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on Banking |
| By: | Beckmann, Rainer |
| Abstract: | This paper analyses structural and cyclical determinants of banking profitability in 16 Western European countries. We find that financial structure matters, particularly through the beneficial effect of the capital market orientation in the respective national financial system. Furthermore, higher diversification regarding banks’ income sources shows a positive effect. The industry concentration of national banking systems, though, does not significantly affect aggregate profitability. Business cycle effects, in particular lagged GDP growth, display a substantial procyclical impact on bank profits. These results are obtained in a single equation panel framework using the Hausman-Taylor instrument variable estimator. The data set comprises aggregate annual country data and banking group data (commercial banks, cooperative banks and savings banks) over the period 1979-2003. |
| Keywords: | bank profits, financial structure, business cycle |
| JEL: | E32 G21 L11 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp2:6929&r=ban |
| By: | Patrick McGuire; Ilhyock Nikola Tarashev |
| Abstract: | This paper illustrates various applications of the BIS international banking statistics. We first compare international bank flows to measures of real activity and liquidity and show that the international banking system is becoming a more important conduit for the transfer of capital across countries. We then use network analysis tools to construct a bird's eye view of the structure of the international banking market and to identify key financial hubs. Linking this information with balance of payments statistics helps to better understand the role of banks in the financing of current account flows, for example the recycling of petrodollars and Asian surpluses. Finally, the paper illustrates how the BIS statistics can be used to analyse internationally active banks' foreign exposures to credit risk and, thus, spot vulnerabilities in the international banking market. |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:244&r=ban |
| By: | Pausch, Thilo |
| Abstract: | Instruments for credit risk transfer arise endogenously from and interact with optimizing behavior of their users. This is particularly true with credit derivatives which are usually OTC contracts between banks as buyers and sellers of credit risk. Recent literature, however, does not account for this fact when analyzing the effects of these instruments on banking. The present paper closes this gap by explicitly modelling the market for credit derivatives and its interaction with banks’ loan granting and deposit taking activities. |
| Keywords: | credit risk, credit derivatives, bargaining |
| JEL: | D53 D82 G11 G14 G21 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp2:6928&r=ban |
| By: | Ongena, Steven; Tümer-Alkan, Günseli; Westernhagen, Natalja von |
| Abstract: | Most of the literature addressing multiple banking assumes equal financing shares. However, unequal, concentrated or asymmetric bank borrowing is widespread. This paper investigates the determinants of creditor concentration for German firms using a comprehensive bank-firm level dataset for the time period between 1993 and 2003. We document that lending is very often concentrated and, consequently, that relationship lending is important, not only for the small firms but also for the larger firms in our sample. However, we also find that risky, illiquid, large and leveraged firms spread their borrowing more evenly between multiple lenders. On the other hand, the degree of concentration increases with the profitability of the relationship lender. Relationship lending may spur financing provided by other banks, especially if the relationship lender is a public sector bank and if the other banks are large or do not have to tie up additional funds in capital. |
| Keywords: | bank relationships, asymmetric financing, banking competition |
| JEL: | G21 G32 G33 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdp2:6927&r=ban |
| By: | Panicos O. Demetriades; Jun Du; Sourafel Girma; Chenggang Xu |
| Abstract: | Using a large panel dataset of Chinese manufacturing enterprises during 1999-2005, which accounts for over 90% of China’s industrial output, and robust econometric procedures we show that the Chinese banking system has helped to support the growth of both firm value added and TFP. We find that access to bank loans is positively correlated with future value added and TFP growth. We also find that firms with access to bank loans tend to grow faster in regions with greater banking sector development. While the effects of bank loans on firm growth are more pronounced in the case of purely private-owned and foreign firms, they are positive and statistically significant even in the case of state-owned and collectively-owned firms. We show that excluding loss-making firms from the sample does not change the qualitative nature of our results. |
| Keywords: | Chinese banking system development; value added and TFP growth; panel dataset |
| JEL: | E44 O53 |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:08/6&r=ban |
| By: | Andrew Feltenstein; Céline Rochon |
| Abstract: | In this paper, we study the impact of labor market restructuring and foreign direct investment on the banking sector, using a dynamic general equilibrium model with a financial sector. Numerical simulations are performed using stylized Chinese data, and banks failures are generated through increases in the growth rate of the labor force, a revaluation of the exchange rate or an increase in debt issue to finance the government deficit, as compared to a benchmark scenario in which banks remain solvent. Thus bank failures can result from what might seem to be either beneficial economic trends, or correct monetary and fiscal policies. We introduce fiscal policies that modify relative factor prices by lowering the capital tax rate and increasing the tax rate on labor. Such policies can prevent banking failures by raising the return to capital. It is shown that such fiscal policies are, in the short run, welfare reducing. |
| Keywords: | Banking failures; fiscal policies |
| JEL: | D58 E44 F37 G21 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:sbs:wpsefe:2008fe03&r=ban |
| By: | Pierre van der Eng |
| Abstract: | This article surveys the growth of consumer credit in Australia during the 20th century, particularly after World War II. Until the 1970s, the regulation of Australia’s financial market caused formal consumer credit to be provided mainly by finance companies under hire-purchase contracts, largely for the purchase of cars and household durables. Deregulation of the financial market since the 1960s allowed banks to gain a dominant share in the market for personal loans. Quantification of long-term trends is difficult, but broad estimates suggest sustained growth in per capita indebtedness during 1945-2007. |
| JEL: | D14 E21 E51 G23 N27 |
| Date: | 2008–01 |
| URL: | http://d.repec.org/n?u=RePEc:acb:cbeeco:2008-489&r=ban |
| By: | Martin Brown; Christian Zehnder |
| Abstract: | We examine how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones, because borrowers may exogenously switch locations. Lenders, however, are also engaged in spatial competition, and lose market power by sharing information with close competitors. Our results suggest that more asymmetric information in the credit market increases information sharing behavior significantly. Stronger competition between lenders reduces information sharing, but its impact seems to be only of second order importance. |
| Keywords: | Credit Market, Information Sharing, Spatial Competition, Adverse Selection |
| JEL: | C92 G21 D82 |
| Date: | 2007–04 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:317&r=ban |
| By: | Carlo Carraro (Department of Economics, University Of Venice Cà Foscari); Valentina Bosetti (Fondazione Eni Enrico Mattei); Emanuele Massetti (University of Yale) |
| Abstract: | Most analyses of the Kyoto flexibility mechanisms focus on the cost effectiveness of “where” flexibility (e.g. by showing that mitigation costs are lower in a global permit market than in regional markets or in permit markets confined to Annex 1 countries). Less attention has been devoted to “when” flexibility, i.e. to the benefits of allowing emission permit traders to bank their permits for future use. In the model presented in this paper, banking of carbon allowances in a global permit market is fully endogenised, i.e. agents may decide to bank permits by taking into account their present and future needs and the present and future decisions of all the other agents. It is therefore possible to identify under what conditions traders find it optimal to bank permits, when banking is socially optimal, and what are the implications for present and future permit prices. We can also explain why the equilibrium rate of growth of permit prices is likely to be larger than the equilibrium interest rate. Most importantly, this paper analyses the efficiency and distributional consequences of allowing markets to optimally allocate emission permits across regions and over time. The welfare and distributional effects of an optimal intertemporal emission trading scheme are assessed for different initial allocation rules. Finally, the impact of banking on carbon emissions, technological progress, and optimal investment decisions is quantified and the incentives that banking provides to accelerate technological innovation and diffusion are also discussed. Among the many results, we show that not only does banking reduce abatement costs, but it also increases the amount of GHG emissions abated in the short-term. It should therefore belong to all emission trading schemes under construction. |
| Keywords: | Emission Trading, Banking, Welfare Distribution, Stabilisation Cost |
| JEL: | C72 H23 Q25 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2008_01&r=ban |
| By: | Mario Padula (Department of Economics, University Of Venice Cà Foscari); Charles Grant (Department of Economics, University of Reading) |
| Abstract: | How does the punishment for default affect repayment behavior? We use administrative data, provided by the leading Italian lender of unsecured credit to the household sector, to analyze households repayment behavior. Administrative data are particularly well suited to study what factors are responsible for default, but raise a fundamental econometric problem, since they identify the determinants of repayment behavior only for those who are granted credit. To overcome this problem, we provide upper and lower bounds on the determinants of repayment behavior. Moreover, we show how to use the restrictions from the theory to narrow the bounds. |
| Keywords: | Manski Bounds, Consumer Credit, Default |
| JEL: | D14 K42 O17 |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:ven:wpaper:2007_26&r=ban |