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Did the Basel Accord cause a Credit Slowdown in Latin America?

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Author Info
Adolfo Barajas
Ralph Chami
Thomas F. Cosimano

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Abstract

Drawing from a unique data set comprising 2,893 banks and 152 countries over the period 1987 to 2000, we test whether the adoption of the Basel Accord by Latin American and Caribbean countries was responsible for the serious slowdowns in credit growth experienced by these countries. We find that, on average, both bank capitalization and lending activities in Latin America increased after Basel. Consequently, Basel did not seem to lead to an overall credit decline. However, we do find evidence that loan growth became more sensitive to some risk factors. Our study suggests that the upcoming adoption of Basel II might cause greater procyclicality of credit.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/38.

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Length: 42 pages
Date of creation: 04 Mar 2005
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Handle: RePEc:imf:imfwpa:05/38

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Keywords: Bank supervision ; Latin America ; Capital markets ; Basel Core Principles ; Credit ;

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  15. Eva Catarineu-Rabell & Patricia Jackson & Dimitrios P.Tsomocos, 2003. "Procyclicality and the new Basel Accord - Banks' choice of loan rating system," OFRC Working Papers Series 2003fe06, Oxford Financial Research Centre. [Downloadable!]
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. William Francis & Matthew Osborne, 2009. "Bank regulation, capital and credit supply: Measuring the Impact of Prudential Standards," Occasional Papers 36, Financial Services Authority. [Downloadable!]
  2. Mario Mansilla & Gustavo Adler & Torsten Wezel, 2009. "Modernizing Bank Regulation in Support of Financial Deepening: The Case of Uruguay," IMF Working Papers 09/199, International Monetary Fund. [Downloadable!]
  3. Birgit Schmitz, 2007. "The impact of Basel I capital regulation on bank deposits and loans: Empirical evidence for Europe," Money Macro and Finance (MMF) Research Group Conference 2006 42, Money Macro and Finance Research Group. [Downloadable!]
  4. Burton A. Abrams & Russell F. Settle, 2007. "Do Fixed Exchange Rates Fetter Monetary Policy? A Credit View," Eastern Economic Journal, Eastern Economic Association, vol. 33(2), pages 193-205, Spring. [Downloadable!]
  5. Adolfo Barajas & Leonardo Luna & Jorge Restrepo, 2007. "Macroeconomic Fluctuations and Bank Behavior in Chile," Working Papers Central Bank of Chile 436, Central Bank of Chile. [Downloadable!]
  6. Alicia García-Herrero & Sergio Gavilá, 2006. "Posible impacto de Basilea II en los países emergentes," Banco de España Occasional Papers 0606, Banco de España. [Downloadable!]
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