Abnormal Loan Growth, Credit Information Sharing and Systemic Risk in Asian Banks

Abstract

This paper investigates the interplay of abnormal loan growth, credit reporting system and systemic risk in banking. Based on a sample of publicly traded banks in Asia from 1998 to 2012, higher abnormal loan growth leads to higher systemic risk one year ahead. A closer investigation further suggests that better credit information coverage and private credit bureaus can stem the buildup of bank systemic risk one year ahead due to higher abnormal loan growth. Eventually, this paper offers some supports to strengthen macro-prudential regulation to limit abnormal loan growth. This paper also advocates the importance of strengthening credit information coverage and the role of private credit bureaus in Asian countries to mitigate the negative impact of abnormal loan growth on bank systemic stability.

Measuring systemic risk in the global banking sector: A cross-quantilogram network approach

“…The existing literature allows us to understand that a high degree of dependence and contagion exists among banks within and across countries and regions during crisis periods (Paltalidis et al, 2015;Black et al, 2016;Dungey et al, 2017;Duprey et al, 2017;Mohanty et al, 2018;Huang et al, 2019;Verma et al, 2019;Wang et al, 2019;Zedda and Cannas, 2020). Furthermore, various determinants, such as fundamental factors, liquidity, market factors, interbank loans, and macroprudential policies, can contribute to the degree of systemic risk (Acharya and Steffen, 2013;Pais and Stock, 2013;Acemoglu et al, 2015;Battaglia and Gallo, 2017;Soedarmono et al, 2017;Varotto and Zhao, 2018;Su and Wong, 2018;Elyasiani and Jia, 2019;Yang et al, 2020;Andries et al, 2020;Bats and Houben, 2020;Brunnermeier et al, 2020;Meuleman and Vennet, 2020).…”

Credit information sharing and non‐performing loans: The moderating role of creditor rights protection

“…It refers to lenders sharing proprietary information about their loan clients either through private credit bureaus or public credit registries. The investigations into its role in credit markets have notably considered its effect on the volume of credit to the private sector (Asongu, 2017; Grajzl, and Laptieva 2016); the cost of credit (Asongu, 2017); banking crisis (Soedarmonoa, Sitorusb and Tarazic, 2017); market power (Boateng, Asongu, Akamavi an dTchamyou, 2018) and loan delinquency and defaults (Ghosh, 2019; Nakamuraa and Roszbach, 2018; Kusi Agbloyora, Ansah‐Adu and Gyeke‐Dakoa, 2017).…”

Economics of loan growth, credit risk and bank capital in Islamic banks

“…The results indicate that domestic banks have higher efficiency than foreign banks. While examining the relationship between loan growth and systematic risk in Asian banks, Soedarmono et al (2017b) conclude that higher abnormal loan growth increases the following years' systematic risk. While studying the Islamic banks of the GCC region, Srairi (2019) finds that loan growth, bank size, deposits flow, bank efficiency, economic growth and credit information influence the banks' risk-taking.…”

“…Here, to examine the in-depth insights, the study uses LLP and LLR and NPL as credit risk like (Sobarsyah et al, 2020). This practice is common in conventional banking research, whereas the pieces of evidence are limited in the Islamic banking context (Sobarsyah et al, 2020;Soedarmono et al, 2017b). The study uses two The moderating role of capital measurements of loan growth (DLOAN) where one is similar to (Pramono et al, 2019;Sobarsyah et al, 2020), and lagged loan growth (LOANG) is similar to (Foos et al, 2010).…”