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on Banking |
| By: | Lehner, Maria; Schnitzer, Monika |
| Abstract: | Foreign bank entry is frequently associated with spillover effects for local banks and increasing competition in the local banking market. We study the impact of these effects on host countries. In particular, we ask how these effects interact and how they depend on the competitive environment of the host banking market. An increasing number of banks is more likely to have positive welfare ffects the more competitive the market environment, whereas spillovers are less likely to have positive welfare effects the stronger competition. Hence, competitive effects seem to reinforce each other, while spillovers and competition tend to weaken each other. |
| Keywords: | foreign bank entry; multinational bank; competition in banking; spillover effects |
| JEL: | F37 G21 L13 O16 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:1208&r=ban |
| By: | Ugo Albertazzi (Bank of Italy - Economic Research Department); Leonardo Gambacorta (Bank of Italy - Economic Research Department) |
| Abstract: | An important element of the macro-prudential analysis is the study of the link between business cycle fluctuations and banking sector profitability and how this link is affected by institutional and structural characteristics. This work estimates a set of equations for net interest income, non-interest income, operating costs, provisions, and profit before taxes, for banks in the main industrialized countries and evaluates the effects on banking profitability of shocks to both macroeconomic and financial factors. Distinguishing mainly the euro area from Anglo-Saxon countries, the analysis also identifies differences in the resilience of the respective banking systems and relates them to the characteristics of their financial structure. |
| Keywords: | bank profitability, economic cycle, macro-prudential analysis |
| JEL: | C53 G21 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_601_06&r=ban |
| By: | Proto, Eugenio (University of Warwick, Department of Economics) |
| Abstract: | The likelihood of a banking crisis appears to be higher in fast-developing countries. An explanation is provided in a Diamond and Dybvig framework, where banks are vehicles of consumption-smoothing, offering insurance against shocks to the consumption path of consumers. The theoretical model shows that the higher consumer growth expectations, the higher the optimal level of illiquidity insurance — even if it implies higher exposure bank runs. Empirical evidence supports this result and suggests that the effect of deposit interest rates on the probability of crisis is stronger after a period of high, uniterrupted growth. Policies of providing bail-outs or deposit insurance are demonstrated to be efficient even when they increase the fragility of the banking system. |
| Date: | 2005–11–07 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2005_013&r=ban |
| By: | Bonin , John (Wesleyan University); Wachtel , Paul (New York University) |
| Abstract: | We examine the efforts of transition economies to deal with financial fragility and resolve banking cries We characterize the birthing process of banking in transition and the three essential features of banking crises in transition economies: (i) bad loans and the relationship to state owned industries, (ii) development of institutional infrastructure and (iii) credible commitments to resolution and privatization. We then discuss the experiences of seven important transition countries in order to identify the salient features of their efforts to resolve banking crises. |
| JEL: | G21 P34 |
| Date: | 2004–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2004_022&r=ban |
| By: | Mario Quagliariello (Banca d'Italia) |
| Abstract: | Supervisors and policy makers pay increasing attention to the possible procyclical nature of banks’ behaviour. Indeed, to guarantee macro and financial stability, it is important to understand whether, and to what extent, banks are affected by the macroeconomy and second round effects occur. This paper provides a comprehensive investigation of these issues using a large dataset of Italian intermediaries over the period 1985-2002. In particular, estimating both static and dynamic models, it investigates whether loan loss provisions and non-performing loans show a cyclical pattern. The estimated relations may be employed to carry out stress tests to assess the effects of macroeconomic shocks on banks’ balance sheets. |
| Keywords: | procyclicality, banks, loan loss provisions, non-performing loans, business cycle |
| JEL: | E30 E32 E44 G28 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_599_06&r=ban |
| By: | Roberta Fiori (Banca d'Italia); Simonetta Iannotti (Banca d'Italia) |
| Abstract: | The paper develops a Value-at-Risk methodology to assess Italian banks’ interest rate risk exposure. By using 5 years of daily data, the exposure is evaluated through a Principal Component VaR based on Monte Carlo simulation according to two different approaches (parametric and non-parametric). The main contribution of the paper is a methodology for modelling interest rate changes when underlying risk factors are skewed and heavy-tailed. The methodology is then implemented on a one year holding period in order to compare the results from those resulting from the Basel II standardized approach. We find that the risk measure proposed by Basel II gives an adequate description of risk, provided that duration parameters are changed to reflect market conditions. Finally, the methodology is used to perform a stress testing analysis. |
| Keywords: | Interest rate risk, VAR, PCA, Non-normality, Non parametric methods |
| JEL: | C14 C19 G21 |
| Date: | 2006–09 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wptemi:td_602_06&r=ban |
| By: | Constantine Manasakis (Department of Economics, University of Crete) |
| Abstract: | This paper examines the shareholder wealth effects of mergers and acquisitions in the Greek banking industry from 1995 to 2001, using the “event study methodology”. The results suggest that targets’ shareholders earned significant abnormal returns upon the announcement of horizontal and diversifying deals. On the other hand, bidders’ shareholders had significant losses in cases of horizontal and zero effects in diversifying deals. Although mergers and acquisitions in the Greek banking industry are not found to be value-enhancing, they can be rationalized as an external growth strategy, whose goal was to strengthen the position of the participants in the domestic market and help them become more tenacious in a fiercely competitive international environment. |
| Keywords: | Mergers and Acquisitions; Banking; Valuation effects |
| JEL: | G34 G21 G14 |
| Date: | 2006–05–31 |
| URL: | http://d.repec.org/n?u=RePEc:crt:wpaper:0612&r=ban |
| By: | Havrylchyk , Olena; Jurzyk, Emilia (K.U. Leuven, Belqium) |
| Abstract: | Using data for 265 banks in Central and Eastern European Countries for the period of 1995-2003, this paper analyses the differences in profitability between domestic and for-eign banks. We show that foreign banks, especially greenfield institutions, earn higher profits than domestic banks. However, this effect is acquired rather than inherited, since there is evidence that foreign banks tend to take over less profitable institutions. Profits of foreign banks in CEECs also exceed profits of their parent banks, explaining the reasons for their entry. Further, we study benefits and costs of foreign ownership by analyzing de-terminants of profitability for domestic, takeover, and greenfield banks. Profits of foreign banks are less affected by macroeconomic conditions in their host countries. However, greenfield banks are sensitive to the situation of their parent banks. Only domestic banks enjoy higher profits in more concentrated banking markets, whereas takeover banks suffer from diseconomies of scale due to the fact that they acquired large institutions. |
| Keywords: | foreign banks; bank profits; multinational banking; transition economies |
| JEL: | F36 G15 G21 |
| Date: | 2006–04–25 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2006_005&r=ban |
| By: | Hernandez-Canovas, Gines (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Koeter-Kant, Johanna |
| Abstract: | This paper examines the impact of country specific determinants on multiple banking using a unique survey sample of 4959 SMEs from 19 European countries. Our data shows that (1) SMEs in countries with inefficient loan enforcement mechanisms are more likely to maintain multiple bank relationships, (2) the association between multiple banking and bank fragility is non-monotonous, being negative when the banking system is relatively stable and positive for high values of bank fragility, and (3) multiple banking is more likely for SMEs in countries with larger banking systems as well as smaller and less active securities markets. Overall, this evidence suggests that SMEs need multiple banking as a diversification mechanism to overcome expensive adverse selection that may arise within a country that suffers from an inefficient legal system and fragile banks, but also that movement towards a more market based financial system decreases the likelihood of multiple bank relationships for SMEs. These findings have important implications for policy makers in Europe when contemplating SME access to finance. |
| Keywords: | SMEs; Relationship Lending; Banks |
| JEL: | G21 G32 |
| Date: | 2006 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:vuarem:2006-19&r=ban |
| By: | Richard S. Grossman (Department of Economics, Wesleyan University) |
| Date: | 2006–06 |
| URL: | http://d.repec.org/n?u=RePEc:wes:weswpa:2006-021&r=ban |
| By: | Claeys, Sophie (CERISE); Lanine , Gleb (CERISE); Schoors, Koen (CERISE) |
| Abstract: | We focus on the conflict between two central bank objectives – individual bank stability and systemic stability. We study the licensing policy of the Central Bank of Russia (CBR) during 1999-2002. Banks in poorly banked regions, banks that are too big to be disciplined adequately, and banks that are active on the interbank market enjoy protection from license withdrawal, which suggests a tacit concern for systemic stability. The CBR is also found reluctant to with-draw licenses from banks that violate the individual's deposits-to-capital ratio as this conflicts with the tacit CBR objective to secure depositor confidence and systemic stability. |
| Keywords: | bank supervision; bank crisis; Russia |
| JEL: | E50 G20 N20 |
| Date: | 2005–09–05 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2005_010&r=ban |
| By: | Peresetsky, Anatoly A. (New Economic School); Karminsky , Alexandr A. (Gazprombank, Moscow, Russia); Golovan , Sergei V. (New Economic School) |
| Abstract: | This paper presents results from an econometric analysis of Russian bank defaults during the period 1997–2003, focusing on the extent to which publicly available information from quarterly bank balance sheets is useful in predicting future defaults. Binary choice models are estimated to construct the probability of default model. We find that preliminary expert clustering or automatic clustering improves the predictive power of the models and incor-poration of macrovariables into the models is useful. Heuristic criteria are suggested to help compare model performance from the perspectives of investors or banks supervision authorities. Russian banking system trends after the crisis 1998 are analyzed with rolling regressions. |
| Keywords: | banks; Russia; probability of default model; early warning systems |
| Date: | 2004–12–30 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2004_021&r=ban |