Do macroprudential policies influence FinTech credit growth?

Abstract

This study examines the impact of macroprudential policies on FinTech credit growth using unbalanced panel dataset from 25 countries, comprising advanced and emerging economies, covering 2005q1 to 2018q4. Employing fixed effects (FE) and feasible generalized least squares (FGLS) models, the analysis reveals that aggregate macroprudential policy action positively influences FinTech credit growth. The analysis further uncovers that the tightening action of macroprudential policies largely drives this effect, suggesting regulatory arbitrage where credit shifts from banks to the nonbank FinTech sector. The findings raise concerns that macroprudential policies effectiveness may be undermined by FinTech credit expansion, potentially increasing financial stability risks. The research calls for policy measures addressing FinTech credit to ensure a stable financial system and prevent regulatory leakage. It also provides insights into the debate on using macroprudential policies beyond the banking sector.