Assessing the Efficiency of Bank of Russia Macroprudential Policy Aimed at Limiting Unsecured Consumer Lending Using the Modified Difference-in-Differences Method
Henry Penikas
After the 2020 pandemic, unsecured consumer lending started growing as much as
at the pre-crisis times. The Bank of Russia is responsible for overall financial
stability. To curb emerging risks, it again activated disincentive
macroprudential measures (risk-weight add-ons), and expects to obtain the right
to implement prohibiting measures. To further use the two groups of measures,
the regulator has to know the efficiency of these measures. Conventional
approaches of the Bank for International Settlements (BIS) and the
difference-in-differences method deliver poorly interpretable results. This is
because of the fact that they do not account for the complex process of measures
implementation (including its multistep nature) and the banks’ reactions to
these measures. That is why we need to modify the difference-in-differences
approach. Due to such modification, we are able to trace the scope of efficient
measures’ application. As many as 10% of banks with the proportion of consumer
loans to assets in excess of 20% reduce such a share by 0.3 pp. per quarter for
each 100 pp. of the risk-weight add-on starting from the measure announcement
date. As many as 70% of banks with the proportion of consumer loans to assets in
excess of 1.5% tend to decrease overall lending pace by