Banks’ Holdings of Government Securities and Credit to the Private Sector in Emerging Market and Developing Economies

Romain Bouis

No 2019/224, IMF Working Papers from International Monetary Fund

Abstract: This paper studies the relationship between banks’ holdings of domestic sovereign securities and credit growth to the private sector in emerging market and developing economies. Higher banks’ holdings of government debt are associated with a lower credit growth to the private sector and with a higher return on assets of the banking sector. Analysis suggests that the negative relationship between banks’ claims on the government and private sector credit growth mainly reflects a portfolio rebalancing of banks towards safer, more liquid public assets in stress times and provides only limited evidence of a crowding-out effect due to financial repression.

Keywords: WP; return on assets; banks' claim; Sovereign debt; credit growth; bank profitability; nonperforming loans; portfolio rebalancing; financial repression; crowding-out; banks' holding; growth in EMDEs; crowding-out effect; private sector lending; growth to the private sector; credit growth to the private sector; government security holding; Credit; Government securities; Commercial banks; Bank soundness; Sub-Saharan Africa (search for similar items in EconPapers)
Pages: 27
Date: 2019-10-11
New Economics Papers: this item is included in nep-ban and nep-fdg
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Citations: View citations in EconPapers (5)

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