Noncore Bank Liabilities and Financial Vulnerability

A lending boom is reflected in the composition of bank liabilities when traditional retail deposits (core liabilities) cannot keep pace with asset growth and banks turn to other funding sources (noncore liabilities) to finance their lending. We formulate a model of credit supply as the flip side of...

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Bibliographic Details
Published in:Journal of money, credit and banking credit and banking, 2013-08, Vol.45 (s1), p.3-36
Main Authors: HAHM, JOON-HO, SHIN, HYUN SONG, SHIN, KWANHO
Format: Article
Language:English
Subjects:
Assets
Bank credit
Bank liabilities
Bank loans
Banking crises
Banks
Credit
credit booms
Credit crises
Credit risk
cross-border banking
Currency crises
Economic crisis
Economic models
F32
F33
F34
Financial liabilities
Funding
Liability
Retail trade
Risk premiums
Stock markets
Studies
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Summary:A lending boom is reflected in the composition of bank liabilities when traditional retail deposits (core liabilities) cannot keep pace with asset growth and banks turn to other funding sources (noncore liabilities) to finance their lending. We formulate a model of credit supply as the flip side of a credit risk model where a large stock of noncore liabilities serves as an indicator of the erosion of risk premiums and hence of vulnerability to a crisis. We find supporting empirical evidence in a panel probit study of emerging and developing economies.
ISSN:0022-2879
1538-4616
DOI:10.1111/jmcb.12035