How do bank-specific characteristics affect lending? New evidence based on credit registry data from Latin America

BIS Working Papers  |  No 798  | 
31 July 2019
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Focus

This paper summarises the result of a joint research project by five central banks in Latin America (Brazil, Chile, Colombia, Mexico and Peru). It evaluates how bank-specific characteristics affect the supply of credit. Each study uses granular credit registry data to disentangle factors affecting credit demand from those affecting credit supply. Since data confidentiality does not allow the data to be pooled, the results are summarised using meta-analysis techniques as the weighted-averaged coefficients of interest reported for each country study.

Contribution

Banks' activities and business models have undergone many changes in the last decade. Technological innovation, a low interest rate environment and post-crisis regulatory responses have affected how banks finance themselves and grant credit and, more generally, how they run their businesses. We contribute to the literature by studying how these changes have affected the supply of credit in Latin America's five main economies. A second contribution is analysing how these changes have affected banks' responses to monetary policy and global shocks.

Findings

We find that the supply of credit is greater for banks that are large, well-capitalised, rely more on deposits, and have more stable sources of funding and lower risk indicators. These bank-specific characteristics also shelter banks from monetary policy and global shocks, with their effects varying by the type of shock.


Abstract

This paper focuses on the recent changes in banking systems and how bank-specific characteristics have affected credit supply in five Latin American countries (Brazil, Chile, Colombia, Mexico and Peru). We use detailed credit registry data and apply a common empirical strategy. Since data confidentiality prevents the pooling of the data, we use meta-analysis techniques to summarise the results. We find 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 specific characteristics varying by the type of shock.

JEL codes: E51, E58, G21

Keywords: bank business models, bank lending, credit registry data, meta-analysis