nep-ban New Economics Papers
on Banking
Issue of 2022‒05‒09
28 papers chosen by
Sergio Castellanos-Gamboa, , Pontificia Universidad Javeriana

  1. Fiscal support and monetary vigilance: Economic policy implications of the Russia-Ukraine war for the European Union By Olivier J Blanchard; Jean Pisani-Ferry
  2. Epidemic Exposure, Financial Technology, and the Digital Divide By Saka, Orkun; Eichengreen, Barry; Aksoy, Cevat Giray
  3. Gambaran Umum Bank Syariah By khasanah, uswatun
  4. On the structural determinants of growth-at-risk By Martin Gächter; Martin Geiger; Elias Hasler
  5. Relevance of Wrong-Way Risk in Funding Valuation Adjustments By T. van der Zwaard; L. A. Grzelak; C. W. Oosterlee
  6. Macroeconomic Effects of Collateral Requirements and Financial Shocks By Aicha Kharazi
  7. Reinforcement Learning Policy Recommendation for Interbank Network Stability By Alessio Brini; Gabriele Tedeschi; Daniele Tantari
  8. A Structured Survey of Quantum Computing for the Financial Industry By Franco D. Albareti; Thomas Ankenbrand; Denis Bieri; Esther H\"anggi; Damian L\"otscher; Stefan Stettler; Marcel Sch\"ongens
  9. Slowdown of the Indian Economy during 2019-20: An Enigma or an Anomaly By Gupta, Poonam; Tyagi, Abhinav
  10. Retail Central Bank Digital Currencies (CBDC), Disintermediation and Financial Privacy: The Case of the Bahamian Sand Dollar By Kilian Wenker
  11. "Currency and commodity return relationship under extreme geopolitical risks: Evidence from the invasion of Ukraine". By Olga Dodd; Adrian Fernandez-Perez; Simon Sosvilla-Rivero
  12. Macroeconomic Drivers and the Pricing of Uncertainty, Inflation, and Bonds By Brandyn Bok; Thomas M. Mertens; John C. Williams
  13. An evolution of global and regional banking networks: A focus on Japanese banks’ international expansion By Harrison, Michael; Nakajima, Jouchi; Shabani, Mimoza
  14. Banks vs. markets : Are banks more effective in facilitating sustainability? By Newton, David P.; Ongena, Steven; Xie, Ru; Zhao, Binru
  15. The Effects of Conventional and Unconventional Monetary Policy Shocks on US REITs Moments: Evidence from VARs with Functional Shocks By Shixuan Wang; Rangan Gupta; Matteo Bonato; Oguzhan Cepni
  16. Fundamental Credit Analysis through Dynamical Modeling and Simulation of the Balance Sheet: Applications to Chinese Real Estate Developers By Xu, Jack
  17. Unintended Consequences of "Mandatory" Flood Insurance By Kristian S. Blickle; João A. C. Santos
  18. Big techs, QR code payments and financial inclusion By Thorsten Beck; Leonardo Gambacorta; Yiping Huang; Zhenhua Li; Han Qiu
  19. The Inverted Leading Indicator Property and Redistribution Effect of the Interest Rate By Patrick A. Pintus; Yi Wen; Xiaochuan Xing
  20. The return of (I)DeFiX By Florentina \c{S}oiman; Guillaume Dumas; Sonia Jimenez-Garces
  21. How Do Banks Respond to Capital Regulation? — The Impact of the Basel III Reforms in the United States By Nicholas Fritsch; Jan-Peter Siedlarek
  22. Gambaran Umum PerbankanSyariah Di indonesia By Ahmad, Rahmayani
  23. The Impact of Fintech Lending on Credit Access for U.S. Small Businesses By Giulio Cornelli; Jon Frost; Leonardo Gambacorta; Julapa Jagtiani
  24. Housing and credit misalignments in a two-market disequilibrium framework By Jaunius Karmelavičius; Ieva Mikaliūnaitė-Jouvanceau; Austėja Petrokaitė
  25. Gambaran Umum Perbankan Syariah By Yaqin, Ainul
  26. Research proposal on Identification of entrepreneur opportunity from traditional to the scientific method of managing crisis and disaster in financial sector of UAE By Sakib, S M Nazmuz
  27. Saving and Wealth Accumulation among Student Loan Borrowers: Implications for Retirement Preparedness By Lisa J. Dettling; Sarena F. Goodman; Sarah Reber
  28. The Limits of Hegemony: Banks, Covert Actions, and Foreign Firms By Aldunate, Felipe; Gonzalez, Felipe; Prem, Mounu

  1. By: Olivier J Blanchard (Peterson Institute for International Economics); Jean Pisani-Ferry (Peterson Institute for International Economics)
    Abstract: The economic shock from the war in Ukraine is forcing Europe to face difficult policy choices, according to Olivier Blanchard and Jean Pisani-Ferry. Governments must decide how best to soften the blow of higher energy and food prices, and how much to rely on debt finance. The European Central Bank must decide how to balance the fight against inflation with the need to sustain aggregate demand, in the face of decreases in real income. The authors analyze the impact of the war on the European economy, discuss the pros and cons of policy options, and call for coherence in balancing sanctions, fiscal measures, and monetary policy. They argue for the use of transfers rather than across-the-board subsidies and point to the room for debt finance. They show the potential role of tripartite wage agreement and also argue that monetary policy can remain on its current trajectory but be ready to adjust.
    Date: 2022–04
  2. By: Saka, Orkun (University of London); Eichengreen, Barry (University of California, Berkeley); Aksoy, Cevat Giray (European Bank for Reconstruction and Development)
    Abstract: We ask whether epidemic exposure leads to a shift in financial technology usage and who participates in this shift. We exploit a dataset combining Gallup World Polls and Global Findex surveys for some 250,000 individuals in 140 countries, merging them with information on the incidence of epidemics and local 3G internet infrastructure. Epidemic exposure is associated with an increase in remote-access (online/mobile) banking and substitution from bank branch-based to ATM activity. The temporary nature of the effects we identify is more consistent with a demand channel rather than that of supply with high initial fixed costs. Exploring heterogeneity using a machine-learning driven approach, we find that young, high-income earners in full-time employment have the greatest tendency to shift to online/mobile transactions in response to epidemics. Baseline effects are larger for individuals with better ex ante 3G signal coverage, highlighting the role of the digital divide in adaption to new technologies necessitated by adverse external shocks.
    Keywords: epidemics, fintech, banking
    JEL: G20 G59 I10
    Date: 2022–03
  3. By: khasanah, uswatun
    Abstract: Perkembangan perbankan syariah di Indonesia merupakan suatu perwujudan dari permintaan masyarakat yang membutuhkan suatu sistem perbankan alternatif yang selain menyediakan jasa perbankan/keuangan yang sehat, juga memenuhi prinsip- prinsip syariah. Penelitian juga menemukan bahwa variasi pembiayaan bank syariah dapat menjelaskan secara signifikan variasi pertumbuhan ekonomi. Dalam rangka meningkatkan kontribusi perbankan syariah terhadap pertumbuhan ekonomi, pihak terkait harus menyediakan kebijakan yang tepat untuk mempercepat pertumbuhan perbankan syariah di Indonesia.
    Date: 2022–04–06
  4. By: Martin Gächter; Martin Geiger; Elias Hasler
    Abstract: We examine structural di erences in growth vulnerabilities across countries associated with financial risk indicators. Considering trade openness, financial sector size, the public spending ratio and government effectiveness, our findings suggest the existence of a structural gap and a risk sensitivity gap. Hence, structural country characteristics not only drive level di erences in growth-at-risk (GaR) but also give rise to di erences in the responsiveness of GaR to financial risks. Furthermore, we show that the impact of structural characteristics varies over the forecasting horizon. A proper understanding of structural country characteristics in the context of the GaR framework is important to facilitate the use of the concept in macroprudential policy.
    Keywords: Growth-at-risk, vulnerable growth, structural characteristics, macroprudential policy
    JEL: E27 E32 E44 F43 G01 G20 G28
    Date: 2022–06
  5. By: T. van der Zwaard; L. A. Grzelak; C. W. Oosterlee
    Abstract: March 2020, the world was thrown into a period of financial distress. This manifested through increased uncertainty in the financial markets. Many interest rates collapsed and funding spreads surged significantly, which increased due to the market turmoil. In light of these events, it is key to understand and model Wrong-Way Risk (WWR) in a Funding Valuation Adjustment (FVA) context. WWR might currently not be incorporated in FVA calculations in banks' Valuation Adjustment (xVA) engines. However, we demonstrate that WWR effects are non-negligible in FVA modeling from a risk-management perspective. We look at the impact of various modeling choices such as including the default times of the relevant parties and we consider different choices of funding spread. A case study is presented for interest rate derivatives.
    Date: 2022–04
  6. By: Aicha Kharazi (Free University of Bozen-Bolzano, Italy)
    Abstract: This article explores the implications of borrower's side collateral constraints have on the real economy. The novel element in this model relative to the industry standard model is that I model the entrepreneurs, which are crucial for investment, as collateral constrained. The model is estimated using Bayesian methods and can be employed to measure the role of collateral. Regarding the results, I document that collateral requirements are highly volatile during the period of 2007–2012, and I find that the effect of an increase in collateral requirements is highly significant. Interestingly, the model assigns an important role for collateral in the shock decomposition, and the contribution of financial shocks is much marked during the financial crisis and substantially shapes macroeconomic fluctuations.
    Keywords: Business Loan, Collateral, Financial Shocks.
    JEL: E32 E44 G21
    Date: 2022–04
  7. By: Alessio Brini; Gabriele Tedeschi; Daniele Tantari
    Abstract: In this paper we analyze the effect of a policy recommendation on the performances of an artificial interbank market. Financial institutions stipulate lending agreements following a public recommendation and their individual information. The former, modeled by a reinforcement learning optimal policy trying to maximize the long term fitness of the system, gathers information on the economic environment and directs economic actors to create credit relationships based on the optimal choice between a low interest rate or high liquidity supply. The latter, based on the agents' balance sheet, allows to determine the liquidity supply and interest rate that the banks optimally offer on the market. Based on the combination between the public and the private signal, financial institutions create or cut their credit connections over time via a preferential attachment evolving procedure able to generate a dynamic network. Our results show that the emergence of a core-periphery interbank network, combined with a certain level of homogeneity on the size of lenders and borrowers, are essential features to ensure the resilience of the system. Moreover, the reinforcement learning optimal policy recommendation plays a crucial role in mitigating systemic risk with respect to alternative policy instruments.
    Date: 2022–04
  8. By: Franco D. Albareti; Thomas Ankenbrand; Denis Bieri; Esther H\"anggi; Damian L\"otscher; Stefan Stettler; Marcel Sch\"ongens
    Abstract: Quantum computers can solve specific problems that are not feasible on "classical" hardware. Harvesting the speed-up provided by quantum computers therefore has the potential to change any industry which uses computation, including finance. First quantum applications for the financial industry involving optimization, simulation, and machine learning problems have already been proposed and applied to use cases such as portfolio management, risk management, and pricing derivatives. This survey reviews platforms, algorithms, methodologies, and use cases of quantum computing for various applications in finance in a structured way. It is aimed at people working in the financial industry and serves to gain an overview of the current development and capabilities and understand the potential of quantum computing in the financial industry.
    Date: 2022–04
  9. By: Gupta, Poonam; Tyagi, Abhinav
    Abstract: In this paper, we analyze the deep and anomalous economic slowdown in 2019-20, when the Indian economy grew at a rate of 4 percent, the lowest in a decade. We argue that the slowdown was largely confined to one year, 2019-20. The growth rate in the prior years averaged at 7 percent a year, and in none of the other years was it significantly below this average rate of growth. In contrast to some of the prevailing narratives, the slowdown did not permeate widely across sectors and activities. It was concentrated primarily in the manufacturing sector. The agriculture sector grew faster than before, and the services sector experienced only a mild deceleration, that too in the last two quarters of the year. On the demand side, the slowdown was primarily reflected in a sharp contraction in exports. In comparison, consumption decelerated by a milder amount, investment growth was broadly flat, and government expenditure grew at a faster pace than in the previous decade. The slowdown can be accounted for by three factors. First, about a 50 basis points worth of the slowdown was due to the COVID-induced lockdown in the last week of March 2020. Second, more than 100 basis points worth of the slowdown was due to the collapse in exports, attributed both to a large global slowdown in trade, and to the fact that India lost ground to other countries in maintaining its market share in a slowing market. Finally, the credit collapse from banks, Non-Banking Financial Companies, and Housing Finance Companies mattered, which likely made the lack of credit an impediment to production, investment, export, and consumption decisions.
    Keywords: Development, Growth, Exports, Manufacturing, India
    JEL: E65 F40 O11 O47 O53
    Date: 2022–04
  10. By: Kilian Wenker
    Abstract: The fast-growing, market-driven demand for cryptocurrencies worries central banks, as their monetary policy could be completely undermined. Central bank digital currencies (CBDCs) could offer a solution, yet our understanding of their design and consequences is in its infancy. This non-technical paper examines how The Bahamas has designed the Sand Dollar, the first real-world instance of a retail CBDC. It contrasts the Sand Dollar with definition-based specifications. I then develop a scenario analysis to illustrate commercial bank risks. In this process, the central bank becomes a deposit monopolist, leading to high funding risks, disintermediation risks, and solvency risks for the com-mercial banking sector. I argue that restrictions and caps will be the new specifications of a regulatory framework for CBDCs if disintermediation in the banking sector is to be prevented. I identify the anonymity of CBDCs as a comparative disadvantage that will affect their adoption. These findings provide insight into governance problems facing central banks, and coherently lead to the design of the Sand Dollar. I conclude by suggesting that combating cryptocurrencies is a task that cannot be solved by a CBDC.
    Date: 2022–04
  11. By: Olga Dodd (Finance Department, Faculty of Business Economics and Law, Auckland University of Technology, New Zealand.); Adrian Fernandez-Perez (Finance Department, Faculty of Business Economics and Law, Auckland University of Technology, New Zealand.); Simon Sosvilla-Rivero (Complutense Institute for International Studies, Universidad Complutense de Madrid. 28223 Madrid, Spain.)
    Abstract: We examine the relationship between currency and commodity returns around the invasion of Ukraine in February 2022. We find that the expected positive contemporaneous relationship between currency and commodity returns reverses and becomes negative during this period of extreme geopolitical risks. In addition to commodity returns, currency returns around the invasion of Ukraine are significantly affected by geopolitical factors, particularly geographic distance to the war. Our results indicate that a war between two major commodity-exporting countries significantly affects global currency pricing.
    Keywords: Foreign exchange rates, Currency return, Commodity return, Russian invasion, Ukraine war, Geographic distance. JEL classification: F31, F51, G13, G14.
    Date: 2022–04
  12. By: Brandyn Bok; Thomas M. Mertens; John C. Williams
    Abstract: This paper analyzes a new stylized fact: The correlation between uncertainty shocks and changes in inflation expectations has declined and turned negative over the past quarter century. It rationalizes this fact within a standard New Keynesian model with a lower bound on interest rates combined with a decline in the natural rate of interest. With a lower natural rate, the likelihood of the lower bound binding increased and the effects of uncertainty on the economy became more pronounced. In such an environment, increases in uncertainty raise the possibility that the central bank will be unable to eliminate inflation shortfalls following negative demand shocks. As a result, the observed decline in the correlation between uncertainty and inflation expectations emerges. Average-inflation targeting policies can mitigate the longer-run effects of increases in uncertainty on the real economy.
    Keywords: uncertainty shocks; inflation expectations; bonds; macroeconomic drivers
    JEL: E52
    Date: 2022–04–13
  13. By: Harrison, Michael; Nakajima, Jouchi; Shabani, Mimoza
    Abstract: This paper examines the possible spillover effects of the global and regional crossborder claims of Japanese banks on domestic financial stability. We contribute to the existing literature by constructing a global banking network and applying the Spinglass methodology to detect communities formed within the network. Furthermore, we employ a novel spatial econometric approach, namely, a timevarying spatial autoregressive (SAR) model that captures the evolution of spillover effects over time. Our empirical results point to the dominant role of Japanese banks in the global banking network and the evolution of the East Asian regional banking network. Furthermore, our findings show considerable variation in the degree of influence of both the global and regional banking networks over time.
    Keywords: banking networks, spillover effect, spatial autoregression
    JEL: C23 G21 F34 R11
    Date: 2022–04
  14. By: Newton, David P.; Ongena, Steven; Xie, Ru; Zhao, Binru
    Abstract: Is bank- versus market-based financing different in its attitudes towards Environmental, Social, and Governance (ESG) risk? Using a novel sample covering 3,783 U.S. public firms from 2007 to 2020, we study how firm-level ESG risk affects its financing outcomes. We find that companies with higher ESG risk borrow less from banks than from markets, potentially to avoid bank monitoring and scrutiny. The Social and Governance components, in particular, matter. Furthermore, firms suffering higher numbers of negative ESG reputation shocks are less likely to continue to rely on bank credit in response to lenders' threats to end the lending arrangements. Finally, our results indicate that firms' ESG risk reduces after borrowing from banks but increases after bond issuance, suggesting that banks are more effective than public bond markets in shaping borrowers' ESG performance.
    JEL: G20 G21 G30 G32
    Date: 2022–04–27
  15. By: Shixuan Wang (Department of Economics, University of Reading, Reading, RG6 6EL, UK); Rangan Gupta (Department of Economics, University of Pretoria, Private Bag X20, Hatfield 0028, South Africa); Matteo Bonato (Department of Economics and Econometrics, University of Johannesburg, Auckland Park, South Africa; IPAG Business School, 184 Boulevard Saint-Germain, 75006 Paris, France); Oguzhan Cepni (Copenhagen Business School, Department of Economics, Porcelaenshaven 16A, Frederiksberg DK-2000, Denmark; Central Bank of the Republic of Turkey, Haci Bayram Mah. Istiklal Cad. No:10 06050, Ankara, Turkey)
    Abstract: We use a vector autoregressive model with functional shocks, capturing the shift of the entire term structure of interest rates on monetary policy announcement dates, to empirically evaluate the effects of conventional and unconventional monetary policy decisions on the Real Estate Investment Trusts (REITs) markets of the United States (US). Using 5-minute interval intraday data, we analyze not only the impact on REITs returns, but also its realized variance (RV), realized jumps (RJ), realized skewness (RSK), and realized kurtosis (RKU) over the daily period of September 2008 to June 2021. While the effects of conventional monetary policy shocks on the moments of REITs returns tend to conform with economic theories, the same is not necessarily the case with unconventional monetary policy shocks. In addition, though monetary policy shocks have the most persistent and strongest effects on RJ, the extreme behaviour of the REITs market is also observed through RSK and RKU. Moreover, when we look into 10 REITs sectors, there are indeed heterogeneity in terms of the strength of the effect, but not so much in terms of the sign of responses of the various moments compared to the overall market. Our results have important implications for REITs market participants, given its exponential growth as an asset class.
    Keywords: US REITs, Intraday Data, Higher-Moments, Conventional and Unconventional Monetary Policies, VAR with Functional Shocks
    JEL: C32 E43 E52 R3
    Date: 2022–04
  16. By: Xu, Jack
    Abstract: Fundamental credit analysis is widely performed by fixed income analysts and financial institutions to assess the credit risk of individual companies based on their financial data, notably the financial statements reported by the companies. Yet, the conventional analysis has not developed a computational method to forecast, directly from a company’s financial statements, the default probability, the recovery rate, and ultimately the fundamental valuation of a company’s credit risk in terms of credit spreads to risk-free rate. This paper introduces a generalizable approach to achieve these goals by implementing fundamental credit analysis in dynamical models. When combined with Monte-Carlo simulation, the current methodology naturally combines several novel features in the same forecast algorithm: 1. integrating default (defined as the state of negative cash) and recovery rate (under liquidation scenario) through the same defaulted balance sheet, 2. valuing the corporate real options manifested as planning in the amount of borrowing and expenditure, 3. embedding macro-economic and macro-financing conditions, and 4. forecasting the joint default risk of multiple companies. The method is applied to the Chinese real estate industry to forecast for several listed developers their forward default probabilities and associated recovery rates, and the fair-value par coupon curves of senior unsecured debt, using as inputs 6-8 years of their annual financial statements with 2020 as the latest. The results show both agreements and disagreements with the market-traded credit spreads at early April 2021, the time of these forecasts. The models forecasted much wider than market spreads on the big three developers, particularly pricing Evergrande in distressed levels. After setting up additional generic industry models, the current methodology is capable of computing default risk and debt valuation on large-scale of companies based on their historical financial statements.
    Keywords: fundamental credit analysis; financial statement analysis; default forecasting; bond valuation; debt valuation; dynamical models; joint default; corporate real options
    JEL: C6 G17
    Date: 2022–04–10
  17. By: Kristian S. Blickle; João A. C. Santos
    Abstract: We document that the quasi-mandatory U.S. flood insurance program reduces mortgage lending along both the extensive and intensive margins. We measure flood insurance mandates using FEMA flood maps, focusing on the discreet updates to these maps that can be made exogenous to true underlying flood risk. Reductions in lending are most pronounced for low-income and low-FICO borrowers, implying that the effects are at least partially driven by the added financial burden of insurance. Our results are also stronger among non-local or more-distant banks, who have a diminished ability to monitor local borrower adherence to complicated insurance mandates. Overall, our findings speak to the unintended consequences of (well-intentioned) regulation. They also speak to the importance of factoring in affordability and enforcement feasibility when introducing mandatory standards.
    Keywords: insurance; unintended consequences; regulation; FEMA maps; flooding; mortgage lending; access to credit
    JEL: G21 G28 Q5 Q54
    Date: 2022–04–01
  18. By: Thorsten Beck; Leonardo Gambacorta; Yiping Huang; Zhenhua Li; Han Qiu
    Abstract: Using a unique dataset of around half a million Chinese firms that use a QR code-based mobile payment system, we find that (i) the creation of a digital payment footprint allows firms to access credit provided by the same big tech company; (ii) transaction data generated via QR code generate spillover effects on access to bank credit; and (iii) there are positive effects of access to big tech credit on sales, including during the Covid-19 shock. The findings suggest that access to innovative payment methods helps micro firms build up credit history, and that using big tech credit can ease access to bank credit.
    Keywords: big tech, big data, QR code, banks, asymmetric information, financial inclusion, credit markets.
    JEL: D22 G31 R30
    Date: 2022–05
  19. By: Patrick A. Pintus (Aix Marseille Univ, CNRS, AMSE, Marseille, France); Yi Wen (Shanghai Jiao Tong University Antai College of Economics and Management: Shanghai, Xuhui District, CN); Xiaochuan Xing (Yale University)
    Abstract: The interest rate at which US firms borrow funds has two features: (i) it moves in a countercyclical fashion and (ii) it is an inverted leading indicator of real economic activity: low interest rates today forecast future booms in GDP, consumption, investment, and employment. We show that a Kiyotaki-Moore model accounts for both properties when interest-rate movements are driven, in a significant way, by self-fulfilling belief shocks that redistribute income away from lenders and to borrowers during booms. The credit-based nature of such self-fulfilling equilibria is shown to be essential: the dynamic correlation between current loanable funds rate and future aggregate economic activity depends critically on the property that the interest rate is state-contingent. Bayesian estimation of our benchmark DSGE model on US data shows that the model driven by redistribution shocks results in a better fit to the data than both standard RBC models and Kiyotaki-Moore type models with unique equilibrium.
    Keywords: endogenous collateral constraints, state-contingent interest rate, redistribution shocks, multiple equilibria
    JEL: E21 E22 E32 E44 E63
    Date: 2022–04
  20. By: Florentina \c{S}oiman (CASC, CNRS - UMR3571); Guillaume Dumas (CNRS - UMR3571); Sonia Jimenez-Garces (CERAG)
    Abstract: Decentralized Finance (DeFi) is a nascent set of financial services, using tokens, smart contracts, and blockchain technology as financial instruments. We investigate four possible drivers of DeFi returns: exposure to cryptocurrency market, the network effect, the investor's attention, and the valuation ratio. As DeFi tokens are distinct from classical cryptocurrencies, we design a new dedicated market index, denoted DeFiX. First, we show that DeFi tokens returns are driven by the investor's attention on technical terms such as "decentralized finance" or "DeFi", and are exposed to their own network variables and cryptocurrency market. We construct a valuation ratio for the DeFi market by dividing the Total Value Locked (TVL) by the Market Capitalization (MC). Our findings do not support the TVL/MC predictive power assumption. Overall, our empirical study shows that the impact of the cryptocurrency market on DeFi returns is stronger than any other considered driver and provides superior explanatory power.
    Date: 2022–04
  21. By: Nicholas Fritsch; Jan-Peter Siedlarek
    Abstract: Understanding banks’ responses to capital regulation is essential for regulators to use this key tool of modern banking regulation effectively. We study how and when US banks responded to changes to the way capital ratios are measured, changes that were introduced as part of the adoption of Basel III. We find that small banks — those below USD 10bn — responded neither before nor after the release of the new rules to the change in measured capital they experienced under the new rules. In contrast, we show that regional banks — those with total assets between USD 10bn and USD 50bn — adjusted their capital ratios to partially compensate for the changes resulting from the new rules: On average, if a bank’s capital ratio when measured under the new rules was lower than under the old rules, then the bank took steps to increase its capital ratio, compared to a bank whose capital ratio did not change with the new rules. This adjustment took place prior to the publication of the specific language applicable to US banks, suggesting that the changes were largely expected by that time. Both groups of banks responded in the periods following the release of the new US rules in relation to their exposure to mortgage servicing rights, suggesting that the severe treatment of this asset class was not expected. The bank responses we estimate take place well before the Basel III rules started to come into force after 2014, emphasizing the importance of policy announcements in shaping bank behavior.
    Keywords: bank regulation; bank capital; capital requirements
    JEL: G21 G28
    Date: 2022–04–20
  22. By: Ahmad, Rahmayani
    Abstract: Makalah ini berjudul gambaran umum perbankan syariah di Indonesia. Bank Syariah adalah lembaga keuangan negara yang memberikan kredit dan jasa-jasa lainnya di dalam lalu lintas pembayaran dan juga peredaran uang yang beroperasi dengan menggunakan prinsip-prinsip syariah atau Islam (Sudarsono). Keberadaan bank syariah dalam kancah perbankan Indonesia telah dikembangkan sejak tahun 1992, ditandai dengan berdirinya bank syariah pertama yaitu Bank Muamalat Indonesia (BMI). Bank ini telah menunjukkan eksistensinya, yaitu kemampuan bertahan dari terpaan krisis yang terjadi pada tahun 1997/1998. Perkembangan perbankan syariah semakin pesat, terutama setelah diubahnya Undang-undang Nomor 7 Tahun 1992 Tentang Perbankan dengan Undang-undang Nomor 10 Tahun 1998. Di buatnya makalah ini bertujuan agar para pembaca mampu memahami pengertian dari bank syariah serta bagaimana perannya bagi perekonomian di Indonesia. Kata kunci: Bank syariah, lembaga keuangan,
    Date: 2022–04–05
  23. By: Giulio Cornelli; Jon Frost; Leonardo Gambacorta; Julapa Jagtiani
    Abstract: Small business lending (SBL) plays an important role in funding productive investment and fostering local economic growth. Recently, nonbank lenders have gained market share in the SBL market in the United States, especially relative to community banks. Among nonbanks, fintech lenders have become particularly active, leveraging alternative data for their own internal credit scoring. We use proprietary loan-level data from two fintech SBL platforms (Funding Circle and LendingClub) to explore the characteristics of loans originated pre-pandemic (2016‒2019). Our results show that fintech SBL platforms lent more in zip codes with higher business bankruptcy filings and higher unemployment rates. Moreover, fintech platforms’ internal credit scores were able to predict future loan performance more accurately than the traditional approach to credit scoring. Using Y-14M loan-level bank data, we also compare fintech SBL with traditional bank business cards in terms of credit access and interest rates. Overall, fintech lenders have a potential to create a more inclusive financial system, allowing small businesses that were less likely to receive credit through traditional lenders to access credit and to do so at lower cost.
    Keywords: peer-to-peer (P2P) lending; marketplace lending; small business lending (SBL); Funding Circle; LendingClub; alternative data; credit access; credit scoring; fintech credit
    JEL: G18 G21 G28 L21
    Date: 2022–04–25
  24. By: Jaunius Karmelavičius (Bank of Lithuania); Ieva Mikaliūnaitė-Jouvanceau (Vilnius University and Bank of Lithuania); Austėja Petrokaitė (Bank of Lithuania)
    Abstract: During the Covid-19 pandemic, house prices and mortgage credit are growing at a long-unseen pace. However, it is unclear, whether such growth is warranted by the underlying market and macroeconomic fundamentals. This paper offers a new structural two-market disequilibrium model that can be estimated using full-information methods, and applied to analyse housing and credit dynamics. Dealing with econometric specification uncertainty, we estimate a large ensemble of the two-market disequilibrium model specifications for Lithuanian monthly data. Using the model estimates, we identify the historical drivers of Lithuania’s housing and credit demand and supply, as well as price and market quantity variables. The paper provides a novel approach in the financial stability literature to jointly measure house price overvaluation and mortgage credit flow gaps. We find that by mid-2021 Lithuania was experiencing a heating in housing and mortgage credit markets, with home prices overvalued by around 16% and the volume of mortgage credit flow being 20% above its fundamentals.
    Keywords: disequilibrium, fundamentals, misalignments, house prices, mortgage credit, early warning indicators
    JEL: C34 D50 E44 E51 G21
    Date: 2022–04–12
  25. By: Yaqin, Ainul
    Abstract: Bank adalah lembaga perantara keuangan atau biasa disebut financial intermediary. Artinya, lembaga bank adalah lembaga yang dalam aktivitasnya berkaitan dengan masalah uang. Oleh karena itu, usaha bank akan selalu dikaitkan dengan masalah uang yang merupakan alat pelancar terjadinya perdagangan yang utama.
    Date: 2022–04–05
  26. By: Sakib, S M Nazmuz
    Abstract: It has been addressed that the research methodology and the research design, philosophy, approach, and the data analysis technique of the project. The introduction of modern technologies has had a positive influence on the growth of the banking sector of the UAE. As per Mirzaei and Ali the financial technology has revolutionised the operations and activities previously performed by traditional financial institutes. The digitalisation of the services that the financial sector provides has drastically increased in the previous years. A basic definition for financial technology can be stated as implementing traditional techniques of the financial institutions with the help of internet and application-oriented products and services . The adoption of modern technologies had a big influence on the banking sector of the UAE increasing the performance of the banks. The results of the study by Kothari, Umesh, and Seetharaman , show that customers is being satisfied by the digital services provided by the banking sector yet there are threats that the banking sector faces as the digitalisation of valuable datasets are being done.
    Date: 2022–04–07
  27. By: Lisa J. Dettling; Sarena F. Goodman; Sarah Reber
    Abstract: Borrowing for education has increased rapidly in the past several decades, such that the majority of non-housing debt on US households' balance sheets is now student loan debt. This chapter analyzes the implications of student loan borrowing for later-life economic well-being, with a focus on retirement preparation. We demonstrate that families holding student loan debt later in life have less savings than their similarly educated peers without such debt. However, these comparisons are misleading if the goal is to characterize the experience of the typical student borrower, as they fail to account for student borrowers who already paid off their debt. We develop strategies to locate families that ever financed their education with student loans in two large datasets which enables us to draw more meaningful comparisons. We find that student loan borrowers roughly follow the earnings, saving, and wealth trajectories of other college-educated families into late-career ages and are much better off financially than those that did not attend college.
    Keywords: College; Retirement; Saving; Student loan debt; Survey of consumer finances; Wealth
    JEL: G51 J26 J24 E21 I22
    Date: 2022–04–01
  28. By: Aldunate, Felipe; Gonzalez, Felipe; Prem, Mounu
    Abstract: Economic sanctions and covert actions from hegemonic states are common tools used to in-fluence other countries. Less is known about non-state actors such as banks and their impact across borders. We use new firm-level data from Chile to document a substantial decrease in financial relations with U.S. banks after socialist Salvador Allende took office in 1970. An analysis of links with banks from other countries reveals that part of the decrease was specific to the U.S. banking sector. Business reports and stock prices suggest that firms were mostly unaffected by the destruction of links with U.S. banks. Substitution of financial relations to-wards state-owned banks appears to be the key mechanism to explain these findings.
    Date: 2022–04–20

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