New Economics Papers
on Banking
Issue of 2008‒01‒19
six papers chosen by
Roberto J. Santillán–Salgado, EGADE-ITESM

  1. Basel II and the Value of Bank Differentiation By Hege, Ulrich; Feess, Eberhard
  2. The Impact of Market Structure, Contestability and Institutional Environment on Banking Competition By Jacob A. Bikker; Laura Spierdijk; Paul Finnie
  3. Informality among formal firms : firm-level, cross-country evidence on tax compliance and access to credit By Honorati, Maddalena; Gatti, Roberta
  4. Foreign bank acquisitions and outreach : evidence from Mexico By Soledad Martinez Peria, Maria; Beck, Thorsten
  5. The payment system intraday liquidity in a dollarized economy: The Peruvian experience By Marylin Choy; Roy Ayllón
  6. Change and continuity: the development of joint stock banking in the early nineteenth century By Lucy Newton

  1. By: Hege, Ulrich; Feess, Eberhard
    Abstract: This paper analyzes optimal bank capital requirements when regulation can be differentiated according to banks’ heterogeneous risk-assessment capabilities. The new Basel II Accord provides the opportunity to do by introducing distinct regulatory systems for banks authorized to apply internal ratings and externally rated banks.
    Keywords: bank capital regulation; capital adequacy; bank competition; risk-taking; Basel Accord; internal ratings
    JEL: H41 K13
    Date: 2007–10–01
  2. By: Jacob A. Bikker; Laura Spierdijk; Paul Finnie
    Abstract: Using a measure of competition based on the Panzar-Rosse model, this paper explains bank competition across 76 countries on the basis of various determinants. Studies explaining banking competition are rare and typically insuffciently robust as they are based on a limited number of countries only. Traditionally, market structure indicators, such as the number of banks and banking concentration, have been considered the major determinants of competition in the banking sector. However, we find that these variables have no significant impact on market power. Instead, we show that a country's institutional framework is a key factor in explaining banking competition. Extensive regulation, particularly antitrust policies, improves the competitive environment. The foreign investment climate, a proxy of contestability, also plays an important role. The fewer restrictions on foreign investments exist, the more competitive the banking sector becomes. In addition, activity restrictions make large banks less competitive and collusion markups are procyclical. Finally, competition is substantially weaker in countries with a socialist past, such as Central- and Eastern Europe.
    Keywords: banking competition, market structure, concentration, contestability, interindustry competition
    JEL: D4 G21 L11 L13
    Date: 2007–12
  3. By: Honorati, Maddalena; Gatti, Roberta
    Abstract: The authors use firm-level, cross-county data fr om Investment Climate surveys in 49 developing countries to investigate an important channel through which informality can affect productivity: access to credit and external finance. Informality is measured as self-reported lack of tax compliance in a sample of registered firms that also answered questions on a large set of other characteristics. The authors find that more tax compliance is significantly associated with more access to credit both in OLS and in country fixed effects estimates. In particular, the link between credit and formality is stronger in high-formality countries. This suggests that firms ' balance sheets are relatively more informative for financial institutions in environments where signal extraction is a less noisy process. The authors ' results are robust to the inclusion of a wide array of correlates and to two-stage estimation.
    Keywords: Access to Finance,,Banks & Banking Reform,Debt Markets,Bankruptcy and Resolution of Financial Distress
    Date: 2008–01–01
  4. By: Soledad Martinez Peria, Maria; Beck, Thorsten
    Abstract: Between 1995 and 2005, foreign bank participation in Mexico rose from 2 percent of bank assets to 83 percent, as the top five largest banks were acquired by foreigners. Th is paper examines the link between foreign bank acquisitions and banking outreach. Using quarterly country, bank, and bank-municipality-level data, the authors find some contrasting patterns. As foreign bank participation rose due to foreign acquisitions, the number of municipalities with bank presence increased but the number of loan and deposit accounts fell for the country as a whole and for banks after they became foreign. The drop in the number of loans, however, was partially off-set by an increase in domestic bank loans. Further, the decline in loan and deposit accounts was more pronounced in more rural and poorer areas. Finally, only very rich and urban areas experienced an increase in branches after foreign acquisition.
    Keywords: Banks & Banking Reform,Access to Finance,,Debt Markets,Corporate Law
    Date: 2008–01–01
  5. By: Marylin Choy (Banco Central de Reserva del Perú); Roy Ayllón (Banco Central de Reserva del Perú)
    Abstract: The Peruvian financial system is highly dollarized with more than 50 per cent of deposits held in dollars. The structure and operation of the payment system reflect this financial dollarization. Not only does it settle payments in local and foreign currency, but the Intraday Financial Facility (IFF), through which the Central Bank provides liquidity to assure the uninterrupted operation of the payment system, reflects as well the financial system dollarization. Thus, due to the high dollar composition of deposits in the financial system, banks keep large amounts of dollar liquidity at the Central Bank, so as to meet the marginal reserve requirement of 30 per cent, while the lower soles share of deposits as well as the minimum requirement to maintain 1 per cent deposited at the Central Bank, makes the soles liquidity of banks insufficient to settle all the transactions undertaken by the payment system, which for the most part are carried out in local currency, in spite of the financial dollarization. This situation leads the banks to utilize the IFF by means mainly of foreign currency swaps, given the ample availability of dollar liquidity. Nevertheless, the gradual dedollarization and the increasing bankarization are reducing the need to utilize the IFF. It is worth noting that at present not only foreign currency liquidity but also the holdings of Central Bank and Government securities are ensuring that the financial system is able to make use of the IFF and have the excess liquidity in order to settle total payments, both in local and foreign currency, thus enabling the payment system to run smoothly and efficiently.
    Keywords: Sistema de pagos, liquidez intradiaria, dolarización e instrumentos de política monetaria.
    JEL: D53 E44 E58 G21 G28
    Date: 2007–12
  6. By: Lucy Newton (Department of Management, University of Reading)
    Date: 2007

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