Banking Crises in Latin America: Experience and Issues

Rojas‐Suárez, Liliana; Weisbrod, Steven R.

doi:10.2139/ssrn.1815951

Cited by 29 publications

(17 citation statements)

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“…Larger percentage of wholesale funding also seems to reduce financial fragility in Latin America, where there is a significance fall in the probability of two and four coexceedances. This is consistent with the findings by Rojas-Suarez and Weisbrod (1995) and Rojas-Suarez (2002). They show that, during the early phases of a banking crisis, Latin American countries experience larger falls in the ratio of deposits to GDP than industrialized countries.…”

Section: Wholesale Fundingsupporting

confidence: 92%

Determinants of Banking System Fragility: A Regional Perspective

2012

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The refereeing process of this paper has been coordinated by a team composed of Gerhard Rünstler, Kalin Nikolov and Bernd Schwaab (all ECB). Terms of use: Documents in EconStor mayThe paper is released in order to make the research of MaRs generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the ones of the author(s) and do not necessarily reflect those of the ECB or of the ESCB. AcknowledgementsThe authors thank an anonymous referee (ECB working paper series), Fabio ABSTRACTWe study the role of regional banking system characteristics for regional banking system fragility in Asia, Europe, Latin America and the US. We find that regional banking system fragility reduces when banks in the region jointly hold more liquid assets, are better capitalized, and when regional banking systems are more competitive. For Asia and Latin-America, a greater presence of foreign banks and more wholesale funded banks also reduces regional banking fragility. In contrast, regional banking fragility increases in foreign bank presence and wholesale funding in the US. We further investigate the possibility of contagion across regions. We find that the contagion effects of Europe and the US on Asia and Latin America are significantly higher compared to the effect of Asia and Latin America among themselves. Finally, the impact of cross-regional contagion is attenuated when the host region has a more liquid and more capitalized banking sector.JEL Classification Codes: G15, G20, G29 Keywords: Banking system stability, cross-regional contagion, financial integration 1 Non-technical summaryIt is well-known that banks may face shocks both on their asset and liability side. A shock that initially affects one institution can become systemic and infect the larger local economy. The globalization of banking implies further that shocks affecting a particular bank or country can now affect not only the local real economy but also the financial system and real economy in other countries. Up to now, the literature on financial fragility has mainly focused on stability of individual banks or stability of individual countries' banking systems. This working paper investigates the determinants of regional banking system fragility, which is referred to as a situation when countries' banking stock indices in a region have jointly very low returns. The 2007-2009 financial crisis has shown that a nation with a ...

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Section: Wholesale Fundingsupporting

confidence: 92%

Determinants of Banking System Fragility: A Regional Perspective

2012

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“…The group management has now the incentives to expropriate banks and all other corporate assets in order to maximize the wealth of ultimate owners. Another potential risk of banks falling into the hands of industrial groups, is that the latter have the capacity to reduce the effective equity invested in the bank -and thus the charter value -by leveraging paid-in capital with loans to the group (Rojas-Suarez and Weisbrod, 1996). While the regulation -and supervision -of such practices is improving, it is by no means universal because it remains hard to implement.…”

Section: B -Credit Risk and Interest Rate Risk Exposurementioning

confidence: 99%

Privatization and bank performance in developing countries

Boubakri

Cosset

Fischer

et al. 2005

Journal of Banking & Finance

165

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“…When the hidden problems finally emerged, especially through improved accounting and auditing, the resulting erosion of profits and capital was unexpected." Rojas-Suarez and Weisbrod (1996) and de Juan (1996de Juan ( , 2003 document abundant evidence from Latin America. "In fact, several banking crises in Latin America have been preceded by capitalization of unpaid interest into new loans to make non-performing loans look healthy (RojasSuarez and Weisbrod, 1996, p.…”

Section: Introductionmentioning

confidence: 99%

Evergreening in banking

Niinimäki¹

2007

Journal of Financial Stability

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Banking Crises in Latin America: Experience and Issues

Cited by 29 publications

References 0 publications

Determinants of Banking System Fragility: A Regional Perspective

Determinants of Banking System Fragility: A Regional Perspective

Privatization and bank performance in developing countries

Evergreening in banking

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