Bank Ownership and Credit Growth in Emerging Markets During and After the 2008–09 Financial Crisis — A Cross-Regional Comparison
IMF Working Papers, September 15, 2014
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- Bank Ownership and Credit Growth in Emerging Markets During and After the 2008–09 Financial Crisis — A Cross-Regional Comparison
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Bibliographic details
- Authors: Guodong Chen, Yi Wu
- Published: September 15, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484390993.001
Major findings
- The paper examines bank credit growth in emerging markets before, during, and after the 2008-09 financial crisis using bank-level data, focusing on the role of bank ownership.
- Credit growth by foreign banks lagged behind that of domestic banks in 2009 in Asia, and in 2010 in Latin America and emerging Europe.
- State-owned banks played a counter-cyclical role during the crisis, particularly in Latin America and emerging Europe; credit by stateowned banks also grew faster than that of private banks after the crisis in Latin America.
- Expansionary monetary policy on average led to higher credit growth.
- Banks in Latin America and Asia that relied more on retail funding had higher credit growth, in particular during the crisis.
- Better-capitalized banks and banks with more liquid assets had faster credit growth.
- Banks in countries with stronger banking regulation had higher credit growth during the crisis.
Regional patterns (as reported)
- Asia:
- Foreign banks’ credit growth lagged domestic banks in 2009.
- Banks that relied more on retail funding had higher credit growth, in particular during the crisis.
- Latin America:
- Foreign banks’ credit growth lagged domestic banks in 2010.
- State-owned banks played a counter-cyclical role during the crisis.
- Credit by stateowned banks grew faster than that of private banks after the crisis.
- Reliance on retail funding was associated with higher credit growth.
- Emerging Europe:
- Foreign banks’ credit growth lagged domestic banks in 2010.
- State-owned banks played a counter-cyclical role during the crisis.
Bank-level determinants of credit growth
- Ownership type:
- Domestic vs. foreign bank status affected the timing of credit recovery (foreign banks lagged domestic banks in specified years and regions).
- State-owned banks exhibited counter-cyclical lending behavior during the crisis and stronger post-crisis credit growth in Latin America relative to private banks.
- Funding structure:
- Greater reliance on retail funding correlated with higher credit growth in Latin America and Asia, especially during the crisis.
- Balance-sheet strength:
- Better-capitalized banks had faster credit growth.
- Banks with more liquid assets had faster credit growth.
- Macro and regulatory environment:
- Expansionary monetary policy correlated with higher credit growth on average.
- Stronger banking regulation at the country level corresponded with higher credit growth during the crisis.
Policy implications (as implied by findings)
- Ownership structure matters for credit supply cyclicality; state-owned banks can act as stabilizers during crises in some regions.
- Policies that support bank capitalization and liquidity may foster stronger credit growth.
- Retail funding models can be associated with greater resilience in credit supply during crises in Latin America and Asia.
- Expansionary monetary policy can support credit growth during systemic downturns.
- Strengthening banking regulation may be associated with higher credit growth during crises.
Publication metadata
- Authors: Guodong Chen, Yi Wu
- Date: September 15, 2014
- Series: IMF Working Papers
- Working Paper No.: 2014/171
- Pages: 30
- Volume: 2014
- Issue: 171
- DOI: https://doi.org/10.5089/9781484390993.001
- Stock No: WPIEA2014171
- ISBN: 9781484390993
- ISSN: 1018-5941
Guodong Chen and Yi Wu, "Bank Ownership and Credit Growth in Emerging Markets During and After the 2008–09 Financial Crisis — A Cross-Regional Comparison", IMF Working Papers 2014, 171, September 15, 2014.
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- _wp14171 - References