Macro-Prudential Policies in Turkey (Roubini)

By Heiko Hesse. Turkey’s economy has long been subject to boom-bust cycles linked to capital flows. And while the Turkish banking system continues to perform well, it faces some structural vulnerabilities that can pose financial stability risks. In common with peer countries, Turkey has been developing and implementing a macroprudential policy (MPP) framework, which has had some success in mitigating financial stability concerns. Looking ahead, Turkey’s macro-prudential and micro-prudential tool kit should be expanded and used in a more targeted and active manner to ensure financial stability, with a focus on debt-to-income limits on households, steps to constrain unhedged foreign exchange borrowing, and more active use of steps to limit growth in very fast-growing credit segments.

Financial Spillovers and Deleveraging: The Case of Romania (Roubini)

By Heiko Hesse. This blog looks at foreign bank deleveraging and examines how Romania’s asset prices have been impacted from European crisis spillovers. Foreign bank deleveraging has been orderly and moderate so far in Romania unlike in some peer countries. Findings from the spillover analysis suggests that Romania’s asset markets tend to co-move more closely with its regional peers but have been also strongly impacted by the Euro area financial crisis. Romania’s bank capitalization has remained strong at 14.7 percent at end-June while prudential provisions covered 98 percent of non-performing loans. In addition, the National Bank of Romania takes a pro-active stance in intensively supervising the financial system.