Credit Growth and Bank Soundness [electronic resource] : Fast and Furious? / Deniz Igan.
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TextSeries: IMF Working Papers; Working Paper ; No. 11/278Publication details: Washington, D.C. : International Monetary Fund, 2011Description: 1 online resource (27 p.)ISBN: 1463925956 :ISSN: 1018-5941Subject(s): Bank Credit | Credit Boom | Credit Growth | Distance to Default | Equation | Financial Institutions and Services: Government Policy and Regulation | BulgariaAdditional physical formats: Print Version:: Credit Growth and Bank Soundness : Fast and Furious?Online resources: IMF e-Library | IMF Book Store Abstract: 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.
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.
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