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on Banking |
| By: | Le, Minh; Hoang, Vincent; Wilson, Clevo; Managi, Shunsuke |
| Abstract: | The net stable funding ratio (NSFR) is introduced under Basel III to promote financial stability. Under this new regulation, individual financial institutions are required to maintain a sustainable funding structure; hence this new universal requirement is expected to affect bank operation. In this paper, we provide one of the first empirical examinations of the non-linear relationship between NSFR and profit (in)efficiency for commercial banks using two data sets from Bankscope (for years from 2000 to 2015) and Federal Financial Institutions Examination Council call reports (2000-2013 period). Our results suggest that modest intensification in liquidity helps to reduce bank profit inefficiency (i.e. increase efficiency) but too much liquidity enlargement could increase the inefficiency. This result is consistent with a trade-off hypothesis on the non-linear relationship between liquidity and bank performance. |
| Keywords: | NSFR, liquidity, profit inefficiency |
| JEL: | G21 G28 |
| Date: | 2019–10–21 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:107179&r=all |
| By: | Carlo Altavilla; Luc Laeven; José-Luis Peydró |
| Abstract: | We show strong complementarities between monetary and macroprudential policies in influencing credit. We exploit credit register data - crucially from multiple (European) countries and for both corporate and household credit - in conjunction with monetary policy surprises and indicators of macroprudential policy actions. Expansive monetary policy boosts lending more in accommodative macroprudential environments. This complementary effect of monetary and macroprudential policy is stronger for: (i) expansionary (as opposed to contractionary) monetary policy; (ii) riskier borrowers; (iii) less capitalized banks (especially when lending to riskier borrowers); (iv) consumer and corporate loans (rather than mortgages); and (v) more (ex-ante) productive firms (especially for less capitalized banks). |
| Keywords: | credit registers, household loans, corporate loans, monetary policy, macroprudential policy |
| JEL: | G21 G28 G32 G51 E58 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1246&r=all |
| By: | Mikael Khan; Olga Bilyk; Matthew Ackman |
| Abstract: | Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified. |
| Keywords: | Coronavirus disease (COVID-19); Credit and credit aggregates; Financial stability; Housing; Recent economic and financial developments; Sectoral balance sheet |
| JEL: | D14 D8 D84 E5 G2 G21 G28 R2 R21 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocsan:21-4&r=all |
| By: | Elsa Assiaty de L. A. Agostinho; Raquel M. Gaspar |
| Abstract: | Microfinance is seen as an important tool for financial inclusion and the fight against poverty because it has both a social and financial focus. The main objective of this paper is to evaluate the financial and social efficiency of 18 microfinance institutions (MFIs) in the year 2016 from 8 member countries of the Southern African Development Community (SADC). The methodology chosen is the data envelopment analysis (DEA) with variable returns to scale (VRS) using an input-oriented production approach. The results indicate higher scores of financial efficiency than social efficiency. This may suggest that microfinance institutions adopt a more institutionalist approach over the welfarist approach. We also find evidence that providing financial services to women or the entire disadvantaged population is profitable. However, non-bank financial institutions (NBFIs) and non-governmental organizations (NGOs) are more efficient in this regard than credit unions or banks. |
| Keywords: | Microfinance, Financial Efficiency, Social Efficiency, DEA and SADC |
| JEL: | G20 G21 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:ise:remwps:wp01722021&r=all |
| By: | Roman Garcia; Dimitri Lorenzani; Daniel Monteiro; Francesco Perticari; Bořek Vašíček; Lukas Vogel |
| Abstract: | This paper analyses empirically the main direct and indirect transmission channels of financial spillovers and contagion risks in the euro area, focusing on the sovereign-to-sovereign, sovereign-to-bank, and bankto-bank channels. We employ correlation analysis, analysis of bank balance sheets, reduced-form models inferring the interconnectedness among agents from market data, and simulated structural models. The value added by this paper to the literature consists both in analysing the recent episodes of financial distress (until 2019), which happened after reforms of the Economic and Monetary Union (EMU) architecture were introduced in response to the euro area debt crisis, and in our reliance on complementary analytical tools (“tool kit”). Overall, the paper suggests that: (i) sovereign-to-sovereign spillover risks have weakened, arguably also due to a more limited role of redenomination risk; (ii) financial spillovers from sovereigns to banks (and vice versa) have become smaller in recent years; and (iii) the bank-to-bank transmission channel remains the most relevant in terms of financial spillovers and potential contagion. Finally, when analysing the impact of financial spillovers on the real economy, we find that higher financial risks can imply sizeable losses in terms of real GDP growth. |
| JEL: | C01 E43 G01 G21 G28 |
| Date: | 2021–01 |
| URL: | http://d.repec.org/n?u=RePEc:euf:dispap:137&r=all |
| By: | Alexander Jiron; Wayne Passmore; Aurite Werman |
| Abstract: | As developed by the BCBS, the expected impact framework is the theoretical foundation for calibrating the capital surcharge applied to global systemically important banks (G-SIB surcharge). This paper describes four improvements to the current implementation of the BCBS expected impact framework. We (i) introduce a theoretically sound and an empirically grounded approach to estimating a probability of default (PD) function; (ii) apply density-based cluster analysis to identify the reference bank for each G-SIB indicator; (iii) recalibrate the systemic loss-given-default (LGD) function that determines G-SIB scores, using both the current system based on supervisory judgment and using an alternative system based on CoVaR; and (iv) derive a continuous capital surcharge function to determine G-SIB capital surcharges. Our approach would strengthen the empirical and theoretical foundation of the G-SIB surcharge framework. Moreover, the continuous surcharge function would reduce banks' incentive to manage their balance sheets to reduce systemic capital surcharges, mitigate cliff effects, allow for the lifting of the cap on the substitutability score and penalise growth in the category for all G-SIBs. In addition, our two capital surcharge functions might be used to monitor G-SIBs' capital adequacy and distortions induced by G-SIB surcharges. |
| Keywords: | xxxxxx investment funds, herding, bank regulation, leverage ratio, social welfare |
| JEL: | G21 G23 G28 D62 |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:935&r=all |
| By: | Michal Kuchta (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Opletalova 26, 110 00, Prague, Czech Republic) |
| Abstract: | The industry consensus on the implementation of the International Financial and Reporting Standard 9 - Financial Instruments (IFRS9) in the field of credit risk is that the estimation of credit risk parameters should be conditioned in the baseline, upside and downside macroeconomic scenarios presumed to be representative of the respective state of the economy. The existing approaches to scenario generation and probability weights assignment suffer from arbitrary inputs, e.g. expert judgment, quantiles selection, severity metric, the specification of a conditioned path. We present a pioneering forecasting approach using a Bayesian MS-VAR which is net of these arbitrary components. This method allows for the consistent contemporaneous formulation of the baseline and alternative scenarios and endogenously ties them to their respective probability weights. We propose to generate representative scenarios as unconditional regime-specific forecasts and to calculate the probability weights associated with representative scenarios as unconditional lifetime transition probabilities. We illustrate the method on artificial as well a real data and conduct an empirical backtest, in which generated scenarios are compared to the actual development during the financial crisis. The method is challenged with the DSGE model and conditional forecasting. |
| Keywords: | scenario generation, IFRS9, Markov-switching VAR, Bayesian |
| JEL: | C11 C32 C53 G17 G38 |
| Date: | 2021–04 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2021_10&r=all |
| By: | NISHIOKA Shuichiro; OKUBO Toshihiro; TANAKA Mari |
| Abstract: | Since the burst of the bubble economy in the early 1990s, the stock and real estate prices collapsed in Japan. Among financial institutions, city banks were impacted the most. As a result, city banks reduced lending markedly, whereas regional banks kept credit flowing to borrowers. We use the plant-level data from the manufacturing sector to examine how regional differences in the share of city banks influenced plant survival. Using the historic share of city banks for each prefecture, we show that survival rates of plants in the mid-1990s were significantly lower in the prefectures with a high share of city banks. However, prefectures that underwent aggressive restructuring of city banks saw no improvements in employment and the prevalence of zombies as well as the reduction of regional markups and productivity. |
| Date: | 2021–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:21021&r=all |
| By: | Merike Kukk; Natalia Levenko |
| Abstract: | The paper investigates how much alternative options for corporate financing have affected the quality of domestic corporate bank loans in Estonia. We use quarterly data from 2004Q1–2019Q3 and three different methods to detect the relationship between the non-performing corporate loans of domestic banks and alternative sources of financing for firms. We find that a rise in intra-group borrowing from parent companies is associated with an increase in overdue corporate loans. There is also some evidence that foreign bank loans and trade credit might be positively related to non-performing corporate loans. The results suggest that a broader set of sources of corporate financing beyond domestic bank loans should be considered when assessing the dynamics of the overdue corporate loans of the domestic banking sector. |
| Keywords: | corporate debt, non-performing loans, alternative financing, Bayesian model averaging, local projection method |
| JEL: | G32 G34 C11 C14 |
| Date: | 2021–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:eea:boewps:wp2020-6&r=all |
| By: | Lorie Logan |
| Abstract: | Remarks at the Annual Primary Dealer Meeting (delivered via videoconference). |
| Keywords: | pandemic; COVID-19; mortgage-backed securities (MBS); Open Market Trading Desk (the Desk); money markets; open market operations; Treasury; purchases; Federal Reserve; reserves |
| Date: | 2021–04–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsp:90754&r=all |