New Economics Papers
on Banking
Issue of 2009‒07‒03
fifteen papers chosen by
Roberto J. Santillán–Salgado, EGADE-ITESM

  1. Financial (in)stability, supervision and liquidity injections : a dynamic general equilibrium approach By Gregory, DE WALQUE; Olivier, PIERRARD; Abdelaziz, ROUABAH
  2. The pursuance and the control of credit progress in conditions of economic recess By Deaconu, Petre
  3. Is Government Ownership of Banks Really Harmful to Growth? By Svetlana Andrianova; Panicos Demetriades; Anja Shortland
  4. The role of bank lending in combating the economic crisis By Coman, Florin
  5. Banking risk management in the context of financial-economic crisis By Ogarca, Angela
  6. CRISIS AND RISK MANAGEMENT By Popescu, Angela; Stefanescu, Roxana
  7. Bad Bank(s) and Recapitalization of the Banking Sector By Dorothea Schäfer; Klaus F. Zimmermann
  8. Sísifo en España: doscientos años de banca francesa (c.1800-c.2000) By Rafael Castro Balaguer
  10. STATISTICAL OPACITY IN THE U.S. BANKING INDUSTRY By Guo Li; Lee Sanning; Sherrill Shaffer
  11. Central bank’s role and involvement in bank regulation: Lender of last resort arrangements and the Special Resolution Regime (SRR) By Ojo, Marianne
  12. ATM Direct Charging Reform: the Effect of Independent Deployers on welfare By Donze, Jocelyn; Dubec, Isabelle
  13. Bancassurance - present and future By Dobrin, Marinica
  14. What do we know about banks securitisation? the spanish experience By Clara Cardone Riportella; Reyes Samaniego Medina; Antonio Trujillo Ponce
  15. This is not a credit crisis By Bezemer, Dirk J

  1. By: Gregory, DE WALQUE; Olivier, PIERRARD; Abdelaziz, ROUABAH
    Abstract: We develop a dynamic stochastic general equilibrium model with an heterogeneous banking sector. We introduce endogenous default probabilities for both firms and banks, and allow for bank regulation and liquidity injection into the interbank market. Our aim is to understand the interactions between the banking sector and the rest of the economy, as well as the importance of supervisory and monetary authorities to restore financial stability. The model is calibrated against real US data and used for simulations. We show that Based regulation reduces the steady state but improves the resilience of the economy to shocks, and that moving from Basel I to Basel II is procyclical. We also show that liquidity injections relieve financial instability but have ambiguous effects on output fluctuations
    Keywords: DGSE; Banking sector; Default risk; Supervision; Central Bank
    JEL: E13 E20 G21 G28
    Date: 2009–02–05
  2. By: Deaconu, Petre (Universitatea Spiru Haret, Facultatea de Finante si Banci)
    Abstract: Results of banking activity depend on the quality of the portfolio of loans that it held, and the tracking and control of credit. The purpose and functioning modality of such inter-banking systems differ from one bank to another. Appropriation requires a more efficient surveillance of the interior work. Tracking behavior and performance customers and conduct their activities are a very important and necessary in conducting a loan. The purpose of this activity is, in general, detecting, as early is possible, indexes of any problems that might arise in carrying out the loan, so as to take timely, remedial measures to welcome the deterioration because of loan debt service.
    Keywords: banking credit; economic recession
    JEL: G21
    Date: 2009–06–16
  3. By: Svetlana Andrianova; Panicos Demetriades; Anja Shortland
    Abstract: We show that previous results suggesting that government ownership of banks has a negative effect on economic growth are not robust to adding more 'fundamental' determinants of economic grwoth, such as institutions. We also present regression results from a more recent period (1995-2007) which suggest that, if anything, government ownership of banks has been associated with higher long run growth rates, even after controlling for institutions and other variables suggested by the growth literature. Drawing on the current global financial crisis, we provide a conceptual framework which explains why under certain circumstances government owned banks could have a greater effect on economic growth than privately-owned banks.
    Date: 2009–05
  4. By: Coman, Florin (Universitatea Spiru Haret, Facultatea de Finante si Banci)
    Abstract: Taking some measures for diminuation the obligatory minimal reserves of the banking societies and for the decrease of the monetary policy rate of interest, the Romanian National Bank intended to make available certain amounts of money to be used by the banking societies to credit the activity of the trading companies and of the natural persons. A diminuation of the interest for the credits granted by the banking societies is required, along with taking some political and fiscal measures.
    Keywords: Romanian National Bank; banking societies; banking credits; (economic) crisis/ depression; standard of coinage; foreign credits; political and fiscal measures
    JEL: F23
    Date: 2009–06–16
  5. By: Ogarca, Angela (Universitatea Spiru Haret, Facultatea de Finante si Banci)
    Abstract: The risk can have a considerable impact on the value of the bank, an impact as such (usually under the form of losses directly supported), as well as an induced impact caused by the effects on the customers, staff, partners and even on bank authority. Bank risk can be defined as a phenomenon that can appear during bank operations development and that can provoke negative effects on respective activities, through deteriorating the businesses quality, through profit diminishing or even loss recording. A global management of risks must ensure to the banking company the possibility to identify and appraise, control the risks, diminish their influence and not lastly, to finance the risks. Global management of banking risks must be a component of banking management system and must be used in this respect.
    Keywords: banking risk; management of risks; performances; banking management
    JEL: G21 M20
    Date: 2009–06–16
  6. By: Popescu, Angela (Universitatea Spiru Haret, Facultatea de Finante si Banci); Stefanescu, Roxana (Universitatea Spiru Haret, Facultatea de Finante si Banci)
    Abstract: The main causes of economic crisis are unfavorable evolution of the macro-economic behavior and poor uncautious corporate governance of banks and authorities in decisions involving the granting of loans by banks and mixing factor in a political activity which must be held in essentially on economic criteria. Risk management is the art of making decisions in a world governed by uncertainty. Risk management is a process of identification, analysis and response to risks to which an organization is exposed. This process involves analyzing internal and external environment in which the organization operates, identify risks, qualitative and quantitative evaluation of their development and implementation of response, monitoring risks, identifying new situations and develop an environment to assure communication about risk.
    Keywords: sub-prime loans; mortgage securitization; financial innovations; transparency; shadow of the banking system; regulatory practices
    JEL: G32
    Date: 2009–06–16
  7. By: Dorothea Schäfer; Klaus F. Zimmermann
    Abstract: With banking sectors worldwide still suffering from the effects of the financial crisis, public discussion of plans to place toxic assets in one or more bad banks has gained steam in recent weeks. The following paper presents a plan how governments can efficiently relieve ailing banks from toxic assets by transferring these assets into a publicly sponsored work-out unit, a so-called bad bank. The key element of the plan is the valuation of troubled assets at their current market value - assets with no market would thus be valued at zero. The current shareholders will cover the losses arising from the depreciation reserve in the amount of the difference of the toxic assets' current book value and their market value. Under the plan, the government would bear responsibility for the management and future resale of toxic assets at its own cost and recapitalize the good bank by taking an equity stake in it. In extreme cases, this would mean a takeover of the bank by the government. The risk to taxpayers from this investment would be acceptable, however, once the banks are freed from toxic assets. A clear emphasis that the government stake is temporary would also be necessary. The government would cover the bad bank's losses, while profits would be distributed to the distressed bank's current shareholders. The plan is viable independent of whether the government decides to have one centralized bad bank or to establish a separate bad bank for each systemically relevant banking institute. Under the terms of the plan, bad banks and nationalization are not alternatives but rather two sides of the same coin. This plan effectively addresses three key challenges. It provides for the transparent removal of toxic assets and gives the banks a fresh start. At the same time, it offers the chance to keep the cost to taxpayers low. In addition, the risk of moral hazard is curtailed. The comparison of the proposed design with the bad bank plan of the German government reveals some shortcomings of the latter plan that may threaten the achievement of these key issues.
    Keywords: Financial crisis, financial regulation, toxic assets, Bad Bank
    JEL: G20 G24 G28
    Date: 2009
  8. By: Rafael Castro Balaguer (Universidad Complutense de Madrid, Facultad de CC. Económicas y Empresariales, Dpto. de Historia e Instituciones Económicas)
    Abstract: With unpublished sources, this paper draws the evolution of French banking in Spain between 1800 and 2000 and shows how French banks operated in the country, seeking, once and again, to consolidate business positions in a more and more difficult market. As the oldest foreign bank presence in the country, French banks strongly dominated the Spanish market in the 19th century. The turn of the 20th century and the Spanish economic evolution meant a sort of hibernation for French banks. They only did with it in the middle of the fifties. The second half of the 20th means for French banking the search of a place in the difficult Spanish bank market. Following the legislation and economy evolution, French banks diversified their financial supply in the sixties, lent capitals in the seventies and the eighties, and tried to compete with Spanish commercial banks in the nineties. Its evolution, for almost one hundred and fifty years, allows us to analyze an episode of foreign direct investment (FDI), focused, in this occasion, in transnational banking. This paper tries to contribute in the debate about persistent and changing patterns of FDI in a host country in the long run.
    Keywords: banking, FDI (foreign direct investment), Spain- France, 20th century
    JEL: N64 N74 N84
    Date: 2008–07
  9. By: Curak, Marijana (University of Split); Poposki, Klime (University St. Kliment Ohridski); Ecim, Tanja (University of Split)
    Abstract: In an endogenous growth framework, well developed and efficient financial system can promote economic growth. A number of empirical studies confirmed this hypothesis. Since the financial systems of transition countries are dominated by banks, in this paper we analyze the importance of banking industry for economic growth using methods of panel data analysis for 15 Central and Eastern European countries in the period from 1992 to 2006. Using variables that measure both quantitative and qualitative aspects of financial intermediation, our findings support the view that the effectiveness of banking industry is more important than its size per se for the economic growth in the Central and Eastern European countries.
    Keywords: banking; financial intermediation; endogenous growth; panel; Central and Eastern Europe
    JEL: C23 G21 O11 O16
    Date: 2009–06–16
  10. By: Guo Li; Lee Sanning; Sherrill Shaffer
    JEL: G21 D8 C53
    Date: 2009–06
  11. By: Ojo, Marianne
    Abstract: This paper considers developments which have necessitated greater involvement and a greater role for the central bank in financial regulation and supervision. The aftermath of the 2007/08 financial crisis has witnessed the enactment of legislation such as the Banking Act of 2009 which has not only introduced greater statutory powers for the central bank, but also the Special Resolution Regime. As well as a consideration of arguments which are in favour of the central bank’s role as supervisor and lender of last resort, the importance of central bank independence and safeguards which exist to ensure that sufficient accountability is fostered, will be considered. Safeguards and accountability mechanisms which are adequate, such that, whilst ensuring that the regulator is not susceptible to regulatory capture, do not impede the ability of such a regulator to obtain vital and necessary information from systemically important individual financial institutions. In its support of the view that central banks should assume a greater role in supervision, this paper not only seeks to justify why such a degree of involvement is vital to ensuring and maintaining stability in the financial system, but also those factors which are considered to be necessary if such a role is to be effective.
    Keywords: central; bank; lender; last; resort;regulation;monetary;policy
    JEL: K2 E58
    Date: 2009–06
  12. By: Donze, Jocelyn; Dubec, Isabelle
    Abstract: Recently in Australia, the interchange fees on shared ATM transactions were removed and replaced by a fee directly set and received by the ATM owner ("direct charging scheme"). We develop a model to study how the entry of independent ATM deployers (IADS) affects welfare under the direct charging scheme. Paradoxically, we show that the entry of IADS benefits banks ! It is also good for consumers if they sufficiently value the ATMs deployed by the independent deployers.
    Keywords: direct charging reform
    JEL: G2 L1
    Date: 2009–06–19
  13. By: Dobrin, Marinica (Universitatea Spiru Haret, Facultatea de Finante si Banci)
    Abstract: The concept of bancassurance has French origin but can be seen in German as Allfinanz and in English as Financial Services. The emergence of bancassurance concept can not be primarily attributed to any banks or insurance institutions. Approaching the two sectors was due to mutations occurring in the supply and demand of financial services. Convergence bankers and insurers to common platforms are determined for each country's local, and influence supervisors and reforms at the central level. Enlargement of the Euro and the proliferation of distribution channels with the Internet as a catalyst, causes pressure on the selling price of financial services. Thus, the combination of banks and insurance companies aimed primarily reducing costs and making activities. In the future there will not insurance companies or banks, but only unit complex to deal with the sale of financial products to customer needs. A step in strengthening relations between the two entities is the bancassurance which is one of the most effective ways of attraction and loyalty of customers, said Peter Schmidt, Event Producer of the Conference The Future of bancassurance, the Assurbanking & Affinity Business, place between 25-26 September 2008 in Prague.
    Keywords: Bancassurance; Financial integrated services; TAR system; Joint Ventures; Insurance Company; Holding; In-house banking; Loan portfolio; Life and non-life insurance; Bank deposits
    JEL: G22
    Date: 2009–06–16
  14. By: Clara Cardone Riportella; Reyes Samaniego Medina; Antonio Trujillo Ponce
    Abstract: The present work analyses the reasons why Spanish financial entities have carried out securitisation programs in the period 2000-2007 on such a scale that Spain has become the European country with the largest issue volumes, second only to the U.K. The results obtained after the application of a logistic regression model to a sample of 408 observations indicate that liquidity and the search for improved performance are the decisive factors in securitisation. The hypotheses of transfer of credit risk and arbitrage in regulatory capital are not confirmed; therefore the normative development of Basel II cannot be expected to affect the volumes issued in future years. The study is complemented with a more detailed analysis, differentiating between programs of asset and liability securitisation
    Keywords: Securitisation, ABS, CDO, Credit risk transfer, Regulatory capital arbitrage
    JEL: G21 G28
    Date: 2009–06
  15. By: Bezemer, Dirk J
    Abstract: Using an analogy with ancient Babylonia as its leading motive, this Viewpoint argues that the credit crisis is the symptom of an underlying problem. Fuelled by government policies, unprecedented debt levels were run up in industrialized countries over the last quarter century. Present policies of financial sector bailouts are not only unwise use of taxpayer’s money. They maintain economic structures opposed to what Classical liberals such as JS Mill envisaged as a free market economy.
    Keywords: credit crisis; debt; Babylonia; Mill; Liberalism
    JEL: B12 E51 E44 G28 A11
    Date: 2009–06–13

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.