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Abnormal loan growth, credit information sharing and systemic risk in Asian banks

Author

Listed:
  • Wahyoe Soedarmono

    (Universitas Siswa Bangsa Internasional, Faculty of Business / Sampoerna School of Business)

  • Djauhari Sitorus

    (The World Bank)

  • Amine Tarazi

    (LAPE - Laboratoire d'Analyse et de Prospective Economique - GIO - Gouvernance des Institutions et des Organisations - UNILIM - Université de Limoges)

Abstract

This paper investigates the interplay of abnormal loan growth, credit reporting system and systemic risk in banking. Based on a sample of publicly traded banks in Asia from 1998 to 2012, higher abnormal loan growth leads to higher systemic risk one year ahead. A closer investigation further suggests that better credit information coverage and private credit bureaus can stem the buildup of bank systemic risk one year ahead due to higher abnormal loan growth. Eventually, this paper offers some supports to strengthen macro-prudential regulation to limit abnormal loan growth. This paper also advocates the importance of strengthening credit information coverage and the role of private credit bureaus in Asian countries to mitigate the negative impact of abnormal loan growth on bank systemic stability.

Suggested Citation

  • Wahyoe Soedarmono & Djauhari Sitorus & Amine Tarazi, 2017. "Abnormal loan growth, credit information sharing and systemic risk in Asian banks," Post-Print hal-01564050, HAL.
    • Handle: RePEc:hal:journl:hal-01564050
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    2. Baumöhl, Eduard & Bouri, Elie & Hoang, Thi-Hong-Van & Shahzad, Syed Jawad Hussain & Výrost, Tomáš, 2020. "Increasing systemic risk during the Covid-19 pandemic: A cross-quantilogram analysis of the banking sector," EconStor Preprints 222580, ZBW - Leibniz Information Centre for Economics.
    3. Mittal, Amit & Garg, Ajay Kumar, 2021. "Bank stocks inform higher growth—A System GMM analysis of ten emerging markets in Asia," The Quarterly Review of Economics and Finance, Elsevier, vol. 79(C), pages 210-220.
    4. Marcin Borsuk & Konrad Kostrzewa, 2020. "Miary ryzyka systemowego dla Polski. Jak ryzyko systemowe wpływa na akcję kredytową banków?," Bank i Kredyt, Narodowy Bank Polski, vol. 51(3), pages 211-238.
    5. Baumöhl, Eduard & Bouri, Elie & Hoang, Thi-Hong-Van & Hussain Shahzad, Syed Jawad & Výrost, Tomáš, 2022. "Measuring systemic risk in the global banking sector: A cross-quantilogram network approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics.
    6. Inka Yusgiantoro & Wahyoe Soedarmono & Amine Tarazi, 2017. "Bank consolidation and financial stability revisited: Evidence from Indonesia," Working Papers hal-01577970, HAL.
    7. Mittal, Amit & Garg, Ajay Kumar, 2018. "Bank stocks inform higher growth – A System GMM analysis of ten emerging markets in Asia," MPRA Paper 98253, University Library of Munich, Germany.
    8. Gozgor, Giray, 2018. "Determinants of the domestic credits in developing economies: The role of political risks," Research in International Business and Finance, Elsevier, vol. 46(C), pages 430-443.
    9. Rusmanto, Toto & Soedarmono, Wahyoe & Tarazi, Amine, 2020. "Credit information sharing in the nexus between charter value and systemic risk in Asian banking," Research in International Business and Finance, Elsevier, vol. 53(C).
    10. Wahyoe Soedarmono & Iman Gunadi & Fiskara Indawan & Carla Sheila Wulandari, 2021. "Exploring The Impact Of Loan Restructuring In Indonesian Banking," Working Papers WP/06/2021, Bank Indonesia.
    11. Albaity, Mohamed & Noman, Abu Hanifa Md. & Saadaoui Mallek, Ray & Al-Shboul, Mohammad, 2022. "Cyclicality of bank credit growth: Conventional vs Islamic banks in the GCC," Economic Systems, Elsevier, vol. 46(1).
    12. Kanga, Désiré & Soumaré, Issouf & Amenounvé, Edoh, 2023. "Can corporate financing through the stock market create systemic risk? Evidence from the BRVM securities market," Emerging Markets Review, Elsevier, vol. 55(C).
    13. Michael Adusei & Ngozi Adeleye, 2022. "Credit information sharing and non‐performing loans: The moderating role of creditor rights protection," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(4), pages 4756-4769, October.

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    More about this item

    Keywords

    credit reporting system; Abnormal loan growth; systemic risk; Asian banks;
    All these keywords.

    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

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