Credit Growth and Bank Soundness: Fast and Furious?
Electronic Access:
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Summary:
We examine the risks to bank soundness associated with credit booms in a large set of countries. Using bank-level data in 90 countries between 1995 and 2005, we analyze the relationship between credit growth and bank soundness taking into account the potential two-way causality. We find that, while sounder banks tend to grow faster at moderate-growth periods, credit growth becomes less dependent on soundness during booms. These findings shed some light on why credit booms are often associated with financial crises.
Series:
Working Paper No. 2011/278
Subject:
Bank credit Bank soundness Banking Credit Credit booms Financial institutions Financial sector policy and analysis Loans Money
English
Publication Date:
December 1, 2011
ISBN/ISSN:
9781463925956/1018-5941
Stock No:
WPIEA2011278
Pages:
27
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