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 12407, 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. ****** En este documento se estudia la relación empírica entre las fuentes de fondeo del crédito y la vulnerabilidad financiera del Sistema Bancario Colombiano. El trabajo propone la estimación Bayesiana de modelos de regresión logística para identificar y predecir episodios de fragilidad bancaria asociados con las fuentes tradicionales y no tradicionales de fondeo, que utilizan los bancos para proveer crédito. En particular, el ejercicio estima la probabilidad de que se presenten eventos de fragilidad tanto para el sistema bancario agregado como para los bancos individuales con datos mensuales de las hojas de balance para el periodo 1996-2013. Los resultados muestran que el creciente uso de los recursos no tradicionales para fondear el crédito, especialmente en sus fases de expansión, son fuente potencial de fragilidad financiera. Por consiguiente, el monitoreo a dichos recursos, a través de la técnica propuesta, proporciona una herramienta para detectar esos eventos.

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:col:000107:012407

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