DEVELOPMENTS IN COMMERCIAL BANK CREDIT DISTRIBUTION (1996-2013): ARE ALL BANKS THE SAME?

Author(s): LOWE, SHANE; GROSVENOR, TIFFANY;

Created 29 Dec, 2014
Categories Working Papers
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Over the past two decades, the contour of commercial banks’ loan portfolios has changed substantially, with greater emphasis on tourism and consumer loans. This paper conducts a data analysis of banks’ loan exposures over the period 1996 to 2013, in conjunction with various indicators of economic activity. In particular, loans are examined by sector to determine the level of concentration and/or diversification that exists, how this measure has changed over time, and the possible implications for banks’ non-performing loans and overall profitability. Additionally, concentration is examined in conjunction with banks’ largest exposures to shed some light on the level risk that may be inherent within individual institutions and sectors. The analysis indicates that consumer lending has been the major driver of credit growth and the most important contributor to adjustments in the maturity structure of banks loan portfolios’ over time. Also, a bank’s relationship between concentration and profitability appears to be dependent on which sector(s) the bank is most concentrated, as well as its size.

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