Performance of Thailand banks after the 1997 East Asian financial crisis

The performance of commercial banks and government-owned specialized banks in Thailand is estimated after the 1997 East Asian financial crisis. Commercial banks exhibit increasing returns to scale, whereas government-owned specialized banks exhibit decreasing returns to scale, implying further increases in bank size and market concentration in the commercial bank sector but not for government specialized banks. Cost inefficiency varies by bank and is a function of the ratio of nonperforming loans (NPLs) to total loans, equity to total assets and liquid assets to total assets, as well as the number of branches. On average, banks with fewer NPLs, that are well capitalized and with adequate liquidity are efficient. Thus, stricter rules to regulate credit risk management and ensure capital and liquidity adequacy would enhance efficiency in the banking sector. Although estimated input substitutability appears to be low, labour and loanable fund are substitutes. However, labour and physical capital as well as physical and loanable funds are complements in commercial banks. All the three inputs of labour, physical capital and loanable funds are substitutes for the government specialized banks.     

不良贷款约束下的中国银行业全要素生产率增长研究

本文运用共同边界Malmquist-Luenberger生产率指数测度了2004—2009年中国27家商业银行在不良贷款约束下的全要素生产率增长及其成分,并对影响全要素生产率增长的宏观经济因素进行了实证分析。本文的主要结论有:在表示偏离共同边界的技术落差比率方面,国有商业银行呈"V"型,股份制商业银行较平稳,城市商业银行逐步上升;总体上,中国银行业的全要素生产率是进步的,纯技术进步是推动全要素生产率进步的主要动力,纯技术效率变化和规模效率变化进步都不明显,技术规模变化显示中国银行业趋向CRS边界;股份制商业银行的纯技术赶超最优,而潜在技术相对变动方面表现较弱;外资银行进入和固定资产投资增加对银行全要素生产率提高有推动作用。     

Lending conditions in EU: The role of credit demand and supply

We analyse the bank lending activity after the financial crisis and focus on bank-specific supply factors. Using a rich microeconomic dataset from Bankscope and macroeconomic shocks data, we employ OLS and 2SLS fixed effects models with banking controls, macroeconomic shocks and institutional quality. The banks’ loan-rate spreads increased despite the recent policy of low interest rates and quantitative easing. We use the bank asset quality as instruments to capture exogenous changes in loan supply. The empirical evidence shows that loan-rate spread and through this the supply of loans is negatively affected by a low asset quality and capital ratios.     

The Asian Currency Crises: Vulnerability, Contagion, or Unsustainability

The Asian currency crises have been introduced by many economists as evidence that almost any country could be vulnerable to speculative attacks and to contagion effects, even with apparently good economic fundamentals. These financial crises have also been interpreted by other economists as rational market reactions to the unsustainability of domestic macroeconomic policies or structural weaknesses. The objective of this paper is to evaluate the relative importance of macroeconomic unsustainability, financial vulnerability, and crisis contagion in a model that explains and predicts the Asian currency crises. Out-of-sample forecasts based on two-stage panel and logit regressions provide evidence of a pure contagion effect, which significantly worsened the crises. They also show that Indonesia was the only one of the six Asian nations examined (India, Indonesia, Malaysia, Philippines, South Korea, Thailand) that was in an unsustainable economic situation, and that the other five nations were only vulnerable to a currency crisis.     

THE POST‐ASIAN CRISIS DROP IN INVESTMENT: THE CASES OF INDONESIA,KOREA, MALAYSIA,AND THAILAND

This study analyzes drops in East Asian investment and their determinants after the 1997–1998 Asian financial crisis. We first employ a random level‐shift autoregressive model to quantify the shift in investment ratios of four Asian economies hit by the 1997–1998 Asian financial crisis: Indonesia, Korea, Malaysia, and Thailand. We trace the major historical shifts in the levels of investment ratios and we find that the cumulated downward shifts in investment ratios during 1997–1998 for Indonesia, Korea, Malaysia, and Thailand are 6, 5, 14, and 14 percentage points, respectively. The investment ratios of most countries experienced several rebounds between 1999 and 2001, but the rebounds were too small to bring investment ratios back to their pre‐1990 levels. Having identified the episodes of investment shifts, the Bayesian Model Averaging (BMA) and several robust tests are employed to investigate the determinants of those level shifts in investment ratios. We find that real per capita gross domestic product growth and banking crises are the two most important factors contributing to shifts in the investment levels of these four crisis‐hit Asian economies. The results are useful in understanding the causes and remedies of global imbalances. (JEL C11, E22, F32, O53)     

Japanese Bank Productivity, 2007–2012: A Dynamic Network Approach

We estimate a dynamic network (DN) directional output distance function for 100 Japanese banks operating during 2007–2012. Network production occurs in that deposits and other funds raised are produced as intermediate products in stage 1 and those intermediate products are used to generate a portfolio of assets in stage 2. The dynamic technology links production periods via nonperforming loans (NPL) and carryover assets, which take the form of excess reserves. Carryover assets expand the future production possibility set while NPL shrink future production possibilities. We extend previous DN methods to measure the performance of three types of Japanese commercial banks: city banks, regional banks and second regional banks. We test for and find differences in the three bank technologies relative to a common technology. Such differences are likely due to different institutional and regulatory structures. Unlike previous DN studies, we also allow for a non‐uniform abatement factor between previously‐produced NPL and other inputs in stage 1 and between performing loans and NPL in the current period. Measured productivity change is greater when each bank faces their own group technology rather than the pooled technology consisting of all bank types.     

Credit Risk Determinants for the Bulgarian Banking System

Using an autoregressive distributed lag model, this paper examines the factors that influence the credit risk of the Bulgarian banking system over the decade 2001–2010, as measured by non-performing loans. Recent papers aim to identify the determinants of non-performing loans using a cross-country modelling framework. As the South East European region (SEE) is non-homogeneous, our analysis is country-specific and captures the timeline between the bank privatisation era up to the global financial crisis and the ensuing Greek crisis. The contribution of our paper is twofold: it uses the ARDL modelling framework that is scarcely employed in related studies but also investigates spillover effects from the Greek crisis in view of the material presence of Greek banks in Bulgaria. In accordance with previous studies, the findings suggest that the credit risk determinants of Bulgarian banks should be sought endogenously in macroeconomic variables and industry-specific factors but also in exogenous factors. We evidence a pronounced role of the global financial crisis and the country’s bank regulatory framework. The Greek debt crisis appears to play an immaterial role indicating that Greek banks have not been a Trojan horse in the Bulgarian banking system.     

Do banking system transparency and competition affect nonperforming loans in the Chinese banking sector?

The increasing importance of transparency practices and the improving status of bank competition in China are rarely explored in nonperforming loans (NPLs) literature. Thus, the purpose of this study is to examine banking system transparency and competition along with macroeconomic and bank-specific variables as determinants of NPL. We use the two-step system GMM dynamic panel model for Chinese banks based on annual data from 2000 to 2014. Our results indicate that high transparency in the Chinese banking system decreases poor-quality assets but not in the case of government-owned banks, whereas increase in competition increases NPL. Moreover, we find mixed results in the context of macroeconomics and bank-specific variables. Our study has practical implications in risk management practices and macro prudential policies.     

Path modelling to bankruptcy: causes and symptoms of the banking crisis

This article studies the bankruptcy of US banks since 2009. It first analyses the financial symptoms that precede bankruptcy, such as low profitability, insufficient revenue or low solvency ratios. It also goes into the causes of these symptoms. It poses several hypotheses on causes of failure, such as loan growth (some of them risky), specialization (in this case concentration in real estate) and the pursuit of a turnover-driven strategy neglecting margin. It presents and tests a structural equation modelling based on partial least squares path modelling (PLS-PM) and logistic regression. Results show that, 5 years before the crisis, failed banks had, compared to solvent banks, the following: higher loan growth, higher concentration on real estate loans, higher risk ratios, higher turnover, but lower margins. A relationship is found between symptoms and causes. Failed banks present a significant relationship between the percentage of real estate loans and risk. This relationship is negative in excellent banks, confirming that they allocated less real estate loans with a high quality. Nonfailed banks compensated increases in risk by strengthening their core capital.     

Macroeconomic and bank-specific determinants of non-performing loans: the case of baltic states

Empirica - This study examines selected macroeconomic and bank-specific determinants of non-performing loans (NPLR) for a panel of 21commercial banks from the Baltics States (Estonia, Latvia and...     

The Efficiency of China's Banking Industry and the Determinants

The recent global financial crisis highlights the importance of a sound financial sector for economic development. This paper evaluates the economic efficiency of China's banking industry and investigates the determinants of this efficiency. Our analysis shows that the average economic efficiency of joint-stock commercial banks is highest, followed by the ‘Big Four’ state-owned commercial banks and city commercial banks. The economic inefficiency of these banks during the past 15 years was mainly caused by technical inefficiency, and this technical inefficiency was mainly caused by scale inefficiency. Using the scores of efficiency as dependent variables, the paper also comprehensively studies the impact of (1) the characteristics of individual banks, (2) the characteristics of the whole banking industry and (3) macroeconomic factors on banking efficiency. The results suggest a number of factors that banks can work on to improve efficiency and lend support to deepening reforms in the Chinese banking industry, including regulatory reforms that require capital adequacy in a more strict way, reforms that introduce more competition and, more broadly, reforms that aim at establishing institutions that can truly commercialize Chinese banks. Last but not least, the efficiency of banking depends on healthy growth of the overall economy.     

现有银行产权制度下的不良资产生成机制

在目前银行改革的背景下,银行的不良资产仍然是阻碍银行发展的重大问题.本文分别在对称信息和不对称信息的前提下,通过建立两阶段的动态博弈模型,用激励相容约束机制,阐明国有银行不良资产之所以仍然不断涌现,是由于政府对银行产权份额的过多持有,激励不够充分而导致的.在此基础上,提出目前银行改革的主要问题和相应的政策建议.     

Dynamic linkages between exchange rates and stock prices: Evidence from East Asian markets

This study examines dynamic linkages between exchange rates and stock prices for seven East Asian countries, including Hong Kong, Japan, Korea, Malaysia, Singapore, Taiwan, and Thailand, for the period January 1988 to October 1998. Our empirical results show a significant causal relation from exchange rates to stock prices for Hong Kong, Japan, Malaysia, and Thailand before the 1997 Asian financial crisis. We also find a causal relation from the equity market to the foreign exchange market for Hong Kong, Korea, and Singapore. Further, while no country shows a significant causality from stock prices to exchange rates during the Asian crisis, a causal relation from exchange rates to stock prices is found for all countries except Malaysia. Our findings are robust with respect to various testing methods used, including Granger causality tests, a variance decomposition analysis, and an impulse response analysis. Our findings also indicate that the linkages vary across economies with respect to exchange rate regimes, the trade size, the degree of capital control, and the size of equity market.     

A dynamic approach to analysing the effect of the global crisis on nonperforming loans: evidence from the Turkish banking sector

This article analyses the effect of the global crisis on the determinants of nonperforming loans (NPLs) in the Turkish banking sector by using dynamic panel estimation techniques. Empirical findings suggest that NPLs present persistence, which is more evident after the crisis, while other regressors have also persistent effects in the post-crisis period. Moreover, NPLs are mostly shaped by bank-specific variables before the crisis, whereas, after the crisis, NPLs are also driven by macroeconomic and policy-related variables. In particular, the post-crisis significance of GDP, policy rate and sovereign debt shows that robust economic activity, tight monetary policy and strong fiscal balances restrict NPLs, thereby enhancing financial stability. The significance of inflation in both sub-periods shows that commitment to price stability objective is indispensable for limiting NPLs and promoting financial stability. In the period ahead, the speed and the direction of normalization in global monetary policies may determine the course of financial conditions, which, therefore, have implications regarding NPL dynamics and financial stability.     

Bank profitability and macroeconomic conditions: Are business models different?

The paper investigates the impact of macroeconomic conditions on the profitability of EU banks by testing for differential effects according to the business model. We group banks into three business models using a hierarchical cluster analysis and find that using clusters based on the share of assets invested in loans reveals heterogeneity in the sensitivity of bank profitability to economic growth across business models. Our main result is that GDP growth, credit growth, and the risk-free yield curve influence profitability as expected, but we also find that the effect of GDP growth is only significant for banks that have a high and medium share of assets invested in loans, and not for banks that hold large portfolios of securities. This difference depends on the impact of growth on asset write downs, especially those on loans and, to a lesser extent, on revenues. The results suggest that studies relating bank profitability to macroeconomic conditions should take the heterogeneity of business models into account.     

Pyramidal group structure and bank risk in Thailand

This paper investigates how banks and finance companies operate in business groups. Using uniquely detailed ownership data from Thailand, we find that the controlling shareholders extensively use pyramids to control banks and finance companies and assign different lending strategies across pyramidal tiers. Lower-tier banks tend to extend loans more aggressively and perform more poorly, while upper tier banks carry out more profitable investments. After the crisis hit, upper-tier banks survived and almost all lower-tier banks went bankrupt. Our results suggest that the multilayer organizational structure of bank ownership can affect a bank’s lending behavior and its resistance to economic shocks.     

The Usual Suspects? Productivity and Demand Shocks and Asia–Pacific Real Exchange Rates

A productivity-based model of East Asian relative prices and real exchange rates is tested using calculated productivity levels for China, Indonesia, Japan, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. Time-series regressions of the exchange rate on relative productivity ratios indicate such a relationship for Japan, Malaysia, and the Philippines (and Indonesia and Korea when oil prices are included). Panel regression provides slightly more encouraging results when the panel encompasses a subset of countries (Indonesia, Japan, Korea, Malaysia, and the Philippines). Neither government spending nor the terms of trade appear to be important factors.     

The Macroeconomic Implications of Regulatory Capital Adequacy Requirements for Korean Banks

The capital adequacy requirement, combined with the flight to quality, contributed to a drastic credit slowdown and a sharp recession in Korea in the aftermath of the financial crisis. Since most banks were placed under the strengthened capital adequacy constraints, they reduced loans to firms with high credit risks. As a result, bank-dependent small and medium-sized enterprises (SMEs) were badly hit, and eventually demand for bank loans fell. The reduction in loans was most visible among banks with poor capital adequacy, yet the overall change in bank portfolios had a disproportionately large negative influence on financial conditions for SMEs. In conclusion, the banks' response to capital adequacy requirements resulted in changes in the loan/bond ratio which, in turn, reduced loans to SMEs and caused a sharp cut in production. The resulting contraction in SME production created a polarized industrial structure and a chronic depression in the traditional sectors of the economy. The introduction of capital adequacy requirements (CARs) in the wake of financial crisis worsened conditions for SMEs and weakened the validity of the CARs that were mainly necessitated by successive failures among larger firms.     

商业银行危机成因研究

商业银行安全是金融安全的重中之重,因此,国际金融界和各国政府都十分重视防范商业银行危机。本文运用统计理论与方法,从银行内部管理不善、贷款过于集中、投机行为、宏观经济形势恶化、贷款人的逆向选择及道德风险、同业竞争过度等角度系统分析了商业银行危机的产生原因与机制,商业银行危机产生的原因。     

中国银行业系统性风险研究*——宏观审慎视角下的三个压力测试

本文在传统网络模型中加入去杠杆—降价抛售机制,研究以下两类宏观经济冲击对银行体系系统性风险的影响。从房地产贷款违约压力测试看,房地产贷款违约引起的传染风险是系统性风险的重要来源;传染损失比重和去杠杆次数结果则表明,2007年我国银行面临的传染风险最高,之后呈现快速下降的趋势;参数敏感性结果表明,网络模型中去杠杆、降价抛售以及破产对传染风险的相对重要性依次递减。从地方政府融资平台贷款违约压力测试看,大型商业银行受平台贷款违约的影响小于股份制和城市商业银行。此外,平台贷款违约概率存在阈值,在阈值之上银行损失和倒闭急剧攀升。基于银行倒闭压力测试,量化出本文的网络模型相对于传统网络模型的优越性。本文还发现中国金融体系的系统重要性与系统脆弱性指标的“错配”对于维持金融体系稳定非常关键。