IMF Working Papers

Banks’ Holdings of Government Securities and Credit to the Private Sector in Emerging Market and Developing Economies

By Romain Bouis

October 11, 2019

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Romain Bouis. Banks’ Holdings of Government Securities and Credit to the Private Sector in Emerging Market and Developing Economies, (USA: International Monetary Fund, 2019) accessed November 4, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper studies the relationship between banks’ holdings of domestic sovereign securities and credit growth to the private sector in emerging market and developing economies. Higher banks’ holdings of government debt are associated with a lower credit growth to the private sector and with a higher return on assets of the banking sector. Analysis suggests that the negative relationship between banks’ claims on the government and private sector credit growth mainly reflects a portfolio rebalancing of banks towards safer, more liquid public assets in stress times and provides only limited evidence of a crowding-out effect due to financial repression.

Subject: Bank soundness, Banking, Commercial banks, Credit, Financial institutions, Financial sector policy and analysis, Government securities, Money, Public debt

Keywords: Bank profitability, Bank soundness, Banks' claim, Banks' holding, Commercial banks, Credit, Credit growth, Credit growth to the private sector, Crowding-out, Crowding-out effect, Financial repression, Government securities, Government security holding, Growth in EMDEs, Growth to the private sector, Nonperforming loans, Portfolio rebalancing, Private sector lending, Return on assets, Sovereign debt, Sub-Saharan Africa, WP

Publication Details

  • Pages:

    27

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2019/224

  • Stock No:

    WPIEA2019224

  • ISBN:

    9781513512952

  • ISSN:

    1018-5941

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