Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/174225 
Year of Publication: 
2018
Series/Report no.: 
IES Working Paper No. 03/2018
Publisher: 
Charles University in Prague, Institute of Economic Studies (IES), Prague
Abstract: 
This paper studies the extent to which monetary policy may affect banks' perception of credit risk and the way banks measure risk under the internal ratings-based approach. Specifically, we analyze the effect of different monetary policy indicators on banks' risk weights for credit risk. We present robust evidence of the existence of the risk-taking channel in the Czech Republic. Further, we show that the recent prolonged period of accommodative monetary policy has been instrumental in establishing this relationship. Finally, we obtain comparable results by extending the analysis to cover all the Visegrad Four countries. The presented findings have important implications for the prudential authority, which should be aware of the possible side-effects of monetary policy on how banks measure risk.
Subjects: 
Banks
financial stability
internal ratings-based approach
risk-taking channel
JEL: 
E52
E58
G21
G28
Document Type: 
Working Paper

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