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Housing market is important from a macroprudential perspective because it has a strong effect on the banking sector. Changes in real estate prices may affect the level of bank risk through household mortgage lending, however, the literature has no clear conclusion on this impact mechanism. Using a bank-level database containing quarterly data from...
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Citations
... Koetter and Pohosyan (2010) find that, in the case of the German real estate market, changes in housing prices are negative to bank instability, but not related to changes in price levels. Banai and Vágó (2018) find that rising housing prices increase bank risk and that the higher the proportion of mortgage loan, the greater the impact. Kok and Ismail (2019) argue that the higher the housing price, the more stable the bank is, but if the housing price exceeds a certain level, the impact of the housing price on bank stability becomes negative. ...
This study analyzes the effect of housing prices on banking performance in Korea. The findings of the study reveal that the impact of housing price changes on banking performance was different in the commercial banks, regional banks and specialized banks. This seems to be due to the different characteristics of each bank. The three types of banks in Korea have different functions, and thus the impact of changes in housing prices on their respective banking performance is different. Therefore, it would be desirable for Korea’s financial regulatory authorities to draw up policies and perform its supervisory functions in consideration of these points.
