysis. Mathematics, 11(19). https://doi.org/10.3390/math11194072

Rizvi, S. A., Juhro, S. M., & Narayan, P. K. (2021). Understanding market reaction to covid-19 monetary and fiscal stimulus in major asean countries. Buletin Ekonomi Moneter Dan Perbankan, 24(3), 313–334. https://doi.org/10.21098/bemp.v24i3.1690

Utami, E. F. (2022). The Role of Monetary and Macroprudential Policy Instruments on Macroeconomic Stability in Southeast Asian Countries. Proceedings of the International Conference on Management, Business, and Technology (ICOMBEST 2021), 194(April 2009), 1–8. https://doi.org/10.2991/aebmr.k.211117.001

Zamfirache, A., Suciu, T., Anton, C. E., Albu, R. G., & Ivasciuc, I. S. (2023). The Interest Shown by Potential Young Entrepreneurs in Romania Regarding Feasible Funding Sources, in the Context of a Sustainable Entrepreneurial Education. Sustainability (Switzerland) , 15(6). https://doi.org/10.3390/su15064823




DOI: https://doi.org/10.26905/jkdp.v27i3.10283

Refbacks

  • There are currently no refbacks.




Jurnal Keuangan dan Perbankan (Journal of Finance and Banking)

Diploma Program of Banking and Finance, Faculty of Economics and Business, University of Merdeka Malang

Published by University of Merdeka Malang

Mailing Address:
2nd floor Finance and Banking Building, Jl. Terusan Raya Dieng No. 57 Malang, East Java, Indonesia
Phone: +62 81 2332-1664
Email: jkp@unmer.ac.id

This work is licensed under a Creative
Commons Attribution-ShareAlike 4.0