Aging Gracefully: Steering the Banking Sector through Demographic Shifts

Patrick Imam () and Christian Schmieder

No 2024/118, IMF Working Papers from International Monetary Fund

Abstract: We analyze how aging populations might affect the stability of banking systems through changes in the balance sheets and risk preferences of banks over the period 2000-2022. While the anticipated decline in maturity transformation due to aging hints at a possible reduction in risk exposure, an older population may propel banks towards yield-seeking behaviors, offsetting the diminishing prominence of conventional lending operations. Through a comprehensive examination of advanced economies over the past two decades, our findings reveal a general enhancement in bank stability correlating with the aging of populations. However, the adaptive responses of banks to these demographic changes are potentially introducing tail risks. Given the rapid global shift towards aging societies, our analysis highlights the critical need for policymakers to be proactive and vigilant. This is particularly pertinent considering historical precedents where periods of relative stability have often been harbingers of emerging risks.

Keywords: Aging; Demographics; Bank risk-taking; Financial Stability; IMF working paper No. 24/118; tail risk; risk preference; stability risk; solvency profile; bank assets; Commercial banks; Bank soundness; Loans; Global (search for similar items in EconPapers)
Pages: 51
Date: 2024-06-14
New Economics Papers: this item is included in nep-age and nep-ban
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Working Paper: Aging gracefully: steering the banking sector through demographic shifts (2024)
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