Banks’ Business Model and Credit Supply in Chile: The Role of a State-Owned Bank

33 Pages Posted: 5 Sep 2019

See all articles by Miguel Biron

Miguel Biron

University of British Columbia (UBC)

Felipe Córdova

Central Bank of Chile

Antonio Lemus

Université Paris Nanterre

Date Written: July 31, 2019

Abstract

During the Global Financial Crisis, banks suffered losses on a scale not witnessed since the Great Depression, partly due to two major structural developments in the banking industry; deregulation combined with financial innovation. In the aftermath of the financial crisis, the regulatory response concentrated on the Basel III recommendations, raising core capital requirements for banking institutions, which affected their business models and funding patterns. Consequently, these changes have had significant implications for how banks grant loans, how they react to monetary policy shocks, and how they respond to external shocks. We find evidence of significant interactions between the bank lending channel and both monetary and global shocks in Chile. These links have changed significantly after the Global Financial Crisis. In particular, they have been shaped by the counter-cyclical behavior of a state-owned bank.

Keywords: bank lending channel, global factors, Banco Estado

JEL Classification: E40, E44, E51, E52, E58, G21

Suggested Citation

Biron, Miguel and Córdova, Felipe and Lemus, Antonio, Banks’ Business Model and Credit Supply in Chile: The Role of a State-Owned Bank (July 31, 2019). BIS Working Paper No. 800. Available at SSRN: https://ssrn.com/abstract=3436187

Miguel Biron (Contact Author)

University of British Columbia (UBC) ( email )

2329 West Mall
Vancouver, British Columbia BC V6T 1Z4
Canada

Felipe Córdova

Central Bank of Chile ( email )

Publicaciones
Huerfanos 1185
Santiago
Chile

Antonio Lemus

Université Paris Nanterre ( email )

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