Non-Core Bank Liabilities and Financial Vulnerability

54 Pages Posted: 29 Sep 2012

See all articles by Joon-Ho Hahm

Joon-Ho Hahm

Yonsei University - Graduate School of International Studies

Hyun Song Shin

Bank for International Settlements (BIS)

Kwanho Shin

Korea University

Date Written: September 2012

Abstract

A lending boom is reflected in the composition of bank liabilities when traditional retail deposits (core liabilities) cannot keep pace with asset growth and banks turn to other funding sources (non-core liabilities) to finance their lending. We formulate a model of credit supply as the flip side of a credit risk model where a large stock of non-core liabilities serves as an indicator of the erosion of risk premiums and hence of vulnerability to a crisis. We find supporting empirical evidence in a panel probit study of emerging and developing economies.

Suggested Citation

Hahm, Joon-Ho and Shin, Hyun Song and Shin, Kwanho, Non-Core Bank Liabilities and Financial Vulnerability (September 2012). NBER Working Paper No. w18428. Available at SSRN: https://ssrn.com/abstract=2154106

Joon-Ho Hahm (Contact Author)

Yonsei University - Graduate School of International Studies ( email )

Seoul
Korea

Hyun Song Shin

Bank for International Settlements (BIS) ( email )

Centralbahnplatz 2
Basel, Basel-Stadt 4002
Switzerland

HOME PAGE: http://www.bis.org/author/hyun_song_shin.htm

Kwanho Shin

Korea University ( email )

1 Anam-dong 5 ka
Sunbuk-Ku, Department of Economics
Seoul 136-701
Korea
82-2-3290-2220 (Phone)
82-2-3290-2719 (Fax)

HOME PAGE: econ.korea.ac.kr/~khshin

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