2011年-IMF国际货币组织全球_Credit_Growth_and_Bank_Soundness_Fast_and_Furious__27页_974kb

Summary of "Credit Growth and Bank Soundness: Fast and Furious?"

Core Content

This working paper by Deniz Igan and Marcelo Pinheiro investigates the relationship between credit growth and bank soundness across 90 countries from 1995 to 2005. The study explores how credit booms affect financial stability and whether the link between credit growth and bank soundness varies between moderate growth and boom periods. It also examines the role of bank ownership in determining the extent of credit risk.

Main Findings

1. Credit Growth and Bank Soundness Relationship

• Credit growth has a negative impact on bank soundness, but this effect is statistically significant only during the earlier period (1995–2000).
• During moderate growth periods, sounder banks tend to grow faster, indicating a positive feedback from bank soundness to credit growth.
• However, during credit booms (2001–2005), this relationship weakens. Less sound banks can grow as fast as sound banks, suggesting that credit booms may lead to a deterioration in loan quality and systemic risk.

2. Threshold Effect and Financial Crises

• The paper identifies a threshold effect in credit growth, where the speed of credit expansion is more strongly associated with financial instability during credit booms.
• Credit booms are more likely to lead to financial crises as they are linked to increased systemic risk and deterioration in lending standards.
• The global financial crisis of 2007–2008 is cited as an example where credit booms preceded crises, highlighting the importance of monitoring credit growth for early warning signals.

3. Role of Bank Ownership

• Foreign-owned banks are less affected by their soundness level in terms of credit growth, suggesting they may be more willing to take on risks.
• This could be due to better access to wholesale funding and superior risk management practices from their parent institutions, especially in emerging markets.
• Domestic banks, on the other hand, are more vulnerable to the negative effects of rapid credit growth, which can weaken their soundness.

4. Methodology and Data

• The analysis uses bank-level data from 90 countries and employs a simultaneous equation framework with three-stage least squares (3SLS).
• The distance to default is used as a proxy for bank soundness.
• A credit boom is defined as a period where the credit-to-GDP ratio grows faster than a country-specific cubic time trend.
• The study identifies 90 credit boom episodes between 1995 and 2005, of which 23% ended in systemic banking crises within two years.

Key Information

1. Credit Booms and Financial Stability

• Credit booms are associated with increased systemic risk and financial instability.
• During booms, banks may dip into marginal borrower pools, leading to deterioration in loan quality and higher non-performing loans.
• The feedback effect from credit growth to bank soundness is negative and significant only during booms, implying that banks become more risk-prone during these periods.

2. Econometric Model

• The model includes bank-level and macroeconomic variables such as:
  • GDP per capita (indicator of catching-up)
  • Real GDP growth (positively correlated with credit growth)
  • Real interest rates (negatively correlated with credit growth)
  • Real exchange rate depreciation (positively associated with credit growth)
  • Net interest margin (positively related to loan growth)
  • Public ownership (negatively related to credit growth)
• Liquidity, bank size, and foreign ownership are also included as determinants of bank soundness.

3. Robustness of Results

• The findings are robust to alternative model specifications, including:
  • Different measures of bank soundness
  • Various definitions of credit booms
  • Time- and country-specific factors
• The nonlinear relationship between credit growth and bank soundness is not statistically significant, indicating a linear impact.

4. Policy Implications

• The link between credit growth and financial stability is more pronounced during booms, emphasizing the need for prudential oversight.
• Cross-border cooperation is important in bank supervision, as foreign banks may take on more risks due to their parental support.
• Early identification of credit booms is critical for policy intervention and preventing financial crises.

Conclusion

The paper concludes that credit booms are often associated with financial crises, as they lead to increased systemic risk and weakening of bank soundness. It highlights the importance of bank soundness in determining credit growth and suggests that supervisors should be vigilant during periods of rapid credit expansion, especially when banks are less sound. The findings also support the idea that foreign banks may have different risk profiles compared to domestic banks, calling for coordinated regulatory efforts across borders.