Loans Growth and Banks´ Risk: New Evidence

Juan Amador Torres (), José Eduardo Gómez G. () and Andrés Murcia
Authors registered in the RePEc Author Service: Jose Gomez-Gonzalez

No 10710, Borradores de Economia from Banco de la Republica

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: 2013-04-11
New Economics Papers: this item is included in nep-ban and nep-fdg
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.banrep.gov.co/docum/ftp/be_763.pdf

Related works:
Journal Article: Loan growth and bank risk: new evidence (2013)
Working Paper: Loans Growth and Banks’ Risk: New Evidence (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:col:000094:010710

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