Currency-based measures targeting banks – Balancing national regulation of risk and financial openness


OECD Working Papers on International Investment

Selected studies on international investment and investment policy prepared for use within the OECD. They address such issues as investment agreements, dispute settlement, fair and equitable treatment, most favored nation treatment, and corruption.


English


Currency-based measures targeting banks – Balancing national regulation of risk and financial openness

This paper presents and analyses new datasets of de jure Currency-Based Measures (CBMs) directed at banks in a sample of 49 countries between 2005 and 2013. These measures are bank regulations that apply a discrimination−e.g. a less favourable treatment−on the basis of the currency of an operation, typically foreign currencies. The new data shows that CBMs have been increasingly used in the post-crisis period, including for macro-prudential purposes. In particular, some Emerging Market Economies, including some OECD countries, have increasingly resorted to and tightened their CBMs, especially to manage capital inflows. Information from these new datasets is also matched with measures on countries’ inability to borrow in domestic currency on international markets, defined as the original sin concept. With the exception of China, only countries suffering from original sin used and tightened CBMs on banks’ foreign exchange liabilities.


English

Keywords: financial stability, macroprudential policy, capital flows, banking regulations, capital controls, foreign currency

JEL:
C82: Mathematical and Quantitative Methods / Data Collection and Data Estimation Methodology; Computer Programs / Methodology for Collecting, Estimating, and Organizing Macroeconomic Data; Data Access;
F38: International Economics / International Finance / International Financial Policy: Financial Transactions Tax; Capital Controls;
F65: International Economics / Economic Impacts of Globalization / Economic Impacts of Globalization: Finance;
G28: Financial Economics / Financial Institutions and Services / Financial Institutions and Services: Government Policy and Regulation;
E58: Macroeconomics and Monetary Economics / Monetary Policy, Central Banking, and the Supply of Money and Credit / Central Banks and Their Policies;
F3: International Economics / International Finance