Non-Core bank liabilities and credit growth: Evidence from an emerging economy ^☆ ☆

The views expressed here are those of the authors and do not reflect the views of the Central Bank of the Republic of Turkey.

Abstract

The composition of bank liabilities has captured a lot of attention especially after the global financial crisis of 2008–2009. It is argued that a compositional change in non-core liabilities reflects the different stages of financial cycle. Banks usually fund their credits with core liabilities, which grow with households’ wealth, but when there is a faster growth in credits compared to deposits, the banks often resort to non-core liabilities to meet the excess demand for loans. This chapter analyses the relationship between non-core liabilities and credits in a small open economy, namely Turkey. It investigates the relationship under alternative settings and presents consistent evidence on a robust relationship between credits and non-core liabilities under all frameworks. The study also verifies that elevated demand for credit may induce some increase in non-core liabilities. Finally, the relationship between non-core liabilities and credit growth is also affirmed in the long run.

Citation

Kilinc, Z., Karasoy, H.G. and Yucel, E. (2013), "Non-Core bank liabilities and credit growth: Evidence from an emerging economy ^☆ ☆

The views expressed here are those of the authors and do not reflect the views of the Central Bank of the Republic of Turkey.

", Global Banking, Financial Markets and Crises (International Finance Review, Vol. 14), Emerald Group Publishing Limited, Leeds, pp. 71-90. https://doi.org/10.1108/S1569-3767(2013)0000014006