nep-ban New Economics Papers
on Banking
Issue of 2016‒07‒16
23 papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. LTV policy as a macroprudential tool: The case of residential mortgage loans in Asia By Morgan, Peter; Regis, Paulo José; Salike, Nimesh
  3. The Impact of Credit Information Sharing on Interest Rates By Gietzen, Thomas
  4. Should AMA be Replaced with SMA for Operational Risk? By Gareth W. Peters; Pavel V. Shevchenko; Bertrand Hassani; Ariane Chapelle
  5. How Do Lead Banks Use Their Private Information about Loan Quality in the Syndicated Loan Market? By Balasubramanyan, Lakshmi; Berger, Allen N.; Koepke, Matthew; Bouwman, Christa H. S.
  6. Making sense of the EU wide stress test: a comparison with the SRISK approach By Homar, Timotej; Kick, Heinrich; Salleo, Carmelo
  7. Modèle de détection avancée des crises bancaires basé sur une approche panel logistique By Zaghdoudi, Taha
  8. Stressed interbank markets: evidence from the European financial and sovereign debt crisis By Frutos, Juan Carlos; Garcia-de-Andoain, Carlos; Heider, Florian; Papsdorf, Patrick
  9. The effect of bank shocks on firm-level and aggregate investment By Amador, João; Nagengast, Arne J.
  10. The drivers of European banks’ US dollar debt issuance: opportunistic funding in times of crisis? By Luna Azahara Romo González
  11. Bank capital structure and the credit channel of central bank asset purchases By Darracq Pariès, Matthieu; Hałaj, Grzegorz; Kok, Christoffer
  12. Tackling sovereign risk in European banks By Andreja LenarÄ iÄ; Dirk Mevis; Dóra Siklós
  13. The asymmetric burden of regulation: will local banks survive? By Pietro Alessandrini; Michele Fratianni; Luca Papi; Alberto Zazzaro
  14. The effect of demographics on payment behavior: panel data with sample selection By Stavins, Joanna
  15. The payout behaviour of German savings banks By Köhler, Matthias
  16. Comments on the Resolution Framework for Banks and Bank Holding Companies in the United States: a speech at the Panel Discussion on Resolution Riksbank Macroprudential Conference, Stockholm, Sweden, June 22, 2016. By Fischer, Stanley
  17. The Financial Stability Dark Side of Monetary Policy By Frank Smets; Stefania Villa
  18. Actual Problems and Perspective with Positive Impact on the Activity of Banking System in Romania By Dana Gabriela SISEA
  19. Money Creation, Monetary Policy, and Capital Regulation By Faure, Salomon; Gersbach, Hans
  20. Access to Credit and Investment Decisions of SMEs in China: size matters By Regis, Paulo José
  21. Banks' interest rate risk and search for yield: A theoretical rationale and some empirical evidence By Memmel, Christoph; Seymen, Atılım; Teichert, Max
  22. Mobile Phone Penetration, Mobile Banking and Inclusive Development in Africa By Simplice Asongu; Jacinta C. Nwachukwu
  23. Aggregate Consequences of Dynamic Credit Relationships By Stephane Verani

  1. By: Morgan, Peter (Asian Development Bank Institute); Regis, Paulo José (Division of Economics, Xi'an Jiaotong-Liverpool University); Salike, Nimesh (Division of Economics, Xi'an Jiaotong-Liverpool University)
    Abstract: Credit creation in the housing market has been a key source of systemic financial risk, and therefore is at the center of the debate on macroprudential policies. The loan-to-value (LTV) ratio is a widely-used macroprudential tool aimed at moderating mortgage loan creation, and its effectiveness needs to be estimated empirically. This paper is unique in that it analyzes the effect of LTV on mortgage lending, the direct channel of influence, using a large sample of banks in ten Asian countries. It uses estimation techniques to deal with the large presence of outliers in the data. Robust to outlier estimations show that countries with LTV polices have expanded residential mortgage loans by 6.7% per year while non-LTV countries have expanded by 14.6%, which suggests LTV policies have been effective.
    Keywords: macroprudential policies, financial stability, robust to outliers regression, mortgage loan creation
    JEL: C23 E58 G21 G28
    Date: 2015–08–25
  2. By: Elisabetta Montanaro (Ragnar Nurkse School of Innovation and Governance, Tallinn University of Technology)
    Abstract: The EU’s institutional architecture for financial regulation, based upon the principles of decentralisation across countries, segmentation across sectors, and voluntary cooperation among national regulators was clearly unsuitable to deal with overall financial stability risks arising from the internationalisation and conglomeration of financial firms. Oppositions to a true European arrangement for burden-sharing, and potential distributional consequences in the event of a crisis of a cross border bank have been the main hurdle to centralisation at European-level financial supervision. At the same time, the objective to create a levelled playing field in the EU single market has been always considered the necessary condition to promote the openness of national financial markets and cross-border banking. The paper aims to demonstrate that, since a single EU financial regulator in a multi-currency area is definitely a no viable alternative, the banking union’s design is just a partial solution for financial stability problems arising from the fragmentation of the single market in the event of idiosyncratic or systemic banking crises. The analysis performed on non-euro countries’ assessments of the pros and cons in joining the banking union clearly shows that until the fiscal responsibility for financial stability remains at the national level, the regulatory centralisation at the EU level cannot severe the traditional divide between home and host supervisors.
    Keywords: EU financial regulation; banking union; non-euro countries; CEE countries; cross-border banking
    JEL: F35 F65 G01 G28
    Date: 2016–01–30
  3. By: Gietzen, Thomas
    Abstract: I study the impact of information sharing among banks on interest rates borrowers pay. To identify the effect of credit information sharing, I exploit a particular feature of the introduction of an Information sharing system in an African banking market. Banks started to Report borrowers to the new system more than a year before they began to actively use the data to screen applicants. Hence, this study is the first to directly control for compositional changes in the borrower pool by combining a control period during which no information was shared among banks with a loan-level data source that facilitates tracing borrowers who switch banks. Results lend great support to the idea that information sharing efficiently mitigates adverse selection problems. Successful repeated borrowers are able to obtain cheaper follow-up loans when information is actively shared among banks and borrowers who Switch institutions profit most from the reduction in adverse selection. At the same time, as banks loose their ability to hold-up successful borrowers for their second loan, first-time credit starts to be more expensive, even though this effect is strongly outweighed by the cost reduction for follow-up loans.
    Keywords: Credit Information Sharing, Credit Registry, Interest Rates, Switching
    Date: 2016–06
  4. By: Gareth W. Peters; Pavel V. Shevchenko; Bertrand Hassani; Ariane Chapelle
    Abstract: Recently, Basel Committee for Banking Supervision proposed to replace all approaches, including Advanced Measurement Approach (AMA), for operational risk capital with a simple formula referred to as the Standardised Measurement Approach (SMA). This paper discusses and studies the weaknesses and pitfalls of SMA such as instability, risk insensitivity, super-additivity and the implicit relationship between SMA capital model and systemic risk in the banking sector. We also discuss the issues with closely related operational risk Capital-at-Risk (OpCar) Basel Committee proposed model which is the precursor to the SMA. In conclusion, we advocate to maintain the AMA internal model framework and suggest as an alternative a number of standardization recommendations that could be considered to unify internal modelling of operational risk. The findings and views presented in this paper have been discussed with and supported by many OpRisk practitioners and academics in Australia, Europe, UK and USA, and recently at OpRisk Europe 2016 conference in London.
    Date: 2016–07
  5. By: Balasubramanyan, Lakshmi (Federal Reserve Bank of Cleveland); Berger, Allen N.; Koepke, Matthew (Federal Reserve Bank of Cleveland); Bouwman, Christa H. S.
    Abstract: Little is known about how lead banks in the syndicated loan market use their private information about loan quality. We formulate and test two hypotheses, the Signaling Hypothesis and Sophisticated Syndicate Hypothesis. To measure private information, we use Shared National Credit (SNC) internal loan ratings, which we make comparable across banks using concordance tables. We find that favorable private information is associated with higher loan retention by lead banks for term loans, consistent with empirical domination of the Signaling Hypothesis, while neither hypothesis dominates for revolvers. Differences in syndicate structure at least partially explain this disparity.
    Keywords: lead bank; private information; loan sales; syndication;
    JEL: G21 G28
    Date: 2016–06–30
  6. By: Homar, Timotej; Kick, Heinrich; Salleo, Carmelo
    Abstract: We analyse the SRISK measure with respect to its usage as a benchmark for the ECB/EBA 2014 stress test. By regressing the ECB/EBA stress test impact and the SRISK stress impact on a set of factors that are commonly associated with bank credit losses and bank vulnerability, we find that the ECB/EBA stress impact is consistent with findings in the literature on credit losses. In contrast, the SRISK measure bears much less relation to these factors; it is largely driven by the banks’ leverage ratio. These differences are deeply rooted in the construction of the respective measures. With its focus on losses to bank equity, the SRISK measure appears poorly matched as a benchmark for the supervisory stress test in Europe, which is centred on losses to banks’ total assets. JEL Classification: C21, G01, G21
    Keywords: Asset Quality Review, SRISK, stress test evaluation
    Date: 2016–06
  7. By: Zaghdoudi, Taha
    Abstract: The succession of banking crises in which most have resulted in huge economic and financial losses, prompted several authors to study their determinants. These authors constructed early warning models to prevent their occurring. It is in this same vein as our study takes its inspiration. In particular, we have developed a warning model of banking crises based on a panel logit approach. The results of this model have allowed us to identify the involvement of the decline in bank profitability, deterioration of the competitiveness of the traditional intermediation, banking concentration and higher real interest rates in triggering bank crisis.
    Keywords: Banking crisis, logistic panel data
    JEL: C23 C25 G01
    Date: 2015–05–19
  8. By: Frutos, Juan Carlos; Garcia-de-Andoain, Carlos; Heider, Florian; Papsdorf, Patrick
    Abstract: This paper documents stress in the unsecured overnight interbank market in the euro area over the course of the financial and sovereign debt crisis in Europe. We find that stress i) leads some banks to borrow in the market at rates that are higher than the rate of the marginal lending facility of the ECB, ii) leads to less cross-border transactions and contributes to the fragmentation of the euro area money market. A triple-difference estimate shows that the borrowing of banks in the periphery from banks in the core almost disappears in the second half of 2011. Domestic borrowing, however, replaces the loss of cross-border borrowing. Our findings document the severe malfunctioning of the market for liquidity caused by asymmetric information problems in crisis times. We exploit euro area payments data to construct a novel dataset of interbank lending and borrowing. We verify the validity of our approach using the post-trading structure MID, maintained at Banco de España. Based on our results, we conclude that MID is a very high quality source of Spanish interbank market data for research and policy purposes. JEL Classification: G01, G21, E58, F36
    Keywords: European sovereign debt crisis, financial crisis, Furfine algorithm, interbank markets, payment systems
    Date: 2016–06
  9. By: Amador, João; Nagengast, Arne J.
    Abstract: We show that credit supply shocks have a strong impact on firm-level as well as aggregate investment by applying the methodology developed by Amiti and Weinstein (2013) to a rich dataset of matched bank-firm loans in the Portuguese economy for the period 2005 to 2013. We argue that their decomposition framework can also be used in the presence of small firms with only one banking relationship as long as they account for only a small share of the total loan volume of their banks. The growth rate of individual loans in our dataset is decomposed into bank, firm, industry and common shocks. Adverse bank shocks are found to impair firm-level investment in all firms in our sample, but in particular for small firms and those with no access to alternative financing sources. For the economy as a whole, granular shocks in the banking system account for around 20-40% of aggregate investment dynamics.
    Keywords: Banks,Credit Dynamics,Investment,Firm-level data,Portuguese Economy
    JEL: E32 E44 G21 G32
    Date: 2016
  10. By: Luna Azahara Romo González (Banco de España)
    Abstract: This paper provides a comprehensive investigation of the determinants of US dollar-denominated long-term debt issuance by European banks. The database used allows the drivers of foreign-currency issuance identified in the literature, including variables at the individual firm (e.g. bank) level, to be explored. The analysis covers overall US dollar issuance as well as Yankee debt issuance, which is defined in this paper as bonds denominated in US dollars issued in domestic US markets by non-US issuers. In addition, issuance determinants are investigated during both crisis and non-crisis periods. The main findings are the following. European banks issue US dollar debt to naturally hedge their US dollar assets (with US dollar exposures obtained from BIS international banking statistics), but they also make extensive use of deviations in covered interest parity and even in uncovered interest parity, particularly after the crisis. There is also evidence that banks issue in US dollars for strategic reasons and that heightened volatility has a negative impact on US dollar issuance. Bank-specific variables are also relevant drivers of US dollar debt issuance: banks with higher asset growth, with a banking subsidiary in the United States and with a high credit rating are more likely to issue in US dollars than others. Bank-specific structures, as captured by deposit and loan ratios, also have a relevant impact on US dollar funding activity in some cases. The results are robust to alternative econometric specifications and to different definitions of covered and uncovered cost savings.
    Keywords: bank funding, foreign currency debt issuance, US dollar-denominated debt, interest rate parity, banking crisis, Europe.
    JEL: G21 G32 F3 G01 O52
    Date: 2016–07
  11. By: Darracq Pariès, Matthieu; Hałaj, Grzegorz; Kok, Christoffer
    Abstract: With the aim of reigniting inflation in the euro area, in early 2015 the ECB embarked on a large-scale asset purchase programme. We analyse the macroeconomic effects of the Asset Purchase Programme via the banking system, exploiting the cross-section of individual bank portfolio decisions. For this purpose, an augmented version of the DSGE model of Gertler and Karadi (2013), featuring a segmented banking sector, is estimated for the euro area and combined with a bank portfolio optimisation approach using granular bank level data. An important feature of our modelling approach is that it captures the heterogeneity of banks’ responses to yield curve shocks, due to individual banks’ balance sheet structure, different capital and liquidity constraints as well as different credit and market risk characteristics. The deep parameters of the DSGE model which control the transmission channel of central bank asset purchases are then adjusted to reproduce the easing of lending conditions consistent with the bank-level portfolio optimisation. Our macroeconomic simulations suggest that such unconventional policies have the potential to strongly support the growth momentum in the euro area and significantly lift inflation prospects. The paper also illustrates that the benefits of the measure crucially hinge on banks’ ability and incentives to ease their lending conditions, which can vary significantly across jurisdictions and segments of the banking system. JEL Classification: C61, E52, G11
    Keywords: banking, DSGE, portfolio optimisation, quantitative easing
    Date: 2016–06
  12. By: Andreja LenarÄ iÄ (European Stability Mechanism); Dirk Mevis (European Stability Mechanism); Dóra Siklós (European Stability Mechanism)
    Abstract: The tight linkage between sovereign and bank balance sheets magnified the depth of the European sovereign debt crisis. As a response to this, reform efforts are therefore focused on severing this vicious tie. Some progress has been made. The Banking Union framework addresses the transfer of banking sector risk to the sovereign. Policy makers are now discussing how to address the treatment of sovereign debt on bank balance sheets. Currently, it is treated as risk free. Zero risk weights are applied, meaning banks do not need to set aside capital to protect themselves from potential losses in these securities. Nor do banks have any limits on their exposure to a particular sovereign. This discussion paper analyses the two widely discussed basic options to address this regulatory gap: applying non-zero risk weights to sovereign exposures, and putting limits on exposures to sovereigns, akin to those in place for other exposures. Although this paper analyses each option in isolation, the two complement one another as they target different facets of risk. Positive risk weights address counterparty credit risk, whereas large exposure limits address concentration risk. Both policy options would, according to our analysis, lead to improved bank risk management and render banks more resilient. They would equip them to better absorb losses: positive risk weights would require higher capital buffers and exposure limits would lead to greater diversification. Positive risk weights would also improve risk transparency and correct distorted incentives for investing in sovereign bonds. At the systemic level, leverage would decrease and losses in the event of default would be more spread out. On the downside, both regulatory proposals would lower bank profitability in the short run. In the longer run, positive risk-weights could permanently reduce bank profits by increasing their funding costs, while exposure limits would lead to a more diversified portfolio and lower funding costs. The benefits in terms of increased resilience in the banking sector would come at a cost for some sovereigns. Sovereign bond holdings would become more costly in terms of capital if positive risk weights were applied or the exposures were capped by a hard limit. In both cases, banks would try to deal with excess sovereign bonds on their balance sheets by injecting fresh capital or reducing their portfolio of sovereign bonds. An increased supply of sovereign paper, or a lack of demand for new issues, would raise funding costs for the sovereign and consequently for the whole economy. Furthermore, both policy options would lower liquidity in the sovereign debt markets, as they add to the cost and hinder the ability of banks to provide market-making services. Exposure limits in particular would have significant repercussions on markets in the short run, as banks traditionally have large exposures to domestic sovereigns that they would have to shed. Other market participants would need to absorb this additional supply. Sovereigns would need to re-arrange their financing sources, which could prove challenging. Additionally, the two options could aggravate long-run macro-level cyclical developments for stressed sovereigns. During an economic downturn, an increased riskiness of a sovereign would translate into higher risk weights and a higher capital charge for the bank holding its debt. This would further worsen financing conditions for sovereigns precisely at the time when fiscal space is most needed. Similarly, exposure limits could lead to cliff effects in a downturn, if sovereigns fail to extend their investor base. We expect that introducing positive risk weights would have the largest effect on stressed sovereigns, while imposing exposure limits would impact sovereigns with large outstanding debt volumes the most. The trade-off between strengthening the resilience of the banking sector to sovereign risk and maintaining the investor base for European sovereigns makes the issue of adjusting regulation particularly complex. Any policy decision needs to take into account the effects it would have on sovereign funding conditions. In addition, as banks traditionally hold large amounts of sovereign debt, any regulatory change could have a large initial impact with potentially destabilising consequences. Hence, a gradual and transparent transition would be crucial for a successful implementation of any combination of the two alternatives.
    Date: 2016–03
  13. By: Pietro Alessandrini (Università Politecnica delle Marche, MoFiR); Michele Fratianni (Indiana University, Kelly School of Business, Bloomington US, Univ. Plitecn ica Marche and MoFiR); Luca Papi (Università Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali, MoFiR); Alberto Zazzaro (Università Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali, MoFiR - Ancona, Italy, CSEF, Naples, Italy)
    Abstract: The re-regulation wave following the recent financial crisis has contributed to produce a complex system of new rules and controls. The paper argues that the burden of this new regulatory system is asymmetric and penalizing for small banks. This conclusion is corroborated from the preliminary results of a questionnaire on the impact of regulation on different types of Italian banks. Asymmetric effects on banking structure produce related asymmetries on firms and regional economies, in light of the fact that small firms and peripheral regions are highly dependent on bank credit and need strategic proximity of banking structures. When firms and regions are heterogeneous, the review of the literature on different countries and on different periods of time suggests the importance of differentiated banking models. Bank size, organization and governance should be evaluated in relative terms reflecting various heterogeneities of clients and regions. Consequently, a regulatory system should not favor one particular bank type but should aim at achieving a more symmetric distribution of the regulatory burden.
    Keywords: banking regulation, local banks, large banks, regions, asymmetries, heterogeneity
    JEL: G01 G18 G21
    Date: 2016–06
  14. By: Stavins, Joanna (Federal Reserve Bank of Boston)
    Abstract: Connolly and Stavins (2015) showed that payment behavior is strongly correlated with consumers’ demographic and income attributes over the 2009–2013 period. In this paper, we apply a random effects panel data model with sample selection based on Wooldridge (1995) to estimate the effect of each attribute on payment-instrument adoption and use. We find that age, education, income, and race are significant in explaining payment behavior even after controlling for all the other attributes of consumers and for payment-instrument characteristics. Most notably, the lowest-income, lowest-education, and minority consumers adopt a very limited set of payment instruments compared with their counterparts even when education and age are controlled for. These consumers also have a significantly different pattern of payment use conditional on adoption; they rely significantly more on cash and less on credit cards for their transactions. The data do not allow us to isolate supply-side and demand-side factors to explain the causes of these discrepancies. Women use significantly less cash than men, but use more debit cards, checks, and online banking bill pay, even when we control for the degree of bill-paying responsibility they have for their households. Single people use more cash, while married people use more checks. Although characteristics of payment instruments, such as cost, convenience, and security, significantly affect payment behavior, consumers’ socio-demographic attributes explain most of the variation. Separating the effects of consumers’ age from the effects of birth cohorts indicates that in most cases age and birth-cohort trends move together.
    JEL: D12 D14 E41
    Date: 2016–06–07
  15. By: Köhler, Matthias
    Abstract: Our analysis finds that despite the growing number, the majority of savings banks currently do not make any payouts. Furthermore, savings banks distribute only a small part of their net profit to the shareholders. This means that they can still build up capital even if they make payouts. Savings banks also hold significantly more capital than is called for by the regulatory framework. Finally, the regression analysis shows that savings banks that have less capital distribute profits to their shareholders considerably less frequently. This correlation has intensified since 2009, even though the Savings Banks Acts (Sparkassengesetze) were relaxed in individual federal states. All in all, our results therefore indicate that payouts do not currently pose a threat to the capital adequacy of most savings banks.
    Keywords: savings banks,distributions,capital adequacy
    JEL: G21 G29 G35
    Date: 2016
  16. By: Fischer, Stanley (Board of Governors of the Federal Reserve System (U.S.))
    Date: 2016–06–29
  17. By: Frank Smets (European Central Bank); Stefania Villa (KU Leuven; University of Foggia)
    Abstract: This paper examines whether financial conditions of the non-financial corporate sector can explain why the recovery from recessions in the United States is slower since the mid-1980s. Leverage by the corporate sector has increased significantly since the financial deregulation of the mid-1980s. Empirical evidence shows that slow recoveries are associated with a significant drop in the growth rates of investment and bank loans, and with a surge in the growth rates of corporate bonds. In an estimated dynamic stochastic general equilibrium model with a financial accelerator, counterfactual experiments based on estimates of two samples - 1965-1983 and 1984-2007 - show that the non-financial corporate indebtedness affects only marginally the speed of the recovery in the two samples.
    Keywords: speed of recoveries, indebtedness, financial frictions, estimated DSGE model.
    JEL: E32 E44
    Date: 2016–06
  18. By: Dana Gabriela SISEA (Faculty of Economics, Ecological University of Bucharest)
    Abstract: The Romanian banking system, though under multiple layout characterized positive (capitalization, monitoring, regulation, solvency, risk factors, etc.), is involved in solving some major problems and in direct connection with the sides of his qualitative. Problems with positive impact on the work of the domestic banking system, customize under different aspect, between which: natural factors, they have generated, the directions in which action must be taken and the strategies imposed by the identification of solutions to solve each problem. Of these factors, the generator problem in the banking business, presents the importance. Many high-risk problems for the banking business are attributable to internal factors, management, management, regulation and monitoring of activities, methods for carrying out financial intermediation operations. Due to internal factors, banking entities are faced with significant problems, such as delays in the resumption of crediting in foreign currency lending priority (especially in CHF), the share of bad loans (most of them outsourced), lack of credibility towards consumers, etc. In regards to the problems stemming from external factors, they may be, in essence: financial disintermediation, delays in application of regulations the concurring with the new European vision in the field of banking activity, etc. Essential aspects relating to issues impacting the banking activity shall be entered in the following.
    Keywords: financial disintermediation, foreign liabilities, external financing lines, subprime loans, digitization of banking services
    JEL: E44 G32 H81
    Date: 2015–11
  19. By: Faure, Salomon; Gersbach, Hans
    Abstract: We develop a general equilibrium model to study money creation by private banks and examine the impact of monetary policy and capital regulation. There are two production sectors, financial intermediation, aggregate shocks, safe deposits, and two types of money creation: private deposits when banks grant loans to firms or to other banks and central bank money when the central bank grants loans to private banks. We show that in the baseline model, equilibria yield the first-best level of money creation and lending, regardless of the monetary policy or capital regulation. If we add price rigidities coupled with the zero lower bound, there may be no equilibrium with banks, but under normal economic conditions, an adequate combination of monetary policy and capital regulation can restore the existence of equilibria and efficiency. Finally, we show that Forward Guidance and capital regulation can only avoid a slump in money creation and lending if economic conditions are sufficiently favorable.
    Date: 2016–06
  20. By: Regis, Paulo José (Division of Economics, Xi'an Jiaotong-Liverpool University)
    Abstract: Financial constraints are common in developing countries where financial systems are underdeveloped. In China, firms report access to finance is the most important obstacle in the business environment. This seems to be related to firms which fail to gain access to the credit market. We examine the likelihood of access to credit of firms where size and exporting seem to be key characteristics to consider. Credit constraints are significant to investment decisions. Together with size, access to credit is among the firm characteristics with the largest impact in the likelihood to invest.
    Keywords: access to finance, investment decision, Small and Medium-sized Enterprises, China
    JEL: G21 G32 O16 D52
    Date: 2015–08–03
  21. By: Memmel, Christoph; Seymen, Atılım; Teichert, Max
    Abstract: We investigate German banks' exposure to interest rate risk. In finance, higher demand for a risky asset is typically associated with higher expected return. However, employing a utility function which implies both risk-averse and risk-seeking behavior depending on the level of profits, we show that this relationship may get weaker and even change its sign at low profit levels. For the period 2005-2014, we find not only the common positive relationship of higher expected returns and rising interest rate exposure but also that this relationship does become weaker with falling operative income, its sign eventually changing.
    Keywords: banks' risk taking,exposure to interest rate risk,low interest rate environment
    JEL: G11 G21
    Date: 2016
  22. By: Simplice Asongu (Yaoundé/Cameroun); Jacinta C. Nwachukwu (Coventry University)
    Abstract: The study assesses the role of mobile phones and mobile banking in decreasing inequality in 52 African countries. The empirical procedure involves first, examining the income-redistributive effect of mobile phone penetration and then investigating the contribution of mobile banking services in this relationship. The findings suggest an equalizing income-redistributive effect of ‘mobile phone penetration’ and ‘mobile banking’, with a higher income-equalizing effect from mobile banking compared to mobile phone penetration. Poverty alleviation channels explaining this difference in inequality mitigating propensity are discussed.
    Keywords: Banking; Mobile Phones; Shadow Economy; Financial Development; Africa
    JEL: E00 G20 L96 O17 O33
    Date: 2016–01
  23. By: Stephane Verani (Federal Reserve Board)
    Abstract: Which financial frictions matter in the aggregate? This paper presents a general equilibrium model in which entrepreneurs finance a firm with a long-term contract. The contract is constrained efficient because firm revenue is costly to monitor and entrepreneurs may default. The cost of monitoring firms and the entrepreneurs' outside options determine the significance of moral hazard relative to limited enforcement for financial contracting. Calibrating the model to the U.S. economy, I find that the relative welfare loss from financial frictions is about 5 percent in terms of aggregate consumption with moral hazard, while it is 1 percent with limited enforcement. Reforms designed to strengthen contract enforcement increase aggregate consumption in the short-run, but their long-run effects are modest when monitoring costs are high. Weak contract enforcement contribute to aggregate fluctuations by amplifying the effect of aggregate technological shocks, but moral hazard does not.
    Date: 2016

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