Non-Core Bank Liabilities and Financial Vulnerability
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.
We are grateful to Stijn Claessens and Ken West for comments on an earlier version. The authors thank Yongwhan Jung and Ilsoo Hahn for their excellent research assistance. This paper was presented at the Federal Reserve Board/JMCB conference on "Regulation of Systemic Risk", September 14, 2011. We thank participants at the conference for their feedback. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Outside Activities of Joon-Ho Hahm
- Korea Exchange (2001-2008, 2010)
- Hana Bank, Korea (2005-2008)
- Ministry of Strategy and Finance, Korea (2008-present)
- Financial Services Commission, Korea (2008-present)
- Korea Securities Finance Corporation (2010-present)
- Prudential Asset Management Co., Korea (2005-2008)
- Gmarket (2005-2009)
- Korea Deposit Insurance Corporation (2008-2010)
- Interpark (2011-present)
- Asian Development Bank (2009)
- Bank of Korea (2011, 2012)Kwanho Shin
There are no other directly related compensated activities to this paper. Other outside activities can be found at http://econ.korea.ac.kr/~khshin.
JoonâHo Hahm & Hyun Song Shin & Kwanho Shin, 2013. "Noncore Bank Liabilities and Financial Vulnerability," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45, pages 3-36, 08. citation courtesy of