MODELING BANK LENDING BEHAVIOR IN THE PERIOD OF GLOBAL FINANCIAL CRISIS

One of the most important roles of banks is that of intermediation. In spate of global financial crisis, banks in Nigeria experienced credit crunch as a result of economic downturn, squeeze profit from economic sectors and high inflationary trend. In this paper, effort was be made to develop a statistical model that explains the behavior of banks in the period of the crisis. More importantly, the study seeks to established causal relationship between factors that affects supply of loans viz a viz rate of return, total deposits, and inflation rate. Using dynamics econometric analysis and ordinary least square regression techniques the results reveal that liquidity position proxied by total deposits has significant influence on the behavior of banks this contradicts REE framework. Secondly, global financial crisis significantly affects the bank lending behavior, however on contrary regulatory intervention has less influence on the behavior. The study is expected to yield an immense benefit to policy makers who strive to stimulate economic growth through monetary and cyclical regulatory policies