nep-ban New Economics Papers
on Banking
Issue of 2015‒03‒27
sixteen papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. Banks’ supply of long term credit after a liquidity shock: Evidence from 2007-2009 By P. Pessarossi; F. Vinas
  2. Bank Stability and Enforcement Actions in Banking By Stefano Caiazza; Matteo Cotugno; Franco Fiordelisi; Valeria Stefanelli
  3. How Cyclical Is Bank Capital? By Haubrich, Joseph G.
  4. CEO risk-taking incentives and bank failure during the 2007-2010 financial crisis By Patricia Boyallian; Pablo Ruiz-Verdú
  5. Securization and banks´ capital structure By Andres Almazan; Alfredo Martín-OliverAuthor-X-Name-First: AlfredoAuthor-X-Name-Last: Martín-OliverAuthor-Workplace-Name: UNIVERSITAT ILLES BALEARS; Jesús Saurina
  6. Insecure Debt By Matta, Rafael; Perotti, Enrico C
  7. Technical Efficiency of Shipping Banks: A DEA Approach By Sambracos, Evangelos; Maniati, Marina
  8. The impact of Internet technology on the Romanian banks performance By Lavinia Mihaela Gutu
  9. Measuring financial stress – A country specific stress index for Finland By Huotari , Jarkko
  11. Essays on competition in banking By van Boxtel, A.A.
  12. Identification of Electronic Banking Acceptance Components in Branches of Keshavarzi Bank of Guilan Province (Northern of Iran) By Mohammad Taleghani
  13. Financial Liberalization in the Developing Countries and Its Effect on Banking Systems and Banking Crises By Mehmet Okan TaÅŸar; SavaÅŸ Çevik
  14. The Impact of Contactless Payment on Spending By Tobias Truetsch
  15. Assesing The Impact of Microcredit in Bolivia Evidence from Crédito Productivo Individual – Banco de Desarrollo Productivo By Werner L. Hernani-Limarino; Paul Villarroel
  16. The Zero Lower Bound: Implications for Modelling the Interest Rate By Joshua C.C. Chan; Rodney Strachan

  1. By: P. Pessarossi; F. Vinas
    Abstract: We study the real effect on banks’ credit supply after a negative liquidity shock. Controlling for demand effects, we take advantage of the exogenous international interbank market freeze in 2007-2008 to assess the causal relation between French banks’ liquidity risk and their lending. We find that banks with a lower funding risk and a lower ratio of long-term loans to long-term funding and deposits provide more loans after the shock. The difference in lending between banks only exists for long-term loan supply. Small firms bear the decline in longterm lending.
    Keywords: financial institutions, liquidity risk, loan maturity.
    JEL: G01 G21 G28
    Date: 2015
  2. By: Stefano Caiazza (Università di Roma "Tor Vergata"); Matteo Cotugno (Università di Catania); Franco Fiordelisi (Università di Roma III); Valeria Stefanelli (Università Niccolò Cusano)
    Abstract: This paper analyzes the causes and consequences of the enforcement actions (sanctions) imposed by supervisory authorities for banks. Focusing on a sample of Italian banks between 2005 and 2012, we found 302 sanctions regarding 3,588 persons (i.e. Board of directors, Top Managers, and Chief Executive Officers) were sanctioned in banks. We have three main results. First, enforcement actions are given to banks having high credit risk and poor Return on Assets (both one and two years in before the sanction). Second, sanctioned banks are unable to change their conduct in the first year following the enforcement sanction and the stability levels do not improve. Rather, it takes at least two years after an enforcement action so that banks are able to improve their stability. We also provide evidence that socio-eco-demographic differences in Italy have a substantial impact on the banks reaction after enforcement actions.
    Keywords: Enforcement actions, Supervisory, Credit Risk
    JEL: G20 G21 G32
    Date: 2015–03–20
  3. By: Haubrich, Joseph G. (Federal Reserve Bank of Cleveland)
    Abstract: The alleged pro-cyclicality of bank capital (high in good times, low in bad) has received some blame for the recent financial crisis. Others blame the countercyclicality of capital regulations: too low in high times and too high in bad. To address this problem, Basel III has introduced countercyclical capital buffers for large banks. But just how cyclical is bank capital? We look at the question from several vantage points, using both detailed recent data on risk-weighted assets and several sources of annual data going back to 1834. To help understand the historical data, we provide a short summary of capital concepts and regulation from early America to the present.
    JEL: E32 G21 G28 N20
    Date: 2015–03–19
  4. By: Patricia Boyallian; Pablo Ruiz-Verdú
    Abstract: We propose a simple measure of the risk-taking incentives of the CEOs of highly levered financial institutions, levered delta, which captures the incentives to take on risk generated by CEOs' stock holdings. Using this measure, we find that stronger CEO risk-taking incentives prior to the 2007-2010 financial crisis are associated with a higher probability of bank failure during the crisis. We find no evidence that risk-taking incentives or bank failure are related to corporate governance failures. However, CEOs' risk-taking incentives appear to be aligned with shareholders' incentivesto shift risk to other claim holders.
    Keywords: Executive compensation, Risk-taking incentives, Leverage, Risk shifting, Bank governance, Financial crisis
    Date: 2015–03
  5. By: Andres Almazan (UNIVERSITY OF TEXAS AT AUSTIN); Alfredo Martín-OliverAuthor-X-Name-First: AlfredoAuthor-X-Name-Last: Martín-OliverAuthor-Workplace-Name: UNIVERSITAT ILLES BALEARS; Jesús Saurina (Banco de España)
    Abstract: Asset securitization offers banks the possibility of altering their capital structures and the financial intermediation process. This study shows that the introduction of securitization is associated with fundamental changes in the funding policies of banks. In particular, we present evidence of more intense use of securitization by banks (i) with stronger growth opportunities; (ii) with liquidity constraints; (iii) with costlier alternative sources of funding; and (iv) with restricted access to capital markets owing to adverse selection. Securitization is also observed to be higher on the pecking order of financing choices of small and medium-sized banks and non-listed banks, which are likely to face more severe adverse selection problems
    Keywords: securitization, capital structure, adverse selection, pecking order
    JEL: G32 G21
    Date: 2015–03
  6. By: Matta, Rafael; Perotti, Enrico C
    Abstract: Does demand for safety create instability ? Secured (repo) funding can be made so safe that it never runs, but shifts risk to unsecured creditors. We show that this triggers more frequent runs by unsecured creditors, even in the absence of fundamental risk. This effect is separate from the liquidation externality caused by fire sales of seized collateral upon default. As more secured debt causes larger fire sales, it leads to higher haircuts which further increase the frequency of runs. While secured funding combined with high yield unsecured debt may reduce instability, the private choice of repo funding always increases it. Regulators need to contain its reinforcing effect on liquidity risk, trading off its role in expanding funding by creating a safe asset.
    Keywords: bank runs; haircuts; repo; secured credit
    JEL: G21 G28
    Date: 2015–03
  7. By: Sambracos, Evangelos; Maniati, Marina
    Abstract: The international transportation Industry involves various sectors, shipping being one with particular characteristics which differentiates it from others. Within this scope, commercial banks are one of the main entities that may offer the required funding in a market that is characterized by the need for large amounts of capital and high operating costs. Banks play a significant role and are required to assess a number of factors in order to limit the risk from loans as well as to establish an accurate risk-return ratio. The efficiency of banks involved in the shipping industry is particularly important since it may, on one hand, affect financial growth, and on the other, create systemic crisis that may affect the economy as a whole as it directly affects the borrowing and consequently the financial situation and investment activity the shipping companies. This paper presents an effort to assess the shipping banks’ efficiency, and the determination of those factors which affect their technical efficiency, through the application of Data Envelopment Analysis. The results of this research indicate the factors that affect the efficiency of the shipping banks such as ROA, ROE, total loan loss provision to total loans ratio, total deposits and total assets, providing significant information to be considered by management regarding factors on which they should further focus in order to maintain and/or reinforce technical efficiency.
    Keywords: Efficiency, shipping banks, DEA, finance, profitability.
    JEL: C14 D22 G21
    Date: 2015–01–19
  8. By: Lavinia Mihaela Gutu (Bucharest University of Economic Studies)
    Abstract: In the last decades the Internet technology era has developed increasingly more and currently it spans the whole business world. Nowadays no manager can conceive the existence of a successful business without its existence in the online environment. Therefore, more and more companies have moved a part of their activities on the Internet in recent years. This fact helps them to become more popular and to attract more customers. So, for the business world, it is well-known that a respectable company should have a website. Banks are also involved in this process. The information technology and communication revolution has affected the financial services, too. The majority of banks have websites today. Here they communicate with the public and carry out certain activities with clients so that they no longer have to go to the bank. But how does the Internet influence the performance of a bank? Since it is about a revolution in this field, it is expected that banks’ performance to increase. The presence of a bank on the Internet through a website, the Internet banking and any other activities undertaken by the bank in the online environment such as online advertising should improve its financial results. Even if the bank spends more resources in this regard, it is expected that more customers to be attracted and that operations made by banks’ employees to be replaced with this kind of technology. This paper examines this issue in the case of Romanian banking industry starting with 2005. How has the Internet technology affect the performance of a bank in terms of ROE? Have the banks benefit from this kind of technology revolution or the costs of these service affects their results since the users of this technology is lower than the developed countries?
    Keywords: Electornic banking, banks' performance, Internet banking
    JEL: G21 G29 G30
    Date: 2014–10
  9. By: Huotari , Jarkko (Aalto University)
    Abstract: I propose a financial stress index (FSI) for the Finnish financial system that aims to reflect the functionality of the financial system and provide an aggregate measure of financial stress in the money, bond, equity and foreign exchange markets and the banking sector. The FSI is a composite index that combines information from these markets and provides a measure of stress in the financial system as a whole. The FSI has obvious benefits for all participants in the financial markets who need a tool for monitoring the functioning of the financial markets, as it provides information on systemic stress events which are not as easily captured with the stress measures of individual markets or sectors. The ESRB recommendation (ESRB, 2014a) also states that national or international FSIs could be used when making a decision about the release of the counter-cyclical capital buffer. Hence, the index can also be used to support the macro-prudential policy decision making in Finland.
    Keywords: financial stress index; counter-cyclical capital buffer; macro-prudential policy
    JEL: C43 G01 G28
    Date: 2015–03–11
  10. By: Lucian Ciprian Crisan (Faculty of Economics and Business Administration)
    Abstract: Stress testing has become an essential and very prominent tool in the analysis of financial sector stability and development of financial sector policy. Starting with 2010 stress test led by the Committee of European Banking Supervisors (CEBS), and reinforced by 2011 stress test and the bank recapitalization exercise led by the European Banking Authority (EBA), the output of EU wide stress tests has been viewed as essential information on the health of the system.The purpose of this paper is to highlight the main elements considered by the EBA and European Central Bank (ECB) in creating the model of the stress test. At the same time it will highlight how the recent financial crisis has influenced the introduction of these decisions in order to stabilize the banking system. The vision of a future banking union will reshape and resize the entire European system profile. Applying stress test will lead to a healthy and robust banking system even if a new potential crises will come.
    Keywords: Banking Union, Stress test, financial crisis, Challenge, Basel philosophy
    JEL: E60 F50
    Date: 2014–10
  11. By: van Boxtel, A.A. (Tilburg University, School of Economics and Management)
    Abstract: Abstract: This thesis consists of three chapters of a theoretical nature, all related to the topic of competition in the financial sector. The first chapter studies how competition for talented workers induces banks to set variable wage<br/>schemes, and how these wage schemes can lead to excessive risk. The<br/>second chapter argues that non-exclusive investor-firm relations can lead<br/>to an excessive provision of liquidity. The third chapter studies an economy<br/>in which different investors all compete non-exclusively for investment in<br/>a long-term project subject to a stochastic liquidity demand. The result is<br/>that investment can only take place if an intermediary is present in this<br/>economy.<br/>
    Date: 2015
  12. By: Mohammad Taleghani (Department of Industrial Management, College of Management & Accounting, Rasht Branch, Islamic Azad University, Rasht, Guilan)
    Abstract: Today, the services industry is changing in the world. The new technologies have changed the method of service representation to customer in many of service organizations. Bank services have been changed basically because communication and information technology. In this study, it has been identified the electronic Banking acceptance components in branches of keshavarzi bank of Guilan province. The stoical community of this research includes all customers of various branches of keshavarzi bank of Guilan province. The current study statistical sample includes 375 individuals (person) of male and female customers with high education and various jobs that are randomly choose of slightly statistical community, and the obtained data are analyzed using of factorial analysis test.
    Keywords: Electronic Banking, Technology Acceptance, Keshavarzi Bank, Factorial Analysis.
    JEL: M15 M10 M31
    Date: 2014–10
  13. By: Mehmet Okan TaÅŸar (Selcuk University, Faculty of Economics and Administrative Sciences); SavaÅŸ Çevik (Selcuk University, Faculty of Economics and Administrative Sciences)
    Abstract: Financial deregulations or financial liberalization can be referred to a variety of changes in the law which allows financial institutions more freedom in how they compete. Whether deregulations are beneficial or harmful to the economy has been widely debated.This paper investigates the effect of financial globalization on the incidence of systemic bank crises in developing countries by using measures of the financial openness. The liberalization trend in the global scale starting with the Washington Consensus has been influential on financial markets and the banking sector. Financial liberalization and uncontrolled expansion of international capital movements has led to the diversification and acceleration of the global financial crisis. Thus, “financial deregulations†which offered as a solution to the debt crisis experienced in the 1980s has led to a new financial crisis in 2010's. An increase in foreign debt liabilities contributes to an increase in the incidence of crises, but foreign direct investment and portfolio equity liabilities have also the opposite effect. This paper discusses how financial liberalization could contribute to financal crises and macroeconomic instabilitiy in the developing countries. For this aim, we analyze empirically a database from developing countries to test the effect of financial openness on macroeconomic indicators. As the dependent variable, we use a variable which take the value of one in the year of a banking crisis. To estimate the indicators of financial crises, main explanatory variables which are employed in the specifications are financial openness, current account balances, exchange rate regime, inflation, trade openness and percent change in GDP. In the introduction to this paper examines the process of liberalization. Second part; banking system and its features are analyzed during the Global financial Crisis. In the third section the historical development of financial crisis and measure of financial liberalization are discussed.In the final part of the paper of financial liberalization and financial crisis the relationship between macro-economic indicators are examined.
    Keywords: Financial deregulations, financial openness, banking crisis, global financial crisis,
    JEL: G01 F43 E44
    Date: 2014–10
  14. By: Tobias Truetsch (University of St.Gallen)
    Abstract: This paper estimates the effect of contactless payment on the spending ratio in terms of transactions for different transaction types at the point-of-sale. The specifc devices that are investigated are debit and credit cards, to which the feature is embedded. Data is drawn from a national representative survey on consumer payment behavior in the US in 2010. Using propensity score matching to control for selection, the estimation shows that the contactless feature yields to a signifcant increase in the spending ratio at the point-of-sale for both payment methods. The average treatment effect on the treated for credit and debit cards is roughly 8 and 10 percent, respectively. These fndings indicate that the private industry can highly benefit from the innovation with respect to new revenue streams. This paper contributes to the existing literature in payment economics by analyzing one of the most recent payment products.
    Keywords: contactless payment, payment innovation, spending habits, credit and debit cards,near-feld communication (NFC), propensity score matching
    JEL: C21 D12 D14
    Date: 2014–10
  15. By: Werner L. Hernani-Limarino (Fundación ARU); Paul Villarroel (Fundación ARU)
    Abstract: This paper presents the impact evaluation of Crédito Productivo Individual from Banco de Desarrollo Productivo S.A.M – government second-tier bank which channels resources toward productive activities in Bolivia. This financial product is specifically directed to micro and small enterprises in the productive sector, concentrating mostly in the agriculture and manufacturing. Taking into account differences in treatment received by beneficiaries, we use multiple control groups – assuming unconfoundedness, to estimate impact on family and production outcomes. The results show us that the main effects of credit are observed in manufacturing sector. In this sector we find an impact between 23% and 28% on machinery investment levels, which could be the explanation for an observed impact higher than 20% on production value. On the other hand, we only find effects in reducing input costs, suggesting that the greatest impact in the agricultural sector could be the opening of financial products to this group of producers.
    Keywords: impact evaluation, microcredits, microfinance
    JEL: C21 G2 I3
    Date: 2015–03
  16. By: Joshua C.C. Chan (Research School of Economics, and Centre for Applied Macroeconomic Analysis, Australian National University); Rodney Strachan (School of Economics, and Centre for Applied Macroeconomic Analysis, University of Queensland; The Rimini Centre for Economic Analysis, Italy)
    Abstract: The time-varying parameter vector autoregressive (TVP-VAR) model has been used to successfully model interest rates and other variables. As many short interest rates are now near their zero lower bound (ZLB), a feature not included in the standard TVP-VAR specification, this model is no longer appropriate. However, there remain good reasons to include short interest rates in macro models, such as to study the effect of a credit shock. We propose a TVP-VAR that accounts for the ZLB and study algorithms for computing this model that are less computationally burdensome than others yet handle many states well. To illustrate the proposed approach, we investigate the effect of the zero lower bound of interest rate on transmission of a monetary shock.
    Date: 2014–12

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