Banks During the Argentine Crisis : Were they All Hurt Equally? Did they All Behave Equally?

Author/Editor:

Adolfo Barajas ; Carlos Quarracino ; Emiliano Basco ; V. Hugo Juan-Ramon

Publication Date:

February 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The simple answer to both questions in the title of this paper is: No. We concentrate on the three main risk elements that contributed to the banking system’s difficulties during the crisis: increasing dollarization of the balance sheet, expanding exposure to the government, and, eventually, the run on deposits. We find that there was substantial cross-bank variation in these elements—that is, not all banks were hurt equally by macroeconomic shocks. Furthermore, using panel data estimation for the 1998–2001 period, we find that depositors were able to distinguish high- from low-risk banks, and that individual banks’ exposure to currency and government default risk depended on bank fundamentals and other characteristics. Thus, not all banks behaved equally in the run-up to the crisis. Finally, our results have implications for the existence of market discipline in periods of stress and for banking regulation, which may have led banks to underestimate some of the risks they incurred.

Series:

Working Paper No. 06/42

Subject:

English

Publication Date:

February 1, 2006

ISBN/ISSN:

9781451863024/1018-5941

Stock No:

WPIEA2006042

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

42

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