Bank Capital and the Credit Crunch: The Roles of Risk-Weighted and Unweighted Capital Regulations

We investigated whether in recent years banks have increased their holdings of securities at the expense of their holdings of business loans in response to shortfalls of their capital relative to risk-weighted capital standards and relative to a capital standard that made no explicit allowance for credit risk. We estimated that bank credit fell by about $4.50 for each $1 that a bank's capital fell short of the unweighted capital standard. Banks that had less capital than required by the risk-weighted standard appear to have shifted away from assets with low risk weights (securities and single-family mortgages) and to have shifted toward assets with higher risk weights (commercial real estate and commercial and industrial loans). When we included both shortfall variables in a regression, shortfalls relative to the unweighted capital standard significantly affected bank credit, while shortfalls of capital relative to the risk-weighted standard did not. We found no significant effects of capital shortfalls at other, local-competitor banks on bank portfolios. Delinquencies in a given category of a bank's loans generally had significantly negative effects on that bank's holdings of loans in that category. In contrast, banks tended to increase holdings of loans in categories in which local-competitor banks were experiencing higher delinquency rates.     

Can Bank Lines of Credit Protect REITs against a Credit Crisis?

In a tight credit market, the primary concern of most real estate investment trusts (REITs) is the ability to access capital and maintain adequate liquidity. Bank lines of credit or loan commitments, which are legally binding contracts arranged to provide debt at the call of the borrowers under prespecified terms, have been theorized to provide insurance protection against a credit crisis. This article examines whether bank lines of credit can indeed provide some insurance for REITs and allow them to access credit during bad times. Covering three credit crunch events, both the origination and utilization patterns of commitment loans by 275 REITs publicly traded between 1992 and 2007 are analyzed. We find that bank lines of credit insulated REITs from credit rationing at both the broad market level as well as at the firm level. However, the insurance value is qualified in the case of smaller and risky firms which may not get to extend their credit limit or draw down on their existing credit lines in a credit crisis.     

ICT adoption,innovation, and SMEs’ access to finance

This study examines the association between ICT adoption, innovation, and SMEs' access to finance by exploiting the World Bank Enterprise Survey (WBES) data of 171,000 SMEs from 149 countries between 2006 and 2020. We decompose SMEs' access to finance into two components, i.e., basic and advanced access to finance. Basic access to finance is captured from two indicators; namely, the firm's bank account and line of credit from a financial institution, while advanced access is captured by whether the firm's investments and working capital is financed by the bank. Consistent with the information asymmetry hypothesis, our findings confirm that ICT adoption reduces information asymmetry between SMEs and banks. Therefore, banks are more likely to grant credit and to finance projects and the working capital needs of innovative SMEs. Moreover, this study complements the argument of resource-based theory (RBT) and suggests that innovation can provide a competitive advantage with regard to a firm's access to credit. These results imply that SMEs with greater access to and use of new technologies are more likely to acquire financial resources from banks. The results hold to various robustness checks and identification strategies. Our findings provide important policy implications for SMEs around the globe.     

Knowledge spillover in corporate financing networks: embeddedness and the firm's debt performance

Building on social embeddedness theory, we examine how the competencies and resources of one corporate actor in a network are transferred to another actor that uses them to enhance transactions with a third actor—a strategic process we dub ‘network transitivity.’ Focusing on the properties of network transitivity in the context of small‐firm corporate finance, we consider how embedded relations between a firm and its banks facilitate the firm's access to distinctive capabilities that enable it to strategically manage its trade‐credit financing relationships. We apply theory and original case‐study fieldwork to explore the types of resources and competencies available through bank–firm relationships and to derive hypotheses about how embedded bank–firm relationships affect the strategy of small‐ to medium‐sized firms. Using a separate large‐scale data set, we then test the generalizability of our hypotheses. Our qualitative analyses show that embedded bank–firm ties provide special governance arrangements that facilitate the firm's access to bank‐centered informational and capital resources, which uniquely enhance the firm's ability to manage trade credit. Consistent with our arguments, our statistical analyses show that small‐ to medium‐sized firms with embedded ties to their bankers were more likely to take lucrative early‐payment trade discounts and avoid costly late‐payment penalties than were similar firms that lacked embedded ties—suggesting that social embeddedness beneficially affects the financial performance of the firm. Copyright © 2002 John Wiley & Sons, Ltd.     

Bank Regulatory Agreements and Real Estate Lending

Recent studies have found that banks with low capital ratios have significantly decreased their lending to the real estate sector. This correlation between real estate lending and bank capital could be the result of voluntary decisions by banks to recapitalize, or it could be the result of direct actions taken by bank regulators. We find that banks with low capital ratios reduce their real estate lending substantially more after formal regulatory actions have been initiated by regulators. Furthermore, this reduction in lending is particularly large for the categories of real estate borrowers most likely to be bank dependent.     

Bank Efficiency, Risk-Based Capital, and Real Estate Exposure: The Credit Crunch Revisited

The turbulent real estate market during the early 1990s coincided with the implementation of risk-based capital standards for commercial banks. In this study we use non-parametric linear programming techniques to identify the lost real estate lending due to bank inefficiency. Inefficiency may arise from one of three sources: risk-based capital standards which constrain bank real estate lending, inefficiency stemming from managerial oversight of real estate lending, and scale inefficiency which arises from banks not operating at constant returns to scale. The results indicate that the lost real estate lending associated with risk-based capital standards averaged 2.7% of total bank assets. However, banks could compensate by exercising better managerial oversight of real estate lending and by operating at constant returns to scale.     

Credit rationing and implicit contract theory : An empirical study

This paper investigate whether or not implicit contract relations predominate in the Japanese bank loan market and produce equilibrium credit rationing. The empirical evidence suggests that risks are shared between banks and firms through interest rate arrangements. This implies that commercial banks in Japan operate in a market dominated by implicit contract relations. However, the evidence does not support the view that Japanese commercial banks execute credit rationing in the sense of Fried and Howitt (1980). Furthermore, the results show that large banks differ from small banks in the risk consideration of loan contracts. These empirical results are completely consistent with the intermarket business group hypothesis such that the group formation aims to share risks and profits among members.     

Investor Sentiment,Limits to Arbitrage and Private Market Returns

This article examines the relation between investor sentiment and returns in private markets. Relative to more liquid public markets, private investment markets exhibit significant limits to arbitrage that restrict an investor's ability to counteract mispricing. Using vector autoregressive models, we find a positive and economically significant relation between investor sentiment and subsequent private market returns. We provide further long‐horizon regression evidence suggesting that private commercial real estate markets are susceptible to prolonged periods of sentiment‐induced mispricing as the inability to short‐sell in periods of overvaluation and restricted access to credit in periods of undervaluation prevents arbitrageurs from entering the market.     

信用风险监管资本测度优化

在巴塞尔新资本协议框架下的IRB模型基础上,通过违约相关性模型的推导,得出了降低信贷资产组合信用风险加权资产的一些有效途径;通过对同质类资产组合和异质类资产组合的风险集中度调整的方法,提出了风险分散的具体路径;通过由银行的资本总成本最小化约束模型和监管者破产银行数目最小化约束模型联合组成的激励相容模型,将银行出于内部风险管理目的而计算出来的风险价值,同监管当局出于监管目的而要求银行确定的监管资本有效地联系起来。     

External Financing Constraints and Firm Innovation

We investigate the effect of individual banks affected by the recent financial crisis of 2008/2009 on the innovation activities of their business customers. Firms associated with a bank that relies strongly on the interbank market are more likely to be exposed to a credit supply shock during the financial crisis and therefore face external financing constraints. Exploiting both the extensive and the intensive margin, our difference‐in‐differences results imply that those firms which have a business relation to a bank with higher interbank market reliance reduce their innovation activities during the financial crisis to a higher degree than other firms. Tests for additional expenditures reveal that marketing expenditures show a lower or even no sensitivity to bank financing during the financial crisis.     

高新技术产业发展的金融支持研究

高新技术产业与金融存在互促共进的关系,高新技术产业化需要金融支持。高新技术产业发展技术经济系统是分为多阶段的,由于各个阶段和各个环节投融资的金融价值不同,对投融资需求的方式和数量也不同,从而导致对金融工具多样性的需求。除大型企业通过内源性融资进行研发外,高新技术产业成长根据各个阶段的目标、主体和特点不同,需要选择商业银行、投资银行、共同基金、风险投资基金、资本市场等不同的渠道融资和方式。     

数字普惠金融与商业信用二次配置

商业信用二次配置是企业充当信用中介,将银行信贷等资金通过商业信用的渠道为供应链的上下游中小企业提供融资支持,这会导致资金供给链延长,加剧了供应链系统性风险,而数字普惠金融发展的重点在于为中小企业提供直接融资,因此,其能否抑制商业信用二次配置,对于防范金融风险和促进实体经济稳定发展具有重要意义。本文深入探讨了数字普惠金融对商业信用二次配置的影响及其作用机制,研究发现:数字普惠金融有助于降低商业信用二次配置,有效减少了企业利用商业信用把长期借款资金进行二次配置的行为,而且该抑制作用对于外部融资能力较强的企业更加明显。机制检验表明,数字普惠金融通过减少上市公司超额银行信贷抑制商业信用二次配置。进一步分析显示,在外部市场竞争程度较低、内部风险较低、现金持有水平较高以及非高科技企业中,数字普惠金融对上市公司商业信用二次配置的抑制作用更加明显;而且,数字普惠金融在降低商业信用二次配置的同时,对于促进企业创新投入具有一定的积极作用。本文研究表明,数字普惠金融通过增加中小企业直接融资,减少了资金供给的中间环节,进而抑制大型企业充当"影子银行"进行资金的二次配置。     

Innovation in the Retail Banking Industry: The Diffusion of Credit Scoring

We study technology diffusion in the retail banking industry. Our contribution to the empirical literature is twofold: Firstly, we explore technology diffusion in the financial sector, whose relevance has often been neglected; secondly we focus on credit scoring adoption, a relevant process innovation still under-explored. Estimating a set of duration models, we analyze the patterns of diffusion of this technology among Italian banks. We find that credit scoring is firstly introduced by large banks with broad branch networks, which can fully exploit scale economies. We present robust evidence that banks with large market shares operating in more concentrated markets are early adopters, providing a direct support of the Schumpeterian hypothesis that market power enhances innovation.The views expressed here are those of the authors and do not necessarily reflect those of the Bank of Italy.     

Payment Systems and Interchange Fees

In a typical bank credit card transaction, the merchant's bank pays an interchange fee , collectively determined by all participating banks, to the cardholder's bank. This paper shows how the interchange fee balances charges between cardholders and merchants under imperfect competition. The privately optimal fee depends mainly on differences between cardholders' and merchants' banks, not their collective market power. In a non-extreme case, the profit-maximizing interchange fee also maximizes total output and producers' plus consumers' surplus. There is no economic basis for favoring proprietary payment systems, which do not need interchange fees to balance charges, over the cooperative bank card systems.     

Residential Mortgage Credit Derivatives

As the fallout from subprime losses clearly demonstrates, the credit risk in residential mortgages is large and economically significant. To manage this risk, this article proposes the creation of derivative instruments based on the credit losses of a reference mortgage pool. We argue that these derivatives would enable banks to retain whole loans while also enjoying the capital benefits of hedging the credit risk in their mortgage portfolios. In comparisons of hedging effectiveness, the analysis shows that instruments based on credit losses outperform contracts based on house price appreciation.     

政府监管对银行稳健性的影响研究——基于中国上市商业银行的实证检验

以2006～2012年16家上市银行为样本,实证分析了特许权价值、资本监管、隐性保险对银行稳健性的影响。研究结果表明：特许权价值对银行风险存在自律效应,对银行绩效和银行流动性没有显著影响;资本监管能够降低银行风险,然而却降低了银行流动性,对银行盈利性没有显著影响;隐性保险制度对于稳健性差的银行保护较多;银行规模越大,银行稳健性越好,即存在“大而不倒”的情况;资本杠杆和经营杠杆对银行稳健性的影响不大：次贷危机对银行稳健性的影响不大,但金融危机对银行稳健性的影响依然存在。     

An Analysis of REIT Security Issuance Decisions

This article tests the ability of traditional capital structure theories to explain the issuance decisions of real estate investment trusts (REITs). For issuances made between 1997 and 2006, we find strong support for the market timing theory of capital structure. Controlling for past returns and growth, a REIT is more likely to issue equity when its price-to–net asset value ratio is high. This suggests that REITs issue equity in public markets when the cost of equity capital is lower in the public market than in the private market. Consistent with traditional market timing, REITs are more likely to issue equity after experiencing large price increases. We also find some support for REITs following the trade-off theory of capital structure. REITs are less likely to issue debt when proxies for expected bankruptcy costs are high.     

Complementarity,status similarity and social capital as drivers of alliance formation

Using data on U.S. investment banking firms’ syndication in underwriting corporate stock offerings during the 1980s, this study explores the factors that drive alliance formation between two specific firms. We compare resource complementarity, status similarity, and social capital as a basis of alliance formation. The findings indicate that the likelihood of investment banks’ alliance formation is positively related to the complementarity of their capabilities, as well as their status similarity. Social capital arising from banks’ direct and indirect collaborative experiences also plays a very important role in alliance formation. The number of deals given by a lead bank to a potential partner over the past three years has an inverted U‐shaped relationship to the probability that the lead bank will invite the potential partner to form an alliance. Our findings indicate that status similarity and social capital have a stronger effect on alliance formation in initial public offering deals than in secondary offering deals, as the former are more uncertain than the latter. Using these findings, we discuss the role of complementarity, status similarity, and social capital in alliance formation. Copyright © 2000 John Wiley & Sons, Ltd.     

Bank Real Estate Lending and the New England Capital Crunch

The stock of real estate loans held by New England banks has declined dramatically. Given the limited potential for real estate investments, weak demand for real estate loans is to be expected. However, supply as well as demand factors may account for some of the decline in bank real estate loans. This paper documents that bank lending for real estate may have been constrained by a capital crunch, whereby poorly capitalized banks shrank their assets, including real estate loans, to satisfy capital requirements. Because the loss of bank capital is so widespread in New England, bank-dependent borrowers may have difficulty obtaining real estate financing.     

Farmer organization,collective action and market access in Meso-America

Farmer organization and collective action are often seen as key factors in enhancing farmers’ access to markets. Often, too little attention is directed at (a) the most appropriate types of organization; (b) whether organization makes less or more sense in the case of producers of an undifferentiated commodity or a higher value product; (c) whether the public or private sector is best placed to support farmer organizations; and (d) the conditions necessary for ensuring their economic viability. Research in Mexico and Central America explored these issues for commodity maize and high value vegetables, respectively. The benefits of farmer organization are more evident in the vegetable sector, characterized by high transaction costs associated with market access. However, horticultural farmer organizations in Honduras and El Salvador include less than 5% of total horticultural producers. This is possibly due to farmer organizations’ limited business skills and non-replicable organizational models. There is less incentive for maize farmers to organize to access output markets as the transaction costs are relatively low. The benefits of maize farmer organization are clearer when it comes to accessing inputs such as credit, seed and fertilizer. Farmer organization is a critical factor in making markets work for the poor, but the role and timing of public and private investment in these organizations is poorly understood.