Loans Growth and Banks’ Risk: New Evidence Documento de trabajo uri icon

Abstracto

  • This study provides new evidence on the relationship between abnormal loan growth and banks’ risk taking behavior, using data from a rich panel of Colombian financial institutions. We show that abnormal credit growth during a prolonged period of time leads to an increase in banks’ riskiness, supported by a reduction in solvency and an increase in the ratio of non-performing loans to total loans. We also show that abnormal credit growth played a fundamental role in the bank-failure process during the late 1990s financial crisis in Colombia. Our results have important implications for financial regulation and macro-prudential policy.

fecha de publicación

  • 2013

Palabras clave

  • Abnormal Loan Growth
  • Emerging Market Economies
  • FGLS Estimation
  • Hazard Duration Models

Número

  • 763