Disclosure policy and international banking

We develop general principles to guide the compulsory public disclosure of information about the financial condition of banks and apply these principles to three issues of particular relevance in international banking: (1) the disclosure of the country risk exposure of individual banks, (2) the rationale for hidden reserves, and (3) the disclosure of information regarding the availability to individual banks of emergency liquidity assistance. Our analysis shows why disclosure standards vary from country to country and why disclosure standards in the U.S. go well beyond the requirements elsewhere.     

National corruption and international banking

This paper identifies national corruption as a determinant of international banking. Using total international banking claims of 21 countries from worldwide borrowers, at the bilateral lender-borrower level, we document that when lender countries are less corrupt than borrower countries, international banking volume tends to be higher between countries with similar corruption levels. In contrast, when lender countries are more corrupt than borrower countries, corruption difference has no significant impact on international banking volume, because relatively more corrupt lenders perceive relatively less corrupt borrowers as generally creditworthy. The effect of corruption difference weakened during the 2007–2009 financial crisis, but subsequently regained its precrisis strength among the relatively less corrupt lenders while gaining new force among relatively more corrupt lenders.     

Operational efficiency in banking: An international comparison

In this paper, we estimate a global cost function for international banks to test for both input and output inefficiencies. Our results for 1988–1992 suggest that for banks in 15 countries, the prevalence of input X-inefficiencies far outweighs that of output inefficiencies (as measured by economies of scale and scope). Moreover, our results suggests that the distribution-free model overestimates the magnitude of X-inefficiencies relative to the stochastic cost frontier approach.Large banks in separated banking countries (that prohibit the functional integration of commercial and investment banking) had the largest measure of input inefficiency amounting to 27.5 percent of total costs as well as significant levels of diseconomies of scale. All other banks have X-inefficiency levels ranging in the area of fifteen percent of total costs with slight economies of scale for small banks.     

Institutions,banking structure and the cost of debt: new international evidence

This paper analyses the effect of institutions and the structure of the banking system on the cost of debt for a sample of firms from 37 countries. The cost of debt decreases with the rule of law, the protection of creditors’ rights and the weight of banks in the economy. Bank financing and bank concentration have a positive differential effect on the cost of debt in those countries where the financial difficulties of banks are greater. Legal enforcement, the protection of creditors’ rights and the weight of bank financing have a greater influence in countries with a lower degree of economic development.     

增强中国银行业国际竞争能力和金融业务创新能力

我演讲的题目是《增强中国银行业国际竞争能力和金融业务创新能力》。为什么要在金融信息化论坛上选择这样一个题目呢?原因是金融国际化的快速推进使得金融企业惟一出路就是在竞争中求发展,进行金融创新。金融业在竞争行业中是最具代表性的一个行业,因为金融业的市场、产品、技     

Operational efficiency in banking: An international comparison Reply to the comment

To avoid problems associated with Jensen's inequality, we use a corrected inefficiency measure to compare the estimate of inefficiency obtained using the distribution free (DF) method with the estimate obtained using the stochastic cost frontier (SCF). The results of the paper are unchanged. The DF method yields measures of inefficiency that are significantly higher than measures obtained using the SCF.     

Money, banking, and monetary policy

An important function of banks is to issue liabilities, like demand deposits, that are relatively safe and liquid. We introduce a risk of theft and a safe-keeping role for banks into modern monetary theory. This provides a general equilibrium framework for analyzing banking in historical and contemporary contexts. The model can generate the concurrent circulation of cash and bank liabilities as media of exchange, or inside and outside money. It also yields novel policy implications. For example, negative nominal interest rates are feasible, and for some parameters optimal; for other parameters, strictly positive nominal rates are optimal.     

Market structure and competitive conditions in the Arab GCC banking system

This paper investigates the market structure of Arab GCC banking industry during the years of 1993–2002 using the most frequently applied measures of concentration k-bank concentration ratio (CRk) and Herfindahl–Hirschman Index (HHI) and evaluates the monopoly power of banks over the ten years period using the ‘H-statistic’ by Panzar and Rosse. The results show that Kuwait, Saudi Arabia and UAE have moderately concentrated markets and are moving to less concentrated positions. The measures of concentration also show that Qatar, Bahrain and Oman are highly concentrated markets. The Panzar–Rosse H-statistics suggest that banks in Kuwait, Saudi Arabia and the UAE operate under perfect competition; banks in Bahrain and Qatar operate under conditions of monopolistic competition; and we are unable to reject monopolistic competition for the banking market in Oman.     

Taxation and international banking

The purpose of this paper is an examination of the relationship between taxation and the working of international banking arrangements. The main task is directed to the ways taxation determinations by national authorities affect the ways international banks go about their business. International coordination through the Organisation for Economic Co-operation and Development (OECD) is a major focus of the analysis. There is no general exposition of principles bearing upon international taxation. Rather, attention is directed to the determination of tax obligations in any one jurisdiction. Thus, there is a close scrutiny of the mechanics of taxation in the international setting bringing out the uncertainties and the imponderables in any application. Much attention is given to structural arrangement in international banking as well as capital arrangements in any one jurisdiction and how this applies to and affects the banking group as a whole. The result is to bring out the complexity of the agenda for tax applications on a common basis across internationally operating groups. Most jurisdictions recognise that they cannot await common agreements because new instruments and arrangements emerge at very frequent intervals and their tax implications have to be addressed. There has to be relief from uncertainty if markets are to develop effectively. Thus, there is in an importance sense of partnership between tax authorities and market participants in many countries. International deliberations have taken too long.     

Sectorial differences in corporate financial behavior: an international survey

This survey-based research deals with sectorial differences in terms of three main corporate finance policies: investment, financing and dividend. We used a multinational survey that was distributed to the chief financial officers in five countries: the US, the UK, Germany, Canada and Japan. We found statistically significant differences between the nine sectors examined in terms of all the three major financial policies. These differences may be due to the following: (1) the unique financial needs and operating conditions of each sector and (2) the imitation effect according to which firms imitate the financial behavior of other firms in their sector. We found that the use of established investment appraisal techniques is most common in the construction sector and least common in the technology sector. The IRR is the most frequently used investment appraisal technique for the entire survey sample, especially in the communication sector; however, it is rarely used in the technology sector. The technology sector has the lowest level of financial leveraging, while the finance sector has the highest level. A constant sum per share is the most common dividend policy in the following sectors: retail and wholesale, services, manufacturing and transport. On the other hand, construction, energy, communication and technology sectors are characterized by a high percentage of firms that do not pay dividends at all.     

Concentrated control,institutions, and banking sector: An international study

Using a broad sample of listed commercial banks in East Asia and Western Europe, this paper investigates the relations among concentrated control, a set of bank operating characteristics, and legal and regulatory regimes. We find that banks with concentrated control exhibit poorer performance, lower cost efficiency, greater return volatility, and higher insolvency risk, relative to widely held ones. We also document that legal institutions and private monitoring effectively reduce the detrimental effects of concentrated control and that official disciplinary power plays a weak governance role, whereas government intervention exacerbates the adverse effects. Further evidence shows that the relations between control concentration and bank operating characteristics are curvilinear and vary according to the types of controlling owners. Overall, our findings support the contention that country-level institutions play important roles in constraining insider expropriation, and that private monitoring mechanisms are more effective than are public rules and supervision in governing banks.     

Liquidity, credit creation and international banking : An econometric investigation

For the past 18 months the Treasury and Civil Service Select Committee of the British House of Commons has been taking evidence from expert witnesses and interested parties concerning International Monetary Arrangements. An important concern of their work has been the inter-relationship between current problems in international bank lending and macroeconomic policies. Our presentation will review the opinions expressed in the Committee's Reports in the light of the econometric evidence we have obtained in our formal paper prepared for this conference. Basically we feel that the current problems facing the international banking system are in no small part due to the increased systematic risk introduced into the system by the macroeconomic policies followed by the industrial countries over the past decade, rather than simply to reckless and imprudent bank management. Further, our econometric evidence suggests that Eurocurrency flows may have a substantial effect on domestic liquidity, in contrast to the accepted view that such flows are unimportant. An underlying major theme of our paper concerns the importance of using modern econometric methods to shed light on current important problems of international financial interdependence.     

Financial innovation, multinational banking, and monetary policy

The subject of the paper is the causal chain from financial innovation to multinational banking and further on to the conduct of monetary policy. The second section identifies the salient features of the present phase of financial innovation. The third section analyzes the consequences for the structure of international banking. The remaining three sections discuss the probable implications for, respectively, (1) the alleged disturbances from international capital flows (which, it is argued, are usually overestimated), (2) the effectiveness of monetary policy (where the principal consequence seems to be the competitive dismantling of discriminatory regulation), and (3) the viability of intermediate targets (which is impaired).     

Economic policy uncertainty,agency problem,and funding structure: Evidence from U.S. banking industry

We empirically examine the impact of economic policy uncertainty (EPU) on banks’ funding structure (FUD). Using an extensive dataset of U.S. bank holding companies, we find that high policy uncertainty strengthens banks’ FUD. For banks with a pre-existing low FUD, an increase in EPU raises FUD. However, for banks with a pre-existing high FUD, the relationship between EPU and FUD becomes negative and economically significant. Considering the lack of relevant studies, our paper contributes to the literature and provides implications for policymakers and practitioners in the banking industry.     

Managers and efficiency in banking

This paper presents evidence on the impact of managers on cost efficiency in banking. Stochastic frontier analysis is applied to a unique Finnish data set. Manager age and education have strong yet complicated effects on efficiency. The impact of age on efficiency depends on education. A university degree is useful mainly in the largest banks of the sample. Educational background seems to be less important for young managers than for mature ones. Managing director changes are systematically followed by efficiency changes. Retirement typically causes an efficiency improvement whereas other manager changes can either improve or weaken efficiency. However, in many cases mature managers outperform their young colleagues.     

Islamic vs. conventional banking: Business model,efficiency and stability

How different are Islamic banks from conventional banks? Does the recent crisis justify a closer look at the Sharia-compliant business model for banking? When comparing conventional and Islamic banks, controlling for time-variant country-fixed effects, we find few significant differences in business orientation. There is evidence however, that Islamic banks are less cost-effective, but have a higher intermediation ratio, higher asset quality and are better capitalized. We also find large cross-country variation in the differences between conventional and Islamic banks as well as across Islamic banks of different sizes. Furthermore, we find that Islamic banks are better capitalized, have higher asset quality and are less likely to disintermediate during crises. The better stock performance of listed Islamic banks during the recent crisis is also due to their higher capitalization and better asset quality.     

Governance,efficiency and risk taking in Chinese banking

We employ a hand-collected unique dataset on banks operating in China between 2003 and 2011 to investigate the impact of board governance features (size, composition and functioning) on bank efficiency and risk taking. Our evidence suggests that board characteristics tend to have a greater influence on banks' profit and cost efficiency than on loan quality. We find that the proportion of female directors on the board appears not only to be linked to higher profit and cost efficiency but also to lower traditional banking risk. Similarly, board independence is associated with higher profit efficiency of banks; while the opposite is found for executive directors and in the presence of dual leadership of the CEO/chairperson. Among the control variables, we found that liquidity negatively affects profit and cost efficiency, while positively affecting risk. Interestingly, we find some evidence of an incremental effect of specific board characteristics on efficiency for banks with more concentrated ownership structures and state-owned institutions; while for banks with CEO performance-related pay schemes the effect on efficiency when significant is usually negative. Our results offer useful insights to policy makers in China charged with the task of improving the governance mechanisms in banking institutions.