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Household Credit Markets During the Financial Crisis of 2008/2009

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  • Gabriel Aparici
  • Fernando Sepúlveda
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    Abstract

    In this paper we study several elements that allow us to explain the greater resilience of household credit markets in emerging economies, and particularly in Chile during the international financial crisis of 2008-2009. The main features identified are primarily related to the development dynamics of these markets, such as a stronger presence of traditional banking in financial intermediation, marginally relevant structured finance markets and derivative products operations of a less diverse and complex nature. In the particular case of the Chilean economy we also analyze idiosyncratic factors such as, for instance, the consolidation of a selective demand driven by institutional investors. Regarding the regulatory issues analyzed, we argue that the basic set of tools available, for either advanced or emerging economies, tends to lose effectiveness in the face of the highly complex financial interactions observed in some of the advanced economies most affected by the crisis. Finally, based on this latter argument, we propose some topics for discussion that could contribute in the development of the financial system in Chile; such as expanding the reach of supervision and regulation, moving towards a consolidated supervision scheme and reducing potential procyclicalities in the available prudential regulation tools.

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    Bibliographic Info

    Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 591.

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    Date of creation: Sep 2010
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    Handle: RePEc:chb:bcchwp:591

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    1. Jacob Gyntelberg & Eli M Remolona, 2006. "Securitisation in Asia and the Pacific: implications for liquidity and credit risks," BIS Quarterly Review, Bank for International Settlements, June.
    2. Stephen G Cecchetti & Jacob Gyntelberg & Marc Hollanders, 2009. "Central counterparties for over-the-counter derivatives," BIS Quarterly Review, Bank for International Settlements, September.
    3. Eliana Balla & Andrew McKenna, 2009. "Dynamic provisioning: a countercyclical tool for loan loss reserves," Economic Quarterly, Federal Reserve Bank of Richmond, issue Fall, pages 383-418.
    4. International Monetary Fund, 2004. "Chile: Financial System Stability Assessment, including Reports on the Observance of Standards and Codes on the following topics: Monetary and Financial Policy Transparency, Banking Supervision, and S," IMF Staff Country Reports 04/269, International Monetary Fund.
    5. Augusto de la Torre & Alain Ize, 2010. "Regulatory Reform: Integrating Paradigms," International Finance, Wiley Blackwell, vol. 13(1), pages 109-139, 03.
    6. Yuliya Demyanyk & Otto Van Hemert, 2008. "Understanding the subprime mortgage crisis," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 171-192.
    7. Santiago Fernández de Lis & Jorge Martínez Pagés & Jesús Saurina, 2000. "Credit Growth, Problem Loans and Credit Risk Provisioning in Spain," Banco de España Working Papers 0018, Banco de España.
    8. Giovanni Dell'Ariccia & Luc Laeven & Deniz Igan, 2008. "Credit Booms and Lending Standards: Evidence from the Subprime Mortgage Market," IMF Working Papers 08/106, International Monetary Fund.
    9. Santiago Fernández de Lis & Jorge Martínez Pagés & Jesús Saurina, 2000. "Credit Growth, Problem Loans and Credit Risk Provisioning in Spain," Banco de España Working Papers 0018, Banco de España.
    10. Benjamin J. Keys & Tanmoy Mukherjee & Amit Seru & Vikrant Vig, 2010. "Did Securitization Lead to Lax Screening? Evidence from Subprime Loans," The Quarterly Journal of Economics, MIT Press, vol. 125(1), pages 307-362, February.
    11. Stephanou, Constantinos, 2005. "Supervision of financial conglomerates : the case of Chile," Policy Research Working Paper Series 3553, The World Bank.
    12. Adam B. Ashcraft & Til Schuermann, 2008. "Understanding the securitization of subprime mortgage credit," Staff Reports 318, Federal Reserve Bank of New York.
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