Credit Growth and Bank Soundness : Fast and Furious?

We examine the risks to bank soundness associated with credit booms in a large set of countries. Using bank-level data in 90 countries between 1995 and 2005, we analyze the relationship between credit growth and bank soundness taking into account the potential two-way causality. We find that, while sounder banks tend to grow faster at moderate-growth periods, credit growth becomes less dependent on soundness during booms. These findings shed some light on why credit booms are often associated with financial crises.
Publication date: December 2011
ISBN: 9781463925956
$18.00
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Economics- Macroeconomics , Economics / General , International - Economics , equation , statistics , net interest margin , bank credit , standard deviation , equations , banking , liquidity ratio , bank ownership , standard errors , financial statistics , simultaneous equation , return on assets , equation system , outliers , probability , bank classification , st

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