Credit booms and bank risk in Southeast Asian countries: does credit information sharing matter?

Abstract

Purpose

This study investigates the relationship between credit booms and bank risk in Association of Southeast Asian Nations (ASEAN) countries, with credit information sharing acting as a moderator.

Design/methodology/approach

The authors use a two-step System Generalized Method of Moments (SGMM) estimator on a sample of 79 listed banks in 5 developing ASEAN countries: Indonesia, Philippines, Malaysia, Thailand and Vietnam in the period 2006–2019. In addition, the authors perform robustness tests with different proxies for credit booms and bank risk. The data are collected on an annual basis.

Findings

Bank risk is positively related to credit booms and is negatively associated with credit information sharing. Further, credit information sharing reduces the detrimental effect of credit booms on bank stability. The authors find that both public credit registries and private credit bureaus are effective in enhancing bank stability in ASEAN countries. These results are robust to regression models with alternative proxies for credit booms and bank risk.

Research limitations/implications

Banks in ASEAN countries tend to have strong lending growth to support the economy, but this could be detrimental to stability of the sector. Credit information sharing schemes should be encouraged because these schemes might enable growth of credit without compromising bank stability. Therefore, policymakers could promote private credit bureaus (PCB) and public credit registries (PCR) to realize their benefits. The authors' research focuses on developing ASEAN countries, but future research could provide more evidence by expanding this study to other emerging economies. In-depth interviews and surveys with bankers and regulatory bodies about these concerns could provide additional insights in the future.

Originality/value

The study is the first to examine the role of PCB and PCR in alleviating the negative impact of credit booms on bank risk. Furthermore, the authors use both accounting-based and market-based risk measures to provide a fuller view of the impact. Finally, there is little evidence on the link between credit booms, credit information sharing and bank risk in ASEAN, so the authors aim to fill this gap.

Citation

Tran, S., Nguyen, D., Nguyen, K. and Nguyen, L. (2024), "Credit booms and bank risk in Southeast Asian countries: does credit information sharing matter?", Asia-Pacific Journal of Business Administration, Vol. 16 No. 2, pp. 352-366. https://doi.org/10.1108/APJBA-12-2021-0619