Determinants of Credit Growth and the Bank-Lending Channel in Peru: A Loan Level Analysis

33 Pages Posted: 5 Sep 2019

See all articles by José Bustamante

José Bustamante

Central Reserve Bank of Peru

Walter Cuba

Central Reserve Bank of Peru

Rafael Nivin

Central Reserve Bank of Peru

Date Written: July 31, 2019

Abstract

This paper uses loan-level data from Peru's credit registry to determine how the role of bank-specific characteristics (i.e. bank size, liquidity, capitalization, funding, revenue, and profitability) may affect the supply of credit in domestic and foreign currency. Also, we analyze how these characteristics affect the banks' response to monetary policy shocks. Finally, we assess how the link between bank-specific characteristics and credit supply is affected by global financial conditions and commodity price changes. Our results show that well-capitalized, high-liquidity, low-risk, more profitable banks tend to grant more credit, especially in domestic currency. Moreover, we found evidence that reserve requirements both in domestic and foreign currency are effective in curbing domestic credit in Peru, giving support to the BCRP's active use of RRs as a macroprudential tool to smooth out the credit cycle. Last, we found that banks with more diversified funding sources are less affected after a negative commodity price change.

Keywords: credit channel, monetary policy, credit registry data

JEL Classification: E44, G21, G32, L25

Suggested Citation

Bustamante, José and Cuba, Walter and Nivin, Rafael, Determinants of Credit Growth and the Bank-Lending Channel in Peru: A Loan Level Analysis (July 31, 2019). BIS Working Paper No. 803. Available at SSRN: https://ssrn.com/abstract=3436205

José Bustamante (Contact Author)

Central Reserve Bank of Peru ( email )

Jirón Miroquesada 441
Lima, Lima 1
Peru

Walter Cuba

Central Reserve Bank of Peru ( email )

Jirón Miroquesada 441
Lima, Lima 1
Peru

Rafael Nivin

Central Reserve Bank of Peru ( email )

Jirón Miroquesada 441
Lima, Lima 1
Peru

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