Are Weak Banks Leading Credit Booms? Evidence from Emerging Europe
IMF Working Papers, September 1, 2008
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- Are Weak Banks Leading Credit Booms? Evidence from Emerging Europe
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Bibliographic details
- Authors: Deniz O Igan, Natalia T. Tamirisa
- Published: September 1, 2008
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451870770.001
Summary and research question
- Paper examines the behavior of bank soundness indicators during episodes of brisk loan growth.
- Uses bank-level data for central and eastern Europe.
- Controls for the feedback effect of credit growth on bank soundness.
Key findings
- "No evidence is found that rapid loan expansion has weakened banks during the last decade."
- "Over time weaker banks seem to have started to expand at least as fast as, and in some markets faster than, stronger banks."
- Implication: the relationship between bank strength and loan growth changed over the sample period, with weaker banks increasingly matching or outpacing stronger banks in expansion.
Policy implications and recommendations
- During credit booms supervisors need to carefully monitor the soundness of rapidly expanding banks.
- Supervisors should stand ready to take action to limit the expansion of weak banks.
Publication and metadata
- Authors: Deniz O Igan, Natalia T. Tamirisa
- Publication date: September 1, 2008
- Series: Working Paper No. 2008/219
- Issue: 219
- Volume: 2008
- Pages: 21
- DOI: https://doi.org/10.5089/9781451870770.001
- Stock No: WPIEA2008219
- ISBN: 9781451870770
- ISSN: 1018-5941
- Subjects: Bank credit, Bank soundness, Banking, Credit, Distressed institutions
- Keywords: bank, credit growth, WP
Source: Are Weak Banks Leading Credit Booms? Evidence from Emerging Europe — IMF Working Papers (Deniz O Igan, Natalia T. Tamirisa, September 1, 2008).