The impact of prudential toolkits on loan growth in Central and Eastern European banking systems

This paper examines the effects of prudential policy on loan growth in 11 Central and Eastern European banking systems, spanning the period from 2000 to 2015. Based on the measures taken by the authorities of our sample countries, we build several prudential indices. Additionally, we control for the effects of several country-specific factors and bank-specific characteristics. Finally, we test the homogeneity of these effects, accounting for cycle, ownership, and bank effects. Generally, the empirical findings reveal a negative correlation between prudential toolkits and credit growth, with a conspicuous impact for tools targeting lending activity. We see that the effects of a change in the lending framework on loan growth are heterogeneous when we account for crisis and cycle patterns. Furthermore, the interaction between ownership and crisis reveals that, in normal times, foreign banks recorded higher loan growth compared to domestic banks. The opposite is true in turbulent times. The analysis of interactions between credit-based measures and bank-specific variables show that the effects of prudential actions depend on the bank size and leverage.     

基于产业异质性的银行贷款政策效应分析——来自上市银行的经验证据

在银行信贷资金配置存在产业间差异的假定下,建立引入产业因素的银行贷款决定模型,考察产业因素影响银行贷款渠道有效性的内在机制,并运用2007年到2010年14家上市银行和5组产业数据展开动态面板模型估计,结果表明:从贷款需求角度看,各个产业的产出对产业贷款的影响效应存在产业间差异;从贷款供给角度看,人民银行运用货币政策工具调控产业贷款的影响效应也存在产业间差异。也就是说,产业因素确实影响到人民银行调控各个特定产业贷款的力度。     

INTEREST RATE PASS‐THROUGH: A META‐ANALYSIS OF THE LITERATURE

The interest rate pass‐through describes how changes in a reference rate (the monetary policy, money market or T‐bill rate) transmit to bank lending rates. We review the empirical literature on the interest rate pass‐through and systematize it by means of meta‐analysis and meta‐regressions. Using the pass‐through to corporate lending rates as the baseline, we find systematically lower estimated pass‐through coefficients in studies that focus on the pass‐through to consumer lending rates and rates on long‐term loans. Also studies estimating the pass‐through by averaging all lending rates into one category report a lower pass‐through. Importantly, the interest rate pass‐through is significantly influenced by the country's macro‐financial environment. In economies with deepening stock markets, the estimated pass‐through strengthens significantly. Interestingly, after the global financial crisis, the pass‐through weakened across the board, including because of growing trade openness and supply chain financing, rising volatility and stock market turnovers, as well as declining central bank independence. Inflation targeting frameworks, if in place, helped diminish this pass‐through weakening.     

Monetary policy and risk taking

We assess the effects of monetary policy on bank risk to verify the existence of a risk-taking channel – monetary expansions inducing banks to assume more risk. We first present VAR evidence confirming that this channel exists and is particularly significant on the bank funding side. Then, to rationalize this evidence we build a macroeconomic model where banks subject to runs endogenously choose their funding structure (deposits vs. capital) and risk level. A monetary expansion increases bank leverage and risk. In turn, higher bank risk in steady state increases asset price volatility and reduces equilibrium output.     

Targeted monetary policy and agriculture business loans

This study examines the effect of a Targeted Easing (TE) policy, an unconventional monetary policy tool initiated by the Chinese central bank to reduce reserve requirement ratios of agricultural financial institutions. Utilizing a longitudinal sample of Chinese agriculture companies and a matching sample of industrial firms between 2012 and 2017, we find that the TE policy successfully achieves its intended policy goal to boost lending to the agriculture sector. Results from our difference-in-differences estimations indicate that loan levels of agriculture firms increases significantly more than that of matching nonagricultural firms under TE relative to the non-TE period. We also document heterogeneous TE effects and find that agricultural firms with smaller agency costs, larger financing constraints, and larger loan intensity levels benefit significantly more from a TE policy than their counterparts. In addition, the TE policy effect is more salient during a contractionary period than in an expansionary period.     

需求不确定的电商供应链融资模式选择

探讨在市场需求不确定情况下,对电商和中小型供应商均有利的融资模式即银行借贷模式和电商借贷模式。研究发现,影响电商供应链各节点企业利润的重要指标是银行贷款利率,有利于电商供应链各节点企业利润的银行贷款利率存在一个确定的区间。若银行贷款利率属于该区间,则电商借贷模式更有利,否则银行借贷模式更有利。     

Risky bank lending and countercyclical capital buffers

We study the properties of a monetary economy with an essential role for risky bank lending. Banks issue deposits and lend to entrepreneurs. Because banks׳ lending rate cannot be made contingent on aggregate shocks, and because banks face capital adequacy regulations, they require a capital buffer against loan losses. Capital adequacy regulations are modeled on the Basel-III rules, including a minimum capital adequacy ratio, an endogenous capital conservation buffer, and a countercyclical capital buffer. We find that a countercyclical capital buffer leads to a significant increase in welfare. It also reduces the need for countercyclical adjustments in policy interest rates.     

The impacts of competition and shadow banking on profitability: Evidence from the Chinese banking industry

This paper contributes to the empirical literature on banking profitability by testing the impacts of competition and shadow banking on bank profitability using a sample of 100 Chinese commercial banks over 2003–2013 with 417 and 395 observations. The current study fills the gaps in the empirical studies by examining the competition in different banking markets (i.e. deposit market, loan market and non-interest income market) in China and further evaluating their impacts on bank profitability. The findings show that the non-interest income market has a higher level of competition compared to the deposit market and loan market. It is further reported that a lower level of competition in deposit market leads to an increase in the profitability of Chinese commercial banks. Finally, the results suggest that shadow banking improves the profitability of Chinese banks.     

What if they had not Gone Negative? A Counterfactual Assessment of the Impact from Negative Interest Rates

The counterfactual estimation technique of Pesaran and Smith ( 2016 ) is employed to provide an assessment of the impact stemming from the implementation of negative interest rates in three European economies (Denmark, Sweden and Switzerland). The analysis indicates that negative interest rates did not have a significant effect on bank lending growth or inflation in any country. This failure to reject the policy ineffectiveness hypothesis most likely lies in the fact that negative interest rates did not ease the situation for the factors restricting the supply of bank lending, namely bank funding costs and Return‐on‐Equity.     

Basel III liquidity rules: The implications for bank lending growth in Africa

This paper examines the possible loan growth effect of the Basel III NSFR and LCR requirements in Africa and seeks to determine whether the different regions of the continent are affected differently. The paper also offers what is possibly the first investigation of how the interaction between the performance of loan portfolios and the new Basel III liquidity requirements might shape bank loan growth rates. Using a dataset of 361 commercial banks across 38 African countries over the 2005–2015 period, our static and dynamic panel analyses show that both the NSFR and the LCR exert significant positive effects on bank loan growth rates. The results also reveal that the NSFR reduces the impact of the negative effect of poor performance of loan portfolios on bank loan growth rates. Compliance with the Basel III liquidity rules in Africa is therefore likely to have beneficial impacts on policies intended to increase bank lending in the continent.     

How does the money market development impact the bank lending channel of emerging Countries? A case from China

Transforming from quantitative-based instruments to price-based instruments is the primary goal of the monetary policy transformation in emerging economies. In essence, this process is gradually replacing the interest rate channel with the credit channel from the perspective of the monetary policy transmission mechanism, which is mainly achieved by promoting financial development to reduce the financial friction. However, there are opposite effects of financial development on the bank lending channel; thus, the topic is controversial. Using banks’ data from 2010 to 2018, this paper studies whether and how the money market development weakens the effect of the bank lending channel in China. The result shows that the mechanism through which the money market development influences the bank lending channel is realized by affecting the substitution elasticity of the asset and liability structure of banks’ balance sheets. Different from the theoretical expectation, the effect of the money market development on the bank lending channel is nonsignificant in China but appears to be weakened when the interest rate market-oriented reform is considered. However, further research based on structural analysis demonstrates that the money market development exerts heterogeneous effects on the bank lending channel under different types of sub-markets and different characteristics of the banks considered.     

不对称信息下商业银行的行为选择——基于房地产在建工程抵押贷款的博弈

在房地产在建工程抵押贷款业务中,商业银行在两个市场上均处于信息劣势的地位,因而存在相应的风险。基于银行针对评估机构委托评估前的逆向选择和银行面临开发公司抵押投贷后的道德风险的主要风险经验归纳,分别运用博弈模型对两个市场的策略互动行为进行了理论研究,实证结果表明存在市场失灵、资源配置效率次优。根据相关理论和市场实践得出商业银行的规范性行为改进有效对策为：通过提供最优激励合约、招投标机制以识别合格努力的评估机构,给予激励相容式的委托;在项目评估和企业审核的基础上,确定合适的贷款抵押率、完善贷款资金的账户管理、进行抵押登记的连续性操作,适时、适当地实现贷款受偿。     

Models of optimal contract in lending: Evaluating the impact of diversified versus focused policies on riskiness of borrower base

Empirical studies on bank lending policies have offered contradictory results regarding the impact of each of the two distinct lending policies of focused and diversification on riskiness of lender’s borrower base. This study first constructs a general model of contracts for lending under asymmetric information and characterizes the equilibrium outcomes under each of the two lending policies. It then demonstrates that the relative preferences of borrower groups towards bank loan plays a key role in determining if a lending policy switch between the two policies increases or decreases the riskiness of the bank’s borrower base. The results offer a rational explanation for the existing contradictory results in the empirical literature.     

How corruption affects bank lending in Russia

The aim of this study is to investigate the impact of corruption on bank lending in Russia. This issue is of major interest in order to understand the causes of financial underdevelopment and the effects of corruption in Russia. We use regional measures of corruption and bank-level data to perform this investigation. Our main estimations show that corruption hampers bank lending in Russia. We investigate whether this negative role of corruption is influenced by the degree of bank risk aversion, but find no effect. The detrimental effect of corruption is only observed for loans to households and firms, in opposition to loans to government. Additional controls confirm the detrimental impact of corruption on bank lending. Therefore, our results provide motivations to fight corruption to favor bank lending in Russia.     

The role of banks in the monetary policy transmission in the new EU member states

This paper aims to enrich the knowledge on the monetary policy transmission mechanism in the new European Union member states with empirical evidence on the impact of monetary policy on bank lending. This work is based on individual bank balance sheet data and covers a sample of commercial banks from 10 Central and Eastern European countries over the period 1998–2006. We follow the approach suggested by Kashyap and Stein (1995) and control for cross-section heterogeneities among banks. The results indicate the existence of asymmetric adjustment of loan quantities with respect to specific bank characteristics. Our findings indicate the existence of a functioning bank-lending channel through small banks. This applies in the short-run to several, but not all, of the analysed banks.     

Role of credit and monetary policy in determining asset prices: Evidence from emerging market economies

We examine the relative dominance of credit and monetary policy shocks in influencing asset prices in emerging markets. Estimates from panel VAR models for 22 EMEs provide evidence of a significant impact of bank credit on house prices in contrast to trivial impact on stock prices, possibly due to prudential regulations on banks’ exposure to stock markets. Contractionary monetary policy triggers sizeable and persistent decline in stock than housing prices as higher interest rates may render the funding of leverage costlier. Global shocks play an important role in explaining fluctuations in domestic stock prices rather than house prices since the latter class of asset is largely non-tradable across countries.     

Branch network structure,authority and lending behaviour

Using a novel dataset of Ukrainian banks, this paper examines the link between the structure of branch network and bank lending. Bank regional branches are categorised into contact points without loan decision-making authority and more independent delegated branches which can make loan decisions. We find that a large and dispersed network of contact points can help increase credit supply and mitigate risks through diversification. Further, banks benefit from the information advantage brought by the presence of delegated branches in local markets. However, the longer distance between headquarters and local delegated branches, the more amplified agency problems become, which outweighs the benefits. Our findings suggest that the optimal structure could be a centralised network of delegated branches combined with a diversified access point network.     

How important can bank lending shocks be for economic fluctuations?

We analyze the quantitative importance of bank lending shocks on real activity fluctuations in Norway and the UK, using structural VARs estimated on quarterly data from 1988 to 2010. We find that an adverse bank lending shock causes output to contract, and that such shocks can account for a substantial share of output volatility. This suggests that financial intermediation is an important source of shocks. The empirical analysis comprises the Norwegian banking crisis (1988–1992) and the recent period of banking failures in the UK. However, the results are also non-trivial when omitting periods of systemic banking distress from the sample.     

Does bond market development enhance the banking sector’s efficiency in resource allocation? Industry-level evidence from Korea

Korea’s financial system used to be bank-based, with banks playing the leading role in financing corporations. As highlighted by Park et al. (2019), however, bond markets have developed rapidly in Korea and other Asian countries. The corporate bond market competes with banks as a source of finance for large borrowers. As such, bond markets may affect banking sector operation, a process known as disintermediation. In this paper, we examine whether bond market development improves the efficiency of resource allocation in Korean bank lending. We propose two channels through which bond market development affects the efficiency of bank lending. Since the two channels have opposing effects on the efficiency of banking, the issue must be settled by empirical analysis. We find that bank loans are much less efficient than bond financing in allocating resources across industries. Furthermore, banks are particularly inefficient in resource allocation in industries that rely more on bond financing. This suggests that competition from bond financing does not improve allocative efficiency of bank loans.     

Bank lending: The bank ownership focus in the pre- and post-global financial crisis periods

The objective of this research is to examine the impact of bank ownership on the composition of working capital, investment, and consumption loan types before and after the global financial crisis (GFC). The data has been grouped into pre-GFC and post-GFC sub-periods. The pre-GFC period encompasses the post-Asian crisis time period until 2006, just before the start of the GFC. The post-GFC period comprises the time period 2009 until 2016. Data were obtained from the Indonesian Banking Directory of the Indonesian Central Bank, commercial bank annual reports provided by Infobank magazine, and the Indonesian Banking Development Institute. The findings reveal the differences and changes in the composition of loan types for the different forms of bank ownership. Government-owned banks tend to focus on consumption loans, whereas foreign-owned banks outpace domestic-owned banks in the financing of working capital loans. After the GFC, government-owned banks increased their consumption loans significantly. This research augments the knowledge about loan portfolio compositions and trends pertaining to different bank types. It can serve as a benchmark and can be applied to enhance decision-making in the banking industry. Furthermore, Indonesian regulating authorities can utilize the information from a strategic and policy perspective to monitor, manage and control financial intermediation from a macroprudential perspective.