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Banks’ Business Model and Credit Supply in Chile: The Role of a State-Owned Bank

Biron Miguel, Julio Cordova () and Antonio Lemus ()

No 2019-11, EconomiX Working Papers from University of Paris Nanterre, EconomiX

Abstract: During the recent financial crisis, banks suffered losses on a scale not witnessed since the Great Depression, partly due to two structural developments in the banking industry; deregulation combined with financial innovation. The regulatory response concentrated on the Basel III recommendations, affected banks’ business model and funding patterns. Consequently, these changes have had implications on how banks grant loans, how they react to monetary policy shocks, and on how they respond to global shocks. We find evidence of significant interactions between banks’ lending and both monetary and global shocks in Chile. In particular, these interactions have been significantly shaped by the counter-cyclical behavior of the state-owned bank. The good governance of this institution along with a sound legal and economic environment, have propitiated this result.

Keywords: bank lending channel; global factors; Banco Estado (search for similar items in EconPapers)
JEL-codes: E40 E44 E51 E52 E58 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mac
Date: 2019
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