Are Weak Banks Leading Credit Booms? Evidence from Emerging Europe

This paper examines the behavior of bank soundness indicators during episodes of brisk loan growth, using bank-level data for central and eastern Europe and controlling for the feedback effect of credit growth on bank soundness. No evidence is found that rapid loan expansion has weakened banks durin...

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Bibliographic Details
Main Author: Igan, Deniz
Other Authors: Tamirisa, Natalia
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2008
Series:IMF Working Papers
Subjects:
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
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245 0 0 |a Are Weak Banks Leading Credit Booms? Evidence from Emerging Europe  |c Deniz Igan, Natalia Tamirisa 
260 |a Washington, D.C.  |b International Monetary Fund  |c 2008 
300 |a 21 pages 
651 4 |a Czech Republic 
653 |a Depository Institutions 
653 |a Distressed institutions 
653 |a Credit 
653 |a Banks 
653 |a Finance 
653 |a Banks and banking 
653 |a Industries: Financial Services 
653 |a Monetary economics 
653 |a General Financial Markets: Government Policy and Regulation 
653 |a Micro Finance Institutions 
653 |a Monetary Policy, Central Banking, and the Supply of Money and Credit: General 
653 |a Mortgages 
653 |a Bank soundness 
653 |a Banks and Banking 
653 |a Financial Institutions and Services: General 
653 |a Financial services industry 
653 |a Bank credit 
653 |a Banking 
653 |a Money and Monetary Policy 
653 |a Finance: General 
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520 |a This paper examines the behavior of bank soundness indicators during episodes of brisk loan growth, using bank-level data for central and eastern Europe and controlling for the feedback effect of credit growth on bank soundness. No evidence is found that rapid loan expansion has weakened banks during the last decade, but over time weaker banks seem to have started to expand at least as fast as, and in some markets faster than, stronger banks. These findings suggest that during credit booms supervisors need to carefully monitor the soundness of rapidly expanding banks and stand ready to take action to limit the expansion of weak banks