Banks During the Argentine Crisis: Were They All Hurt Equally? Did They All Behave Equally?

42 Pages Posted: 23 Mar 2006

See all articles by Adolfo Barajas

Adolfo Barajas

International Monetary Fund (IMF) - Western Hemisphere Department

Emiliano Basco

Central Bank of Argentina

V. Hugo Juan-Ramón

International Monetary Fund (IMF)

Carlos Quarracino

Ministry of Finance of Argentina

Date Written: February 2006

Abstract

The simple answer to both questions in the title of this paper is: No. We concentrate on the three main risk elements that contributed to the banking system's difficulties during the crisis: increasing dollarization of the balance sheet, expanding exposure to the government, and, eventually, the run on deposits. We find that there was substantial cross-bank variation in these elements - that is, not all banks were hurt equally by macroeconomic shocks. Furthermore, using panel data estimation for the 1998-2001 period, we find that depositors were able to distinguish high- from low-risk banks, and that individual banks' exposure to currency and government default risk depended on bank fundamentals and other characteristics. Thus, not all banks behaved equally in the run-up to the crisis. Finally, our results have implications for the existence of market discipline in periods of stress and for banking regulation, which may have led banks to underestimate some of the risks they incurred.

Keywords: Argentina, banking, crisis, market discipline

JEL Classification: F30, F41, G14, G21

Suggested Citation

Barajas, Adolfo and Basco, Emiliano and Juan-Ramón, V. Hugo and Quarracino, Carlos, Banks During the Argentine Crisis: Were They All Hurt Equally? Did They All Behave Equally? (February 2006). IMF Working Paper, Vol. , pp. 1-42, 2006. Available at SSRN: https://ssrn.com/abstract=892933

Adolfo Barajas (Contact Author)

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4152 (Phone)
202-623-6070 (Fax)

Emiliano Basco

Central Bank of Argentina ( email )

Reconquista 266
Edificio Central, piso 7
Buenos Aires, 1003

V. Hugo Juan-Ramón

International Monetary Fund (IMF)

700 19th Street NW
Washington, DC 20431
United States

Carlos Quarracino

Ministry of Finance of Argentina ( email )

Argentina

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