Balance Sheet Strength and Bank Lending During the Global Financial Crisis
IMF Working Papers, May 8, 2013
Source details
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- Balance Sheet Strength and Bank Lending During the Global Financial Crisis
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Bibliographic details
- Authors: Tümer Kapan, Camelia Minoiu
- Published: May 8, 2013
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484315842.001
Authors and Publication
- Authors: Tümer Kapan, Camelia Minoiu
- Publication date: May 8, 2013
- Series: Working Paper No. 2013/102
- Issue: 102
- Volume: 2013
- Pages: 38
- DOI: https://doi.org/10.5089/9781484315842.001
- ISBN: 9781484315842
- ISSN: 1018-5941
Research question and data
- Objective: Examine the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy.
- Data source: Syndicated loan market data.
- Identification strategy: Exploit variation in banks’ reliance on wholesale funding and their structural liquidity positions in 2007Q2 to estimate the impact of exposure to market freezes during 2007–08 on the supply of bank credit.
Key findings
- Banks with strong balance sheets were better able to maintain lending during the crisis.
- Banks that were ex-ante more dependent on market funding and had lower structural liquidity reduced the supply of credit more than other banks.
- Higher and better-quality capital mitigated the adverse effect of market freezes on credit supply.
- Implication: Strong bank balance sheets are key for the recovery of credit following crises.
Policy implications and recommendations
- Findings provide support for regulatory proposals under the Basel III framework.
- Reinforces the importance of higher and better-quality capital and structural liquidity requirements to preserve credit supply during market freezes.
Subjects and keywords
- Subject: Bank credit; Banking; Financial institutions; Financial regulation and supervision; Financial statements; Liquidity requirements; Loans; Money; Public financial management (PFM); Syndicated loans
- Keywords: bank capital; Bank credit; bank health indicator; bank lending channel; bank nationality effect; bank soundness; Basel III; capital; changes bank; Financial statements; Global; Liquidity requirements; liquidity shock; Loans; net stable funding ratio; risk profile; Syndicated loans; wholesale funding; WP
Source: IMF Working Papers — "Balance Sheet Strength and Bank Lending During the Global Financial Crisis", Tümer Kapan and Camelia Minoiu, May 8, 2013, Working Paper No. 2013/102.