Did the Basel Accord Cause a Credit Slowdown in Latin America?

By Thomas F. Cosimano, Ralph Chami, Adolfo Barajas

February 1, 2005

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Thomas F. Cosimano, Ralph Chami, and Adolfo Barajas. Did the Basel Accord Cause a Credit Slowdown in Latin America?, (USA: International Monetary Fund, 2005) accessed November 8, 2024

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

Drawing from a unique data set comprising 2,893 banks and 152 countries over the period 1987 to 2000, we test whether the adoption of the Basel Accord by Latin American and Caribbean countries was responsible for the serious slowdowns in credit growth experienced by these countries. We find that, on average, both bank capitalization and lending activities in Latin America increased after Basel. Consequently, Basel did not seem to lead to an overall credit decline. However, we do find evidence that loan growth became more sensitive to some risk factors. Our study suggests that the upcoming adoption of Basel II might cause greater procyclicality of credit.

Subject: Bank credit, Banking, Basel Core Principles, Capital adequacy requirements, Loans

Keywords: Bank behavior, Bank risk variable, Credit crunch, Loan growth, Loan-asset ratio, Means test, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2005/038
Stock No:

WPIEA2005038
ISBN:

9781451860573
ISSN:

1018-5941

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