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Assessing and Managing Rapid Credit Growth and the Role of Supervisory and Prudential Policies

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Author Info

  • Ceyla Pazarbasioglu
  • Gudrun Johnsen
  • Paul Louis Ceriel Hilbers
  • Inci Ötker

Abstract

This paper reviews trends in bank lending to the private sector, with a particular focus on Central and Eastern European countries, and finds that rapid growth of private sector credit continues to be a key challenge for most of these countries. The paper discusses possible implications for economic and financial stability and the policy options available to counter and reduce these risks. It argues that the authorities will need to focus on the implications for both the macro economy and the financial system and, depending on their assessment, may need a comprehensive policy response comprising a mix of macro and prudential policies. In particular where there are limitations to the effective use of monetary and fiscal measures, supervisory and prudential policy responses will have a key role in addressing financial stability concerns.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/151.

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Length: 58
Date of creation: 01 Jul 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/151

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Related research

Keywords: Financial stability; Credit expansion; banking; foreign exchange; financial sector; bank credit; financial system; reserve requirements; reserve requirement; financial institutions; hedging; banking system; banking sector; capital adequacy; bank lending; loan classification; financial intermediation; bank loans; financial markets; liquid asset; international financial statistics; bank deposits; bank borrowing; financial systems; bank for international settlements; macroeconomic stability; disintermediation; currency crises; bank assets; hedging instruments; bank liquidity; banking crisis; banks ? balance sheets; internal control; hedge; bank supervisors; domestic interest rates; connected lending; banking market; financial liberalization; capital adequacy ratio; capital base; systemic banking crisis; banks ? loan; financial instability; national bank; deposit growth; bank risk; bank supervision; financial market; deposit rates; bank balance sheets; bank capital; banking crises; banking systems; banks ? assets; bank activities; asset valuation; prudential regulation; banks ? asset; mortgage lending; asset valuations; deposit money banks; working capital; bank portfolio; bank asset; return on assets; bank secrecy; financial vulnerabilities; bank profits; stabilization programs; potential exposure; equity markets; currency crisis; banks ? balance sheet; bank of spain; banking statistics; eurobond; financial reform; bank lending rates; bank loan; bank of england; financial assets; stock prices; bank secrecy laws; banking license; banking supervision; bank restructuring; international reserves; cash flows; banks with asset; foreign exchange exposure; currency mismatch; evergreening; banking sector stability; future cash flows; bank debt; domestic financial sector; financial transaction; financial conglomerates; currency risk; bank share; deposit money; hedges; deposit rate; debt stock; banking law; banks balance sheets; financial market development; moral hazard; reserve ratio; excess liquidity; financial sector liberalization; financial corporations; money market; international standards; distressed bank;

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References

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  1. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.).
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  13. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  14. Ilan Goldfajn & Rodrigo O. Valdés, 1997. "Capital Flows and the Twin Crises," IMF Working Papers 97/87, International Monetary Fund.
  15. Gourinchas, Pierre-Olivier & Landerretche, Oscar & Valdés, Rodrigo, 2001. "Lending Booms: Latin America and the World," CEPR Discussion Papers 2811, C.E.P.R. Discussion Papers.
  16. Ben S. Bernanke & Mark Gertler, 1995. "Inside the Black Box: The Credit Channel of Monetary Policy Transmission," Journal of Economic Perspectives, American Economic Association, vol. 9(4), pages 27-48, Fall.
  17. Inci Ötker & R. B. Johnston, 1999. "A Modernized Approach to Managing the Risks in Cross-Border Capital Movements," IMF Policy Discussion Papers 99/6, International Monetary Fund.
  18. Otker, Inci & Pazarbasioglu, Ceyla, 1997. "Speculative attacks and macroeconomic fundamentals: evidence from some European currencies," European Economic Review, Elsevier, vol. 41(3-5), pages 847-860, April.
  19. Asli Demirgüç-Kunt & Enrica Detragiache, 1997. "The Determinants of Banking Crises," IMF Working Papers 97/106, International Monetary Fund.
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