Template-Type: ReDIF-Paper 1.0
Author-Name: Xolani Sibande
Author-Name: Dumakude Nxumalo
Author-Name: Keaoleboga Mncube
Author-Name: Steve Koch
Author-Name: Nicola Viegi 
Title: Regulation and bank lending in South Africa a narrative index approach
Abstract: The extension of affordable credit is key to financial inclusion but it could reduce the stability of the financial sector. Macroprudential policy, on the other hand, is designed to mitigate financial sector risk. Thus, inclusion and macroprudential regulations may be in opposition. This study estimates and contrasts the impact of these potentially contradictory regulations on the bank lending rates and volumes of South Africas largest banks. Our results suggest that macroprudential policy is working as intended, as it is associated with increases in interest rates on unsecured lending rates and decreases in short-term secured and mortgage lending rates. Inclusion-focused regulation is associated with increased bank lending rates in unsecured credit. We observe a decrease in the growth of unsecured lending for households and an increase in secured lending for corporates. We find that the estimated effects of financial inclusion initiatives largely overlap with  rather than offset  the estimated effects of macroprudential policy.
Creation-Date: 2024-10-22
File-URL: https://www.resbank.co.za/content/dam/sarb/publications/working-papers/2024/regulation-and-bank-lending-in-south-africa-a-narrative-index-approach.pdf
File-Format: application/pdf
File-Function: Revision
Number: 11069
Handle: RePEc:rbz:wpaper:11069