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

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  • Thomas F. Cosimano
  • Ralph Chami
  • Adolfo Barajas

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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Bibliographic Info

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

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Length: 42
Date of creation: 01 Feb 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/38

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Keywords: Bank supervision; Latin America; Basel Core Principles; Credit; Monetary policy; basel accord; banking; capital requirements; deposit insurance; bank loans; bank risk; bank capital; bank behavior; arbitrage; credit risk; banking system; nonperforming loan; bank credit; banking systems; moral hazard; net interest margin; risk-weighted assets; capital adequacy; bank assets; bank lending; bank for international settlements; bank regulation; bank deposits; capital regulation; emerging markets; capital adequacy ratio; financial systems; banking crisis; bank activities; bank failures; bank capitalization; deposit insurance systems; return on equity; banks ? loan; banking crises; bank competition; banking regulation; insurance systems; bank risk-taking; return on assets; risk management; bank stock; bank panics; banking sectors; tier 1 capital; prudential regulation; capital budgeting; supervisory authorities; banking activities; central banking; bank capital regulation; contingent liabilities; bank of england; deposit insurance scheme; banking industry; bank intermediation; banking supervision; bank loan; bank balance sheets; banking sector; bank runs; market risk; banking market; probability of default; bank stability; federal deposit insurance; banks ? balance sheets; bank managers; risk taking; bank lending behavior; bank crisis; bank performance; bank stock prices; supervisory framework; bank safety;

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References

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Citations

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Cited by:
  1. 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.
  2. Alicia García-Herrero & Sergio Gavilá, 2006. "Posible impacto de Basilea II en los países emergentes," Banco de Espa�a Occasional Papers 0606, Banco de Espa�a.
  3. Ralph Chami & Thomas F. Cosimano, 2001. "Monetary Policy with a touch of Basel," IMF Working Papers 01/151, International Monetary Fund.
  4. Torsten Wezel & Mario Mansilla & Gustavo Adler, 2009. "Modernizing Bank Regulation in Support of Financial Deepening," IMF Working Papers 09/199, International Monetary Fund.
  5. Ghosh, Saibal, 2010. "Credit Growth, Bank Soundness and Financial Fragility: Evidence from Indian Banking Sector," MPRA Paper 24715, University Library of Munich, Germany.
  6. 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.

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