Loan Market Competition and Bank Risk-Taking

Recent literature (Boyd and De Nicoló, J Finance 60:1329–1343, 2005) has argued that competition in the loan market lowers bank risk by reducing the risk-taking incentives of borrowers. Using a model where competition arises from falling switching costs for entrepreneurs, we show that the impact of loan market competition on banks is reversed if banks can adjust their loan portfolios. The reason is that when borrowers become safer, banks want to offset the effect on their balance sheet and switch to higher-risk lending. They even overcompensate the effect of safer borrowers because loan market competition erodes their franchise values and thus increases their risk-taking incentives.     

Bank Quality,Loan Demand,and Market Discipline

In this paper, we examine the disciplinary role of borrowers, who are one of the key stakeholders in Turkish banks and are heavily affected when their banks experience difficulty. In the theoretical model, we show that borrowers prefer to have a relationship with less risky banks although it increases their cost of getting funds. Empirically, we examine the relationship between quality of a bank and its loan demand and find that as riskiness of a bank decreases, its loan demand increases significantly, suggesting the disciplinary role of borrowers in Turkey.     

Bank Quality,Judicial Efficiency,and Loan Repayment Delays in Italy

Italian firms delay payment to banks weakened by past loan losses. Exploiting Credit Register data, we fully absorb borrower fundamentals with firm-quarter effects. Identification therefore reflects firm choices to delay payment to some banks, depending on their health. This selective delay occurs more where legal enforcement of collateral recovery is slow. Poor enforcement encourages borrowers not to pay when the value of their bank relationship comes into doubt. Selective delays occur even by firms able to pay all lenders. Credit losses in Italy have thus been worsened by the combination of weak banks and weak legal enforcement.     

Fintech,Credit Market Competition,and Bank Asset Quality

Journal of Financial Services Research - This study explores bank screening incentives under credit market competition between traditional banks and a Fintech startup. The bank screening incentives...     

Enhancing Loan Quality Through Transparency: Evidence from the European Central Bank Loan Level Reporting Initiative

We explore whether transparency in banks’ securitization activities enhances loan quality. We take advantage of a novel disclosure initiative introduced by the European Central Bank, which requires, as of January 2013, banks that use their asset‐backed securities as collateral for repo financing to report securitized loan characteristics and performance in a standardized format. We find that securitized loans originated under the transparency regime are of better quality with a lower default probability, a lower delinquent amount, fewer days in delinquency, and lower losses upon default. Additionally, banks with more intensive loan level information collection and those operating under stronger market discipline experience greater improvement in their loan quality under the new reporting standards. Overall, we demonstrate that greater transparency has real effects by incentivizing banks to improve their credit practices.     

公司治理与银行借款融资

本文以中国深沪两市A股上市公司为样本,检验了公司治理在银行信贷决策中的作用。通过检验公司治理水平对企业银行借款融资能力和融资成本的影响,我们发现,企业银行借款融资能力方面,无论长期借款还是短期借款,公司治理因素对企业银行借款融资能力均没有影响,银行更看重企业的经营状况。企业银行借款融资成本方面,我们发现公司治理机制中只有监事会特征和股权集中度对企业银行借款融资成本有显著影响。具体地,监事会规模越大,融资成本越低;股权集中度越高,融资成本越高。本文结果说明公司治理因素在我国银行放贷决策中的作用有限。     

委托贷款违约风险传染与企业银行借款

违约是信用风险传染的一种表现形式,现有研究忽视了委托贷款的违约风险。本文利用上市公司委托贷款数据研究发现,委托贷款借入方违约导致贷出方银行借款可得性下降。当贷出方两权分离程度和融资约束较高时,其抵御风险能力较弱,更容易受到风险传染;货币政策从紧时期以及经济政策不确定性较高时期,风险传染更容易发生。进一步研究发现,借入方违约通过提高贷出方的经营风险,降低了贷出方银行借款可得性。本文为企业间风险传染提供了实证证据,对于企业委托贷款决策、银行授信决策和监管部门防控金融创新工具的风险具有一定的启示作用。     

Imperfect Competition in Bank Retail Markets,Deposit and Loan Rate Dynamics,and Incomplete Pass Through

This paper examines determinants of pass through from the market interest rate to bank retail deposit and loan rates. A dynamic adjustment cost model with imperfect competition implies that these rates depend on own lagged values and on lagged, current, and expected future values of the security rate. Greater competition in retail markets reduces the impact of lagged and expected rates on current retail rates while raising the effect of the current security rate, yielding greater pass through. These results have important implications for both the specifications used in empirical work and biases introduced into estimates of pass‐through effects.     

Federal Home Loan Bank Advances and Commercial Bank Portfolio Composition

Federal Home Loan Bank (FHLB) advances are a source of government‐sponsored liquidity intended to encourage housing finance, although “community financial institutions” may use such funds more generally. Because money is fungible, it is an empirical question as to how advances are actually employed. Using panel‐vector autoregression techniques, we estimate dynamic responses of U.S. commercial bank portfolios to: FHLB advance shocks, bank lending shocks, and macroeconomic shocks. We find that FHLB advances: (i) are used as a general source of liquidity by U.S. commercial banks of all sizes and (ii) dampen the sensitivity of mortgage lending to macroeconomic shocks at small banks.     

商业银行贷款定价理论与实践

本文系统阐述了贷款定价的基本理论,对西方商业银行贷款定价主要模式进行了比较分析,结合我国金融市场发展现状和商业银行内部管理体制,提出建立我国商业银行贷款定价体系的建议.     

Bank Loan Availability and Trade Credit Demand

This paper investigates the effects of bank loan availability on the trade credit and credit card demand of small firms, using firm‐level data from the 1995 Credit, Banks, and Small Business Survey, conducted by the National Federation of Independent Business. We find that firms increase their demand for trade credit and credit card debt when facing credit constraints imposed by banks. These results provide evidence of a pecking order of debt financing, where firms increase their reliance on potentially expensive sources of funds when bank loans are not available.     

汽车行业运行态势与银行信贷投放

商业银行应充分考虑行业运行态势及行业政策,通过细分客户市场与产品市场,确定安全、有效的信贷方式。2006年行业运行态势良好在经历了油价上涨导致的短暂低潮后,2006年我国汽车行业重新回到了高速增长的平台。根据中国汽车工业协会统计,预计2006年全年汽车销量将达到690万辆,超过日本,成为仅次于美国的世界第二大汽车消费国；增速将达到20%,超过2004年和2005年的水平(图1)。从全球角度看,我国汽车消费量占全球总消费量的比例已由2001年的4．3%上升至2006年     

Bank Competition and Credit Standards

This article offers an explanation for the substantial variationof credit standards and price competition among banks over thebusiness cycle. As the economic outlook improves, the averagedefault probabilities of borrowers decline. This affects theprofitability of screening and causes bank screening intensityto display an inverse U-shape as a function of economic prospects.Low screening activity in expansions creates intense price competitionamong lenders and loans are extended to lower-quality borrowers.As the economic outlook worsens, price competition diminishes,and credit standards tighten significantly. Deposit insurancemay contribute to the countercyclical variation of credit standards.     

Bank Competition and Leverage Adjustments

We test whether bank competition affects firms’ leverage adjustment speeds. Using Chinese data where bank concentration varies across both years and provinces, we find that underlevered firms move to their target leverage faster when bank competition is high. Tests surrounding an exogenous shock to bank competition lead to the same conclusion. We also find that small firms and nonstate‐owned firms exhibit faster leverage adjustments when bank competition is high, which is consistent with the conjecture that bank risk taking increases with competition.     

Bank Competition and Financial Stability

Under the traditional “competition-fragility” view, more bank competition erodes market power, decreases profit margins, and results in reduced franchise value that encourages bank risk taking. Under the alternative “competition-stability” view, more market power in the loan market may result in higher bank risk as the higher interest rates charged to loan customers make it harder to repay loans, and exacerbate moral hazard and adverse selection problems. The two strands of the literature need not necessarily yield opposing predictions regarding the effects of competition and market power on stability in banking. Even if market power in the loan market results in riskier loan portfolios, the overall risks of banks need not increase if banks protect their franchise values by increasing their equity capital or engaging in other risk-mitigating techniques. We test these theories by regressing measures of loan risk, bank risk, and bank equity capital on several measures of market power, as well as indicators of the business environment, using data for 8,235 banks in 23 developed nations. Our results suggest that—consistent with the traditional “competition-fragility” view—banks with a higher degree of market power also have less overall risk exposure. The data also provides some support for one element of the “competition-stability” view—that market power increases loan portfolio risk. We show that this risk may be offset in part by higher equity capital ratios.