Managing Non-Core Liabilities and Leverage of the Banking System: A Building Block for Macroprudential Policy Making in Korea

By Ali Alichi, Cheol Hong, Sang Chul Ryoo

January 1, 2012

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Ali Alichi, Cheol Hong, and Sang Chul Ryoo. Managing Non-Core Liabilities and Leverage of the Banking System: A Building Block for Macroprudential Policy Making in Korea, (USA: International Monetary Fund, 2012) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

Korea has been active in implementing targeted macroprudential policies to address specific financial stability concerns. In this paper, we develop a conceptual model that could serve as a building block for the broader framework of macroprudential policy making in Korea. It is assumed that the policy maker imposes taxes on key aggregate financial ratios in the banking system to mitigate excessive leverage over the economic cycle. The model is calibrated for Korea. The results illustrate how countercyclical tools, such as simple taxes on key financial ratios, could be incorporated to enrich the broader macroprudential policy framework in the Korean context.

Subject: Business cycles, Capital adequacy requirements, Commercial banks, Economic growth, Financial institutions, Financial sector policy and analysis, Macroprudential policy, Macroprudential policy instruments, Systemic risk

Keywords: Assets of the banking system, Balance sheet identity, Banking system, Banking system consist, Banking system leverage, Banking system's problem, Business cycles, Commercial banks, Global, Macroprudential Model, Macroprudential Policies, Macroprudential policy, Macroprudential policy instruments, Systemic Risk, WP

Publication Details

Pages:

20
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2012/027
Stock No:

WPIEA2012027
ISBN:

9781463932541
ISSN:

1018-5941

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