Capital Structures and Portfolio Composition During Banking Crisis: Lessons from Argentina 1995
IMF Working Papers, August 1, 1998
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- Capital Structures and Portfolio Composition During Banking Crisis: Lessons from Argentina 1995
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Bibliographic details
- Authors: Alberto M. Ramos
- Published: August 1, 1998
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451854350.001
Theoretical framework and core mechanisms
- Constructs a theoretical framework rationalizing banks’ short- and long-run adjustment dynamics in portfolio composition and in the capital structure following a period of financial distress.
- Model captures stylized facts about banks’ behavior following a shock to the capital base, namely:
- the rush to liquidity
- the credit crunch
Empirical findings (Argentina, post-Mexican devaluation)
- Bank panel data show Argentine domestic retail banks underwent a period of adjustment of six quarters following the Mexican devaluation crisis.
- During this six-quarter adjustment domestic retail banks reduced their risk-exposure.
- The reduction in risk-exposure is attributed to bank capital scarcity making depositors less prone to tolerate bank default risk.
- Foreign-owned banks suffered a milder shock and adjusted immediately.
Subject coverage and keywords
- Subject: Banking, Bonds, Capital adequacy requirements, Deposit insurance, Financial crises, Financial institutions, Insurance, Loans, Stocks
- Keywords (as listed): ÷ assets, adjustment dynamics, Argentina, asset risk, Bank Capital, bank default risk, bank regulator, Banking Crisis, Banking Distress, Bonds, capital base, capital structure, central bank, Deposit insurance, expected return, exposure bank, Insurance, insurance bank, Loans, optimal portfolio, present discounted value, Stocks, Tequila effect, vault reserve, WP