Bank Risk Determinants in Latin America

36 Pages Posted: 15 Jun 2020

See all articles by Laura Baselga-Pascual

Laura Baselga-Pascual

University of Deusto - Deusto Business School

Mariña Martínez-Malvar

Nordea Bank AB; University of Deusto

Date Written: May 20, 2020


Systemic Banking crises are a recurrent phenomenon that affects society, and there is a need for a better understanding of the risk factors to support prudential regulation and reduce unnecessary risk intake in the financial system. This paper examines the main bank risk determinants in Latin America. The period analysed covers the timespan from 1999 to 2013, including the systemic banking crisis episodes in Argentina (2001-2003) and Uruguay (2002-2005). We apply a new data-driven comparable methodology to classify and select commercial banks from the sample. We study bank risk proxied by the Z-score. In the analysis, we apply bank specific, macroeconomic and regulatory variables. We use the system-GMM estimator as our main empirical analysis method. Our results show negative relationships between the profitability and the liquidity of a bank and its risk and a positive relationship between bank asset quality and its risk. However, we find a negative correlation between good management and bank risk. We perform several robustness tests by applying alternative methodologies, and the results are similar to those our original model.

Keywords: Latin America, Financial risk and risk management, Banks and depository institutions, Bank risk management, Emerging markets

JEL Classification: G21, G32, L11

Suggested Citation

Baselga-Pascual, Laura and Martínez-Malvar, Mariña and Martínez-Malvar, Mariña, Bank Risk Determinants in Latin America (May 20, 2020). Available at SSRN: or

Laura Baselga-Pascual

University of Deusto - Deusto Business School ( email )

Camino de Mundaiz, 50
San Sebastian, 20012

Mariña Martínez-Malvar (Contact Author)

University of Deusto ( email )

Bilbao, 48007

Nordea Bank AB ( email )

Copenhagen, 105 71

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