Banking fragility in Colombia: An empirical analysis based on balance sheets

Ignacio Lozano-Espitia and Alexander Guarín López

Revista ESPE - Ensayos sobre Política Económica, 2014, vol. 32, issue 75, No 75, 48-63

Abstract: In this paper, we study the empirical relationship between credit funding sources and the financial vulnerability of the Colombian banking system. We propose a statistical model to measure and predict banking fragility episodes associated with credit funding sources classified into retail deposits and wholesale funds. We compute the probability of financial fragility for both the aggregated banking system and the individual banks. Our approach performs a Bayesian averaging of estimated logit regression models with monthly balance sheet data between 1996 and 2013. The results show the increasing use of wholesale funding to support credit expansion is a potential source of financial fragility. Therefore, monitoring credit funding sources could provide an additional tool to warn against banking disruptions.

Keywords: Credit cycle; Financial stability; Balance sheet; Logistic model regression; Bayesian model averaging (search for similar items in EconPapers)
JEL-codes: C11 C23 C52 C53 G01 G20 G21 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (4)

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https://doi.org/10.1016/j.espe.2014.10.001

Related works:
Journal Article: Banking fragility in Colombia: An empirical analysis based on balance sheets (2014)
Working Paper: Banking Fragility in Colombia: An Empirical Analysis Based on Balance Sheets (2014)
Working Paper: Banking Fragility in Colombia: An Empirical Analysis Based on Balance Sheets (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:bdr:ensayo:v:32:y:2014:i:75:p:48-63

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