Bank Ownership and Credit Over the Business Cycle: Is Lending by State Banks Less Procyclical?

36 Pages Posted: 20 Apr 2016

See all articles by Ata Can Bertay

Ata Can Bertay

World Bank - Development Research Group (DECRG); Tilburg University - European Banking Center

Asli Demirgüç-Kunt

World Bank - Development Research Group; World Bank

Harry Huizinga

Tilburg University - Center for Economic Research (CentER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Date Written: June 1, 2012

Abstract

This paper finds that lending by state banks is less procyclical than lending by private banks, especially in countries with good governance. Lending by state banks in high-income countries is even countercyclical. On the liability side, state banks expand potentially unstable non-deposit liabilities relatively little during booms, especially in countries with good governance. Public banks also report loan non-performance more evenly over the business cycle. Overall the results of the analysis suggest that state banks can play a useful role in stabilizing credit over the business cycle as well as during periods of financial instability. However, the track record of state banks in credit allocation remains quite poor, questioning the wisdom of using state banks as a short-term countercyclical tool.

Keywords: Banks & Banking Reform, Debt Markets, Bankruptcy and Resolution of Financial Distress, Access to Finance, Economic Theory & Research

Suggested Citation

Bertay, Ata Can and Demirgüç-Kunt, Asli and Huizinga, Harry, Bank Ownership and Credit Over the Business Cycle: Is Lending by State Banks Less Procyclical? (June 1, 2012). World Bank Policy Research Working Paper No. 6110. Available at SSRN: https://ssrn.com/abstract=2096779

Ata Can Bertay (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

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Tilburg University - European Banking Center ( email )

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Asli Demirgüç-Kunt

World Bank - Development Research Group ( email )

United States
202-473-7479 (Phone)
202-522-1155 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/ademirguckunt/

World Bank ( email )

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Washington, DC 20433
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Harry Huizinga

Tilburg University - Center for Economic Research (CentER) ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands
+31 13 466 2623 (Phone)
+31 13 466 3042 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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