New Economics Papers
on Banking
Issue of 2009‒05‒02
fourteen papers chosen by
Roberto J. Santillán–Salgado, EGADE-ITESM

  1. Banking on politics By Braun, Matias; Raddatz, Claudio
  2. A Framework for Assessing the Systemic Risk of Major Financial Institutions By Xin Huang; Hao Zhou; Haibin Zhu
  3. Auctions for Injecting Bank Capital By Lawrence M. Ausubel; Peter Cramton
  4. The Effects of General and Firm-Spesific Training on Wages and Performance: Evidence from Banking By Derek Jones; Panu -Kauhanen Kalmi
  5. A Two-Sided Auction for Legacy Loans By Lawrence M. Ausubel; Peter Cramton
  6. Satisfaction Drivers in Retail Banking: Comparison of Partial Least Squares and Covariance Based Methods By Monika Oleksiak
  7. Making Sense of the Aggregator Bank By Lawrence M. Ausubel; Peter Cramton
  8. From Subprime Loans to Subprime Growth? Evidence for the Euro Area By Martin Cihák; Petya Koeva Brooks
  9. Performance and Merton-Type Default Risk of Listed Banks in EU: a panel VAR approach By Anastasia Koutsomanoli-Filippaki; Emmanuel Mamatzakis
  10. Estimation of Conditional Time-Homogeneous Credit Quality Transition Matrices for Commercial Banks in Colombia By José Eduardo Gómez-González; Inés Paola Orozco Hinojosa
  11. Importance of Regional Financial Institutions in Regional Economic Development: Based on the results of corporate surveys in Japan's Tokai and Kansai regions By Yamori, Nobuyoshi
  12. The diversity of organisational forms in banking: France, Italy and Spain 1900-2000 By Maixe-Altes, J. Carles
  13. Banks' Types of Ownership and Efficiency: Evidence from Indonesia By Rasyad A. Parinduri; Yohanes E. Riyanto
  14. Foreign Banks in the CESE Countries: In for a Penny, in for a Pound? By Andrea M. Maechler; Li L. Ong

  1. By: Braun, Matias; Raddatz, Claudio
    Abstract: This paper presents new data from 150 countries showing that former cabinet members, central bank governors, and financial regulators are many orders of magnitude more likely than other citizens to become board members of banks. Countries where the politician-banker phenomenon is more prevalent have higher corruption and more powerful yet less accountable governments, but not better functioning financial systems. Regulation becomes more pro-banker where this happens more often. Furthermore, a higher fraction of the rents that are created accrue to bankers, former politicians are not more likely to be directors when their side is in power, and banks are more profitable without being more leveraged. Rather than supporting a public interest view, the evidence is consistent with a capture-type private interest story where, in exchange for a non-executive position at a bank in the future, politicians provide for beneficial regulation.
    Keywords: Banks&Banking Reform,Public Sector Corruption&Anticorruption Measures,,Access to Finance,Corporate Law
    Date: 2009–04–01
  2. By: Xin Huang; Hao Zhou; Haibin Zhu
    Abstract: In this paper we propose a framework for measuring and stress testing the systemic risk of a group of major financial institutions. The systemic risk is measured by the price of insurance against financial distress, which is based on ex ante measures of default probabilities of individual banks and forecasted asset return correlations. Importantly, using realized correlations estimated from high-frequency equity return data can significantly improve the accuracy of forecasted correlations. Our stress testing methodology, using an integrated micro-macro model, takes into account dynamic linkages between the health of major US banks and macro-financial conditions. Our results suggest that the theoretical insurance premium that would be charged to protect against losses that equal or exceed 15 % of total liabilities of 12 major US financial firms stood at $110 billion in March 2008 and had a projected upper bound of $250 billion in July 2008.
    Keywords: systemic risk, stress testing, portfolio credit risk, credit default swap, high-frequency data
    Date: 2009–04
  3. By: Lawrence M. Ausubel (Economics Department, University of Maryland); Peter Cramton (Economics Department, University of Maryland)
    Abstract: Public discussion has turned, in the past few days, toward using some of the $700 billion in rescue funds for the injection of government money into banks in return for ownership stakes. The purpose of this short note, an addendum to “A Troubled Asset Reverse Auction,” is to describe an auction mechanism suitable for injections of capital into banks. The auctions would price the equity purchases through a competitive process.
    Keywords: Auctions, financial auctions, financial crisis
    JEL: D44 G21
    Date: 2009
  4. By: Derek Jones; Panu -Kauhanen Kalmi
    Abstract: ABSTRACT : By using new panel data for Finnish banks we study the impact of training on wages and performance. To the best of our knowledge, ours is the first paper to compare explicitly the effects of general and firmspecific workplace training on outcomes for both employees and firms. Unlike much existing literature, we find stronger evidence that training improves worker outcomes rather than organizational performance. Depending upon specification, the estimated wage elasticity with respect to training is in the range of 3-7%, whereas the performance effects vary widely depending on the measures of training intensity. The other key finding is that general training is associated with higher wage and performance effects than is firm-specific training. YLEISEN JA YRITYSKOHTAISEN KOULUTUKSEN VAIKUTUKSET PALKKOIHIN JA MENESTYMISEEN : Näyttöä pankkitoimialalta
    JEL: M53 J24 G21
    Date: 2009–04–22
  5. By: Lawrence M. Ausubel (Economics Department, University of Maryland); Peter Cramton (Economics Department, University of Maryland)
    Abstract: On Monday, 23 March 2009, Treasury Secretary Geithner presented the Public-Private Investment Program as a key instrument to resolve the financial crisis ( The Treasury’s description still leaves many issues unanswered. We flesh out the auction design for legacy loans. A two-sided auction is required. Both banks and private investors must compete in a transparent and competitive process.
    Keywords: Auctions, financial auctions, financial crisis
    JEL: D44 G21
    Date: 2009
  6. By: Monika Oleksiak (Warsaw School of Economics)
    Abstract: The primary goal of the study is to diagnose satisfaction and loyalty drivers in Polish retail banking sector. The problem is approached with Customer Satisfaction Index (CSI) models, which were developed for national satisfaction studies in the United States and European countries. These are multiequation path models with latent variables. The data come from a survey on Poles’ usage and attitude towards retail banks, conducted quarterly on a representative sample. The model used in the study is a compromise between author’s synthesis of national CSI models and the data constraints. There are two approaches to the estimation of the CSI models: Partial Least Squares - used in national satisfaction studies and Covariance Based Methods (SEM, Lisrel). A discussion is held on which of those two methods is better and in what circumstances. In this study both methods are used. Comparison of their performance is the secondary goal of the study.
    Keywords: satisfaction, loyalty, customer satisfaction index models, banking sector, structural equation models with latent variables, structural equations modeling, partial least squares, covariance based methods
    JEL: C13 C39 C51 G21 M31
    Date: 2009–03–19
  7. By: Lawrence M. Ausubel (Economics Department, University of Maryland); Peter Cramton (Economics Department, University of Maryland)
    Abstract: On Tuesday, 10 February 2009, Treasury Secretary Geithner proposed the aggregator bank (“public-private investment fund”) as a key instrument to resolve the financial crisis ( The Treasury description leaves many issues unanswered. Here we explain how an aggregator bank might operate in practice. We fill in some of the major details so as to enhance the effectiveness of the aggregator bank. In particular, the approach emphasizes transparency and value to the taxpayer, minimizing the need for bank-by-bank negotiations and thereby minimizing the opportunities for the government to play favorites.
    Keywords: Auctions, financial auctions, financial crisis
    JEL: D44 G21
    Date: 2009
  8. By: Martin Cihák; Petya Koeva Brooks
    Abstract: The global financial crisis has highlighted the potential of financial conditions for influencing real economic activity. We examine the linkages between the financial and real sectors in the euro area, finding that (i) bank loan supply responds negatively to declines in bank soundness; (ii) a cutback in bank loan supply has a negative impact on economic activity; (iii) a positive shock to the corporate bond spread lowers industrial output; and (iv) risk indicators for the banking, corporate, and public sectors show an improvement beginning in 2002–03, followed by a major deterioration since 2007. These estimates imply that the currently estimated bank losses would subtract some 2 percentage points from the euro area output (but with considerable uncertainty around the estimates).
    Keywords: Credit risk , Euro Area , Financial sector , Real sector , Banking , Demand for money , Interest rates , Financial risk , Economic models ,
    Date: 2009–03–27
  9. By: Anastasia Koutsomanoli-Filippaki (Council of Economic Advisors, Ministry of Economy and Finance, Greece); Emmanuel Mamatzakis (Department of Economics, University of Macedonia)
    Abstract: This paper provides empirical evidence that sheds new light into the dynamic interactions between risk and efficiency, a highly debated issue in the literature. Using a large panel data set that includes 251 listed banks operating in the enlarged European Union over the period 1998 to 2006 this study exploits a three-step procedure. First, we estimate three alternative measures of bank performance, based on alternative efficiency definitions, by employing a directional distance function framework, along with a cost frontier and a profit function. As a second step, we calculate a Merton type bank default risk, based on the Black and Scholes (1973) option pricing theory. Then, we employ a Panel-VAR analysis, which allows the examination of the underlying relationships between efficiency and risk without applying any a-priori restrictions. Most evidence shows that the effect of a one standard deviation shock of the distance to default on inefficiency is negative and substantial. There is some evidence of a reverse causation, but the impact of a shock in bank inefficiency on risk is small and lasts for a short period of time. As part of a sensitivity analysis, we extent our study to investigate the relationship between efficiency and default risk for banks with different types of ownership structures and across financial systems with different levels of development.
    Keywords: bank inefficiency, default risk, panel VAR, causality.
    JEL: G21 G28 D21
    Date: 2009–04
  10. By: José Eduardo Gómez-González; Inés Paola Orozco Hinojosa
    Abstract: This paper presents an estimation of credit quality transition matrices for commercial banks in Colombia, using a duration hazard function model, and following the methodology proposed by Gómez-González et al (2009). Using a test developed by Weißbach et al (2005), we test for the time-homogeneity of transition matrices estimated this way, after conditioning on firm-specific and macroeconomic variables. We found that 70% of the time we could not reject the null hypothesis of time homogeneity. We also found that obtaining matrices for different subsamples was not necessary, given the similarities of the survival function
    Date: 2009–04–26
  11. By: Yamori, Nobuyoshi
    Abstract: This paper has analyzed the relationship between medium/small firms and financial institutions based on the results of questionnaires prepared for medium/small firms in the Tokai and Kansai regions. With the development of telecommunication technology and progress in securities market infrastructure, there are fewer cases in which geographical distance poses a problem in financial transactions. However, financing for medium/small firms is expected to remain dependent on indirect finance, i.e., financing through their major trading bank, inasmuch as it will be necessary for financial institutions to play a major role in overcoming the problem of information asymmetry in that sector. More specifically, this type of relationship banking in which periodical and direct contact lends to increased company knowledge is thriving as a means to eliminate the issue of information asymmetry. The direct contact or communication, an integral part of relationship banking entail costs, and can become difficult when banks locate far from firms.
    Keywords: Regional Finance; Japan; Bank; SME Finance
    JEL: O53 G32 G21
    Date: 2008–09
  12. By: Maixe-Altes, J. Carles
    Abstract: This paper examines, from a historical perspective, the gradual entrance into the market of mutual and not for profit banks (specifically cooperative banks and savings banks), their continually increasing competitiveness with traded banks in France, Italy and Spain. In all three countries, these institutions played an important role in the retail banking sector. Special attention will be devoted to analysing the different models of adjustment adopted by the banking systems in the south of Europe in the wake of the deregulating process undertaken in the last quarter of the twentieth century. In summary, then, this paper is an attempt to identify the historical factors responsible for the persistence, or disappearance, of certain idiosyncratic aspects of the banking system in each country, together with the various adjustments produced in each case.
    Keywords: banks; savings banks; co-operative banks; comparative banking systems; France; Spain; Italy
    JEL: N24 N2 N84
    Date: 2009–04
  13. By: Rasyad A. Parinduri (Nottingham University Business School - Malaysia Campus); Yohanes E. Riyanto (Department of Economics, National University of Singapore)
    Abstract: We examine the relationship between banks' types of ownership and banks' efficiency using Greene's "true" panel data stochastic frontier model. We find that, even after taking unobserved heterogeneity more properly into account, state-owned banks in Indonesia are the least efficient banks and joint-venture banks are the most efficient ones.
    Keywords: Banking; Ownership types; Efficiency; Stochastic frontier
    JEL: C23 G21
    Date: 2009–04
  14. By: Andrea M. Maechler; Li L. Ong
    Abstract: The aim of this paper is to construct a comprehensive and consistent dataset to analyze the potential risks from foreign bank lending, for both the creditor and borrower countries of Central, Eastern and South-Eastern Europe (CESE). We develop a picture of bank claims on 13 CESE countries by combining credit statistics from several sources. Our constructed data suggest that some of these host countries have become more at risk from a sudden withdrawal of short-term external funding, while home countries have significant aggregate exposures to the region. Overall, we find that data on banking activity remain largely inadequate for surveillance and policymaking purposes, and that a concerted effort to improve data collection is needed at the international level.
    Keywords: Banks , Central and Eastern Europe , Southern Europe , Banking , Foreign investment , Private sector , Emerging markets , Economic integration , Spillovers , Data collection , Cross country analysis ,
    Date: 2009–03–19

This issue is ©2009 by Roberto J. Santillán–Salgado. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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