The change in banks' business models and their impact on bank lending: an empirical analysis using credit registry data (2017-19)

After the Great Financial Crisis, banks' activities and business models have undergone large transformations. Profound changes in money and securitisation markets, cross-border banking activity, technological innovation, and the post-crisis regulatory response, have affected how banks finance themselves and grant credit, ie on the "bank business models". The transformations in business models have likely altered how banks respond to monetary policy and external shocks, as several studies have shown for advanced economics. The effects on banks in emerging markets, however, have been less investigated.

This project studies how the evolution of business models in Latin America's main economies and other characteristics have affected credit supply, including how credit supply responds to domestic and external shocks. The five participating central bank studies follow a common methodology complemented by a narrative specific to their national experience. All studies use confidential and granular bank-firm data to identify the effects of changing bank characteristics while disentangling the drivers of credit supply from those of credit demand.

Since data confidentiality prevents the pooling of the data, the summary paper synthetizes the results applying meta-analysis techniques. It finds that large and well-capitalised banks with low risk indicators, stable sources of funding, and a commercial business model generally supply more credit. Such banks are also more sheltered from monetary and global shocks, with the role of banks-specific characteristics varying by the type of shock.

Leonardo Gambacorta of the BIS is the project's main academic adviser.

Meetings

Workshop of the BIS CCA CGDFS Working Group on "Changes in banks' business models and their impact on bank lending: an empirical analysis using credit registry data", Mexico City, 29-30 January 2018.

Closing conference of the BIS CCA CGDFS Working Group on "Changes in banks' business models and their impact on bank lending: an empirical analysis using credit registry data", Mexico City, 6-7 September 2018.

Papers

How do bank-specific characteristics affect lending? New evidence based on credit registry data from Latin America by Carlos Cantú, Stijn Claessens and Leonardo Gambacorta

Monetary policy surprises and employment: evidence from matched bank-firm loan data on the bank lending-channel by Rodrigo Barbone Gonzalez

Banks' business model and credit supply in Chile: the role of a state-owned bank by Miguel Biron, Felipe Cordova and Antonio Lemus

The internationalization of domestic banks and the credit channel: an empirical assessment by Paola Morales, Daniel Osorio and Juan Sebastian Lemus-Esquivel

A loan-level analysis of bank lending in Mexico by Carlos Cantú, Roberto Lobato, Calixto López and Fabrizio López-Gallo

Determinants of credit growth and the bank-lending channel in Peru: A loan level analysis by José Bustamante, Walter Cuba and Rafael Nivin