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Noncore Bank Liabilities and Financial Vulnerability

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  • JOON‐HO HAHM
  • HYUN SONG SHIN
  • KWANHO SHIN

Abstract

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.

Suggested Citation

  • Joon‐Ho Hahm & Hyun Song Shin & Kwanho Shin, 2013. "Noncore Bank Liabilities and Financial Vulnerability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(s1), pages 3-36, August.
    • Handle: RePEc:wly:jmoncb:v:45:y:2013:i:s1:p:3-36
    DOI: 10.1111/jmcb.12035
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    More about this item

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems

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