Bank Ownership and Credit Cycle: the lower sensitivity of public bank lending to the business cycle
AbstractOverall lending cyclicality increased in the years 2000s, but public bank lending remains significantly less cyclical than their private counterparts. This stylized fact is showed to hold empirically on a dataset of 140 countries over 1989-2009 covering 464 public banks and 72 privatizations while accounting for the unbalanced feature of the panel. Using a dataset on banking crisis and records about bank privatizations, I can control for nationalizations during crisis as well as the evolution of ownership status overtime. Nevertheless the cyclical properties remain heterogeneous depending (i) on the area considered --still procyclical in OECD countries, acyclical in Europe, while countercyclical for developing countries, or on (ii) the phase of the business cycle itself --with lower reactions to economic fluctuations in periods of recession, even in Europe, where credit expansion by public banks is then acyclical. As a robustness check, I indeed observe that newly privatized banks engage in more procyclical lending. In addition, most liability item, like short/long term liabilities or customer deposits, pattern the same reduced cyclicality, especially during economic downturns. Last, I do not find evidences that this cyclical pattern is encompassed by forced loans to the government nor institutional features.
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Bibliographic InfoPaper provided by Banque de France in its series Working papers with number 411.
Length: 41 pages
Date of creation: 2012
Date of revision:
lending cycle; procyclicality; public banking; privatizations.;
Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- H44 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Goods: Mixed Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-12-15 (All new papers)
- NEP-BAN-2012-12-15 (Banking)
- NEP-CBA-2012-12-15 (Central Banking)
- NEP-MAC-2012-12-15 (Macroeconomics)
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