Loans Growth and Banks’ Risk: New Evidence

Juan Amador Torres (sebastian_amador@uky.edu), José EDuardo Gómez G. (jgomezgo@banrep.gov.co) and Andrés Murcia
Authors registered in the RePEc Author Service: Jose Gomez-Gonzalez

Borradores de Economia from Banco de la Republica de Colombia

Abstract: 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.

Keywords: Abnormal loan growth; Hazard duration models; FGLS estimation; Emerging market economies. (search for similar items in EconPapers)
JEL-codes: G20 G21 (search for similar items in EconPapers)
Pages: 26
Date: 2013-04
New Economics Papers: this item is included in nep-lam
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
https://doi.org/10.32468/be.763 (application/pdf)

Related works:
Journal Article: Loan growth and bank risk: new evidence (2013)
Working Paper: Loans Growth and Banks´ Risk: New Evidence (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdr:borrec:763

Access Statistics for this paper

More papers in Borradores de Economia from Banco de la Republica de Colombia Cra 7 # 14-78. Contact information at EDIRC.
Bibliographic data for series maintained by Clorith Angélica Bahos Olivera (cbahosol@banrep.gov.co).