Aging Gracefully: Steering the Banking Sector through Demographic Shifts

June 14, 2024

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Format: Chicago

Patrick A. Imam, and Christian Schmieder. Aging Gracefully: Steering the Banking Sector through Demographic Shifts, (USA: International Monetary Fund, 2024) accessed November 21, 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

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.

Subject: Aging, Bank soundness, Commercial banks, Financial institutions, Financial sector policy and analysis, Loans, Population and demographics

Keywords: Aging, Bank assets, Bank risk-taking, Bank soundness, Commercial banks, Demographics, Financial Stability, Global, IMF working paper No. 24/118, Loans, Risk preference, Solvency profile, Stability risk, Tail risk

Publication Details

Pages:

51
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2024/118
Stock No:

WPIEA2024118
ISBN:

9798400279447
ISSN:

1018-5941

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