Banks During the Argentine Crisis: Were they All Hurt Equally? Did they All Behave Equally?

By V. Hugo Juan-Ramon, Emiliano Basco, Carlos Quarracino, Adolfo Barajas

February 1, 2006

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V. Hugo Juan-Ramon, Emiliano Basco, Carlos Quarracino, and Adolfo Barajas. Banks During the Argentine Crisis: Were they All Hurt Equally? Did they All Behave Equally?, (USA: International Monetary Fund, 2006) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

The simple answer to both questions in the title of this paper is: No. We concentrate on the three main risk elements that contributed to the banking system’s difficulties during the crisis: increasing dollarization of the balance sheet, expanding exposure to the government, and, eventually, the run on deposits. We find that there was substantial cross-bank variation in these elements—that is, not all banks were hurt equally by macroeconomic shocks. Furthermore, using panel data estimation for the 1998–2001 period, we find that depositors were able to distinguish high- from low-risk banks, and that individual banks’ exposure to currency and government default risk depended on bank fundamentals and other characteristics. Thus, not all banks behaved equally in the run-up to the crisis. Finally, our results have implications for the existence of market discipline in periods of stress and for banking regulation, which may have led banks to underestimate some of the risks they incurred.

Subject: Bank deposits, Banking, Commercial banks, Currencies, External debt, Financial institutions, Financial services, Foreign currency exposure, Money

Keywords: Argentina, Bank capitalization, Bank characteristic, Bank deposits, Bank financing, Bank fundamentals, Bank performance indicator, Bank variability, Banking, Commercial banks, Country risk, Crisis, Currencies, Disaggregated bank data, Foreign currency, Foreign currency exposure, Interest rate, Macro variable, Market discipline, Market share, Performance indicator, Private sector, WP

Publication Details

Pages:

42
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2006/042
Stock No:

WPIEA2006042
ISBN:

9781451863024
ISSN:

1018-5941

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