Colombian paper finds wholesale funding can increase financial sector fragility
Credit expansion fuelled by increased wholesale funding can be problematic
The increasing use of wholesale funding to support credit expansion is a potential source of financial fragility, according to a new working paper published by the Central Bank of Colombia.
In Banking fragility in Colombia: an empirical analysis based on balance sheets, authors Ignacio Lozano and Alexander Guarín study the empirical relationship between credit funding sources and the financial vulnerability of the Colombian banking system, and propose a statistical model to measure and predict
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