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Mortgage lending, banking crises, and financial stability in Asia and Europe
- Source :
- Asia Europe Journal. 15:463-482
- Publication Year :
- 2017
- Publisher :
- Springer Science and Business Media LLC, 2017.
-
Abstract
- Our paper investigates the relationship between financial stability and mortgage lending. We estimated the effect of the share of mortgage lending by individual banks (together with some control variables) on two measures of financial stability—the bank Z-score and the non-performing loan ratio—for a sample of 1889 banks in 65 advanced and emerging economies for the period 1987–2014 from the Bankscope database. We specifically compared the behavior of banks in Europe and Asia. We find evidence that an increased share of mortgage lending is positive for financial stability, specifically by lowering the probability of default by financial institutions and reducing the non-performing loan ratio, at least in non-crisis periods, for levels of mortgage shares up to 49–68%. For higher levels of mortgage lending shares, the impact on financial stability turns negative. Also, the occurrence of a banking crisis reduces the diversification benefits associated with mortgage lending. Compared with the base sample, Asian banks show greater financial stability during non-crisis periods, but are more negatively affected by a higher mortgage ratio during crisis periods, while European banks show greater financial stability during non-crisis periods, but are less negatively affected during crisis periods. Finally, a higher level of regulatory quality improves both financial stability measures, but the effects of macroprudential measures are found to be mixed.
- Subjects :
- 040101 forestry
Secondary mortgage market
05 social sciences
Diversification (finance)
General Social Sciences
Financial system
04 agricultural and veterinary sciences
Shared appreciation mortgage
Loan-to-value ratio
General Business, Management and Accounting
Probability of default
Loan
0502 economics and business
0401 agriculture, forestry, and fisheries
Mortgage underwriting
Collateralized mortgage obligation
Business
050207 economics
Subjects
Details
- ISSN :
- 16121031 and 16102932
- Volume :
- 15
- Database :
- OpenAIRE
- Journal :
- Asia Europe Journal
- Accession number :
- edsair.doi...........11418bcc50be0f1546c36ed327ac1e2b