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How capital inflows translate into new bank lending: tracing the mechanism in Latin America

Carlos Cantù, Catherine Casanova, Rodrigo Alfaro, Fernando Chertman, Gerald Cisneros, Toni Ricardo dos Santos, Roberto Lobato, Calixto Lopez, Roberto Luna Mallea (), David Moreno, Miguel Sarmiento and Rafael Nivin

No 1051, BIS Working Papers from Bank for International Settlements

Abstract: We explore the mechanism that links capital inflows from abroad with domestic bank lending. Five Latin American countries use their credit registry data to examine the changes in outstanding loans and prices that are charged by banks with different balance sheet characteristics. Our meta-analysis sums up their results. We find that high capital inflows generally induce weak banks to relax their lending standards. For the most vulnerable market segment, where weak banks lend to risky firms, only banks with low capital ratios tend to lend more and charge less during periods of high capital inflows. Financial stability concerns could arise, but they are limited as even low-capital banks are above the regulatory minimum.

Keywords: credit registry data; international capital flows; bank lending; SME financing. (search for similar items in EconPapers)
JEL-codes: E0 F0 F1 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2022-11
New Economics Papers: this item is included in nep-ban, nep-fdg and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
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