Search

Accused of being Canada’s biggest financial backer of fossil fuel projects, the bank is feeling the heat -- even if it doesn’t say that [...]

We study the impacts of the 2009 monetary stimulus and its interaction with infrastructure spending on credit allocation. We develop a two-stage estimation approach and apply it to China's loan-level data that covers all sectors in the economy. We find that except for the manufacturing sector, monetary stimulus itself did not favor state-owned enterprises (SOEs) over non-SOEs in credit access. Infrastructure investment driven by nonmonetary factors, however, enhanced the monetary transmission to bank credit allocated to local government financing vehicles in infrastructure and at the same time weakened the impacts of monetary stimulus on bank credit to non-SOEs in sectors other than infrastructure. JEL classification: E5, E02, C3, C13 Key words: infrastructure investment, monetary policy transmission, fiscal shocks, policy interaction, credit reallocation, LGFVs, Working Paper 2020-16 August 2020 I. Introduction During economic crises such as the 2008 global financial crisis, central banks around the world (Federal Reserve System, European Central Bank, Bank of [...]

We show that the cost of employee turnover in firms that rely on decentralized knowledge and personal relationships depends on the firms' planning horizons and the departing employees' incentives to transfer information. Using exogenous shocks to the relationship between borrowers and loan officers, we document that borrowers whose loan officers are on leave are less likely to receive new loans from the bank, are more likely to apply for credit from other banks, and are more likely to miss payments or go into default. These costs are smaller when turnover is expected, as in the case of maternity leave, or when loan officers have incentives to transfer information, as in the case of voluntary resignations. Keywords: information; incentives; corporate finance; banking; intermediation; organizational studies; performance History: Received May 23, 2013; accepted January 14, 2014, by Wei Jiang, finance. Published online in Articles in Advance August 1, 2014., 1. Introduction The recent management literature has documented that modern firms rely heavily on human capital-intensive technologies and flatter organizational structures, which allows authority and responsibility to be delegated more [...]

Adam Bennett, Group Executive Business & Private Banking, Commonwealth Bank of Australia's opening statement at the ASBFEO small business loans inquiry on Wednesday, 30 November 2016. Commonwealth Bank considers the [...]

Financial deregulation played a key role in changes on an international scale. This article examines the impact of deregulation on the business practices of banks. I compare the United States and France between the early 1980s and the 2007-2008 crisis and show the effects of similar policies in different contexts. I find that in both cases banks turned to new financing techniques, took greater risks, and were a major cause of the crisis. However, the process assumed different forms due to the initial contexts and the respective roles of banks and financial markets in the economy. The path used by each country has necessarily influenced the outcome. Comparative Economic Studies (2013) 55, 479-500. doi: 10.1057/ces.2013.13 Keywords: deregulation, US banks, French banking sector, financial crisis JEL Classifications: G01, G21, G28, INTRODUCTION A thoroughgoing process of deregulation began at the end of the 1970s in the United States and the United Kingdom before gradually spreading to the rest of the world. [...]

* Almost three quarters of Australian shoppers believe stores should offer cashless payment methods. * Nearly two thirds say cash-only stores will lose sales to competitors this Christmas. * More [...]

CASE DESCRIPTION The primary subject matter of this case concerns PFF Bank and Trust, a fast growing regional bank located in Southern California. Secondary issues examined include the structure of [...]

To link to full-text access for this article, visit this link: http://dx.doi.org/10.1016/j.jfineco.2008.12.003 Byline: William R. Kerr, Ramana Nanda Abstract: We examine entrepreneurship and creative destruction following US banking deregulations using US Census Bureau data. US banking reforms brought about exceptional growth in both entrepreneurship and business closures. Most of the closures, however, were the new ventures themselves. Although we find evidence for the standard story of creative destruction, the most pronounced impact was a massive increase in churning among new entrants. We argue that creative destruction requires many business failures along with the few great successes. The successes are difficult to identify ex ante, which is why democratizing entry is an important trait of well-functioning capital markets. Author Affiliation: Harvard Business School, Boston, MA 02163, USA Article History: Received 13 October 2008; Revised 12 December 2008; Accepted 15 December 2008 Article Note: (footnote) [star] We are grateful to Rodrigo Canales, Nicola Cetorelli, Shawn Cole, Jim Davis, Ed Glaeser, Paul Gompers, Victoria Ivashina, Ron Jarmin, Josh Lerner, Ross Levine, Javier Miranda, Debarshi Nandy, Mitch Petersen, Steve Ross, David Scharfstein, Antoinette Schoar, Jesper Sorensen, Scott Stern, Phil Strahan, Rebecca Zarutskie, and seminar participants at the US Census Bureau, Danish Research Unit for Industrial Dynamics, European Regional Science Association, Harvard University, Innovation, Policy, and the Economy Group, Kellogg School of Management, London School of Economics and Political Science, Massachusetts Institute of Technology, National Bureau of Economic Research, New York Federal Reserve Board, Reserve Bank of India, and the University of Connecticut for insightful comments on this paper. We also thank the Innovation Policy and the Economy group for financial assistance. The research in this paper was conducted while we were Special Sworn researchers of the US Census Bureau at the Boston Census Research Data Center. Support for this research from National Science Foundation (NSF) Grant (ITR-0427889) is gratefully acknowledged. Research results and conclusions expressed are our own and do not necessarily reflect the views of the Census Bureau or NSF. This paper has been screened to ensure that no confidential data are revealed. A first draft of this paper was circulated in December 2006. All results discussed but not formally presented are available upon request.

Bad home loans and uncertainty about who these loans would hit next has driven the U.S. banking system to near insolvency this week. Executives of financial institutions have announced financial rescue steps to avoid the repeat of bank runs in the 1930s. Other views and information on the U.S. banking system, are presented.

To purchase or authenticate to the full-text of this article, please visit this link: http://dx.doi.org/10.1111/j.1467-937X.2008.00483.x Byline: ANTJE BRUNNER (a), JAN PIETER KRAHNEN (b) Abstract: Multiple banking is a common characteristic of the corporate lending, particularly of medium-sized and large firms. However, if the firms are facing distress, multiple lenders may have serious coordination problems, as has been argued in the theoretical literature. In this paper we analyse the problems of multiple banking in borrower distress empirically. We rely on a unique panel data set that includes detailed credit-file information on distressed lending relationships in Germany. In particular, it includes information on 'bank pools', a legal institution aimed at coordinating lender interests in distress. We find that the existence of small pools increases the probability of workout success and that this effect reverses when pools become large. We identify major determinants of pool formation, in particular the number of banks, the distribution of lending among banks, and the severity of the distress. Author Affiliation: (a)Humboldt University, Berlin and CFS Center for Financial Studies and (b)Goethe University, Frankfurt and CFS Center for Financial Studies Article History: First version received February 2001; final version accepted August 2007 (Eds.)

A theoretical model is developed to analyze the adjustment of banks of their low and high credit risk commercial loans under the revised Basel Accord. High-risk loans are reduced more under the revised Basel Accord, but low credit risk loans may actually increase under certain conditions.

With reference to the Grameen Bank of Bangladesh, the extent to which participation in microcredit programs influences the non-economic activities, such as fertility behavior, of the borrowers is examined.

With reference to Grameen Bank in Bangladesh, the inter relationship in the loan repayment patterns is examined to understand the mutual dependency of micro-credit lending institutions. The significance of these mutual relationships for improving poverty conditions in developing countries is discussed.

The problem of searching for the most preferred alliance model between banks and insurance companies in Finland is analyzed using analytic hierarchy process.

Benefits of credit risk shift during equal liquidity demand in banks are analyzed using a model with insurance and banking sectors. Factors leading to contagion between both the sectors are discussed.

Contingent claims are recorded as income till the crystallization of the liability, if any. Consequently, it is difficult to classify it either as income or expenditure. The tax implications arising from such contingent liabilities in commercial banking industry are discussed. The study is based on reports of commercial banks from 1990-1996. The effect of contingent liabilities on financial leverage of the bank is also examined.

The issue of taxation on commercial loans, which are not reflected on balance sheet, is examined.

The influence of different rational bonds on customers' perceptions of utilitarian and hedonic values, as well as on the loyalty among different customer groups in the banking industry is investigated. The results indicate that both financial and structural bonds positively affect customer utilitarian value, whereas the social bond positively influences hedonic value and both utilitarian and hedonic values positively affect customer loyalty.

Byline: Brent W. Ambrose (1), Michael LaCour-Little (2), Anthony B. Sanders (3) Keywords: Banks; debt; securitization; regulatory capital Abstract: Banks can choose to keep loans on balance sheet as private debt or transform them into public debt via asset securitization. Securitization transfers credit and interest rate risk, increases liquidity, augments fee income, and improves capital ratios. Yet many lenders still retain a portion of their loans in portfolio. Do lenders exploit asymmetric information to sell riskier loans into the public markets or retain riskier loans in portfolio? If riskier loans are indeed retained in portfolio, is this motivated by regulatory capital incentives (regulatory capital arbitrage), or a concern for reputation? We examine these questions empirically and find that securitized mortgage loans have experienced lower ex-post defaults than those retained in portfolio, providing evidence consistent with either the capital arbitrage or reputation explanation for securitization. Author Affiliation: (1) Gatton College of Business and Economics, University of Kentucky, Lexington, KY, 40506-0053, USA (2) California State University, Fullerton, USA (3) The Ohio State University, Columbus, USA Article History: Registration Date: 19/08/2005 Online Date: 12/11/2005

A study examining whether the ratings being given by credit rating agencies to firms that are not seeking such ratings are lower than the actual ratings, is presented. These firms claim that the credit rating agencies do not have adequate information for rating, which is the reason they have been rated lower. The study confirms such claim. For the purpose of the study, ratings of 1,060 banks across the world were examined.

This paper justifies the relevance of capital controls on the basis of markets' incompleteness, examines the pros and cons of restrictions on capital mobility, surveys the literature's recent attempts to assess the effectiveness of capital controls, and delineates the focal points of debate among researchers and policymakers. Additionally, the link between capital controls and financial stability is examined using frequency domain techniques. The study of the Chilean stock market and Peso-Dollar exchange rate fluctuations reveals that financial volatility due to irregular components increased after the removal of capital controls in September 1998., 1. Introduction Perhaps the most significant development in the world economy of the past several decades has been a rapid process of globalization and financial integration--the process spurred by the [...]

The significance of market discipline to monitor financial performance of banks is examined.

Byline: Mark M. Spiegel (1), Nobuyoshi Yamori (2) Keywords: Japan; banking; main bank. Abstract: Under the Japanese 'main bank' relationship, a bank holds equity in a firm and plays a leading role in its decision-making and financing. This may leave a firm dependent on its main bank for financing due to its information advantage over other potential lenders. This dependency may be particularly severe during episodes of financial turbulence. We examine the sensitivity of returns on portfolios of Japanese firm equity to the returns of their main banks using a three-factor arbitrage-pricing model. We find no significant dependence when coefficient values are held constant over the entire sample. However, the data strongly suggest a structural break in the relationship subsequent to the last quarter of 1997, a turbulent period for Japanese financial markets. When a structural break is introduced, main bank sensitivity increases after the break, usually to significantly positive levels. Author Affiliation: (1) Federal Reserve Bank of San Francisco, USA (2) Nagoya University, Japan Article History: Registration Date: 05/10/2004

The antebellum interbank relationships using a previously unknown microdata set for Pennsylvania banks from 1851 to 1859 that disaggregate the amounts due from other banks by debtor bank were examined. The study revealed that country banks dealt exclusively with financial center banks, had a stable and large financial relationship with a single bank and location of the correspondent of the country banks was consistent with the likely trade patterns particularly railroad and canal linkages.

The author finds no economic difference between proprietary payment systems and cooperative bank card systems. The fee amount depends not on banks' collective market power but on differences between merchant's banks and cardholders' banks.

The paper discusses the function of law in the formation of global financial markets and how this process affects at the same time the traditional concept of law. The examples used to illustrate this point include the prohibition of insider trading, the battle over accounting standards, the changing framework of capital adequacy rules for commercial banking, and the reshaping of the structure of important market participants in the U.S., in Germany, and in Japan. (JEL: F 20, K 20).

In the course of the EU enlargement process, the participation of accession countries in the European Monetary Union might lead to a significant redistribution of seigniorage wealth if current regulations prevail. In general, accession countries will be winners from this redistribution, for example Poland with 12.9 billion euros, Romania with 9.9 billion euros or Hungary with 3.3 billion euros. Correspondingly, the current member countries of the European Union face cost os 35.3 billion euros in total, the biggest part of which has to be borne by Germany.

Many companies may not survive the harsh economic reforms planned by the Japanese government but the strong companies will survive and the economy will be stronger after weak companies have failed. The causes of Japan's economic problems, excessive debt, bad banking processes and speculative investments in land must be reformed.

A model examines bank assets' risk characteristics. Estimates of deposit insurance premium amounts that are based on the market need to include a 'capped' call option due to the loan function, to avoid underestimating the premium.

This article examines the financial troubles of Japan's banking industry throughout the 1990s from a macroeconomic perspective. Topics addressed include the losses incurred by banks because of nonperforming loans, the nationalization of banks, and the socialist aspects of Japan's economy.

Bank executives' salaries exhibit homogeneity in pay-for-performance systems. The model developed in this article can be used with several kinds of compensation systems. It is found that heterogeniety leads to varous kinds of incentives.

Banks must strike a delicate balance to maintain liquidity. Enough reserves need to be maintained to cover unexpected runs by depositors. Yet banks must lend and invest money to make money. This balancing act is examined.

Byline: Allen N. Berger (1,2), Robert DeYoung (3) Keywords: banks; efficiency; mergers; financial institutions Abstract: We assess the effects of geographic expansion on bank efficiency, using cost and profit efficiencies estimated for over 7000 U.S. banks from 1993 to 1998. We find both positive and negative links between geographic scope and bank efficiency. Parent organizations exercise some control over the efficiency of their affiliates, although this control tends to dissipate with the distance to the affiliate. However, on average, distance-related efficiency effects tend to be modest, and our results suggest that some efficient organizations can export efficient practices to their affiliates and overwhelm any effects of distance. The results imply there may be no particular optimal geographic scope for banking organizations--some may operate efficiently within a single region, while others may operate efficiently on a nationwide or international basis. Author Affiliation: (1) Board of Governors of the Federal Reserve System, Washington, DC (2) Wharton Financial Institutions Center, Philadelphia (3) Federal Reserve Bank of Chicago, USA Article History: Registration Date: 23/10/2004

This paper investigates the market discipline prior to bank failure and finds that market discipline is strong, and less efficient holding companies pay larger bond spreads before bank failure of its subsidiaries. Thus, these indications can serve as useful warnings to bank supervisors.

Byline: Bertrand Rime (1) Keywords: banking; competition; capital requirements Abstract: We present an alternative view on regulatory distortions in the banking industry. We use the duopoly model developed by Boot, Dezelan, and Milbourn (BDM, 2000), where a bank with low monitoring costs faces a bank with high monitoring costs. We show that when the initial level of the capital requirement is low, an increase of the minimum ratio between capital and total assets causes a higher decrease in profits at the bad bank than at the good bank. This finding contrasts with BDM's theorem 1, which predicts that a regulation imposing an identical increase in production costs on both banks will cause a greater loss in profits at the good bank than at the bad bank. We also look at the impact of an increase in the minimum ratio between capital and total assets on the profits of a representative bank in three other competitive environments identified in BDM. We find that the decrease in the representative bank's profit caused by an increase in the capital requirement is larger when the bank faces competition from an unregulated firm than when it faces a regulated competitor or no competitor at all. This result is consistent with BDM's theorem 2. Author Affiliation: (1) Swiss National Bank, Zurich, Switzerland Article History: Registration Date: 23/10/2004

Byline: Joseph P. Hughes (1), William Lang (2), Loretta J. Mester (3), Choon-Geol Moon (4) Keywords: banking; production; risk; efficiency; agency problems. Abstract: We present and estimate a model that shifts the focus of modeling production from the traditional assumptions of profit maximization and cost minimization to a more general assumption of managerial utility maximization that can incorporate risk incentives into the analysis of production and recover value-maximizing technologies. We implement the model using the almost ideal demand system. In addition, we use the model to measure efficiency in a more general way that can incorporate a concern for the market value of firms' assets and equity and identify value-maximizing firms. This shift in focus bridges the gap between the risk incentives literature in banking that ignores the microeconomics of production and the production literature that ignores the relationship between production decisions and risk. Our estimation of the model for a sample of U.S. commercial banks illustrates that results obtained from our generalized model can differ significantly from those obtained from the standard profit-maximization model, which ignores risk. Author Affiliation: (1) Rutgers University, USA (2) Office of the Comptroller of the Currency, USA (3) Federal Reserve Bank of Philadelphia and The Wharton School, University of Pennsylvania, USA (4) College of Business and Economics, Hanyang University, USA Article History: Registration Date: 09/10/2004

The main motivation for prudential regulation is to increase the solvency of the banking sector. However, it is usually understood that tighter regulation also leads to more concentration and higher spreads. Thus, these prudential measures are seen as implying a trade-off between solvency and competition. In this paper we argue that this trade-off does not necessarily exist. We present a model in which tighter capital requirements lead banks to choose a lower degree of product differentiation, potentially inducing more intense competition and lower spreads. The model is motivated by the recent evolution of the Argentine banking sector.

A discussion of the impact of embedded options in financial institution assets and liabilities on interest rate risk is presented. Findings include a decline in both asset and liability durations when embedded options are present and liability duration declines faster. This mismatch between durations reduces equity value as interest rates rise and increases it as they decline. A more sophisticated model is shown which eliminates the duration mismatch but retains a large convexity mismatch; the impact is strongest and most complex when maturities are roughly intermediate

A description and critique of the procedures used to audit a set of material transactions from Lincoln Savings and Loan (LSL), a well-known audit failure, is presented. The resulting civil litigation yielded considerable auditor deposition testimony and working papers presented as evidence that provide a basis for formal analysis and proposal of alternative procedures; other research methods have not proved very successful in determining why audits fail, but a detailed analysis suggests several potential reasons, especially when management fraud is involved. Opportunities for future research and integration with professional standards are also discussed.

Byline: Maximilian J.B. Hall (1) Keywords: Japan; banks; bad debts Abstract: In January 1998, the Japanese Ministry of Finance (MoF, 1998) released figures which suggested that the Japanese banking industry' s 'bad' debts might be as high as AY=77 trillion (since revised upward to AY=87.5 trillion, if cooperative-type institutions are included Financial Supervisory Agency (FSA), 1998). This compared with the previous official estimate of AY=28 trillion. The 'revelation' was designed to do three things: (1) to convince investors, at home and abroad, who had long suspected that the 'true' level of bad debts was much higher than the authorities (and the banks) were willing to admit to, that the authorities were sincere in their quest to enhance disclosure by local financial intermediaries (2) to stifle opposition to the government's plans to use up to AY=30 trillion (since increased to AY=60 trillion) of public funds to stabilize the financial system.sup.1 by underlining the gravity of the situation facing the Japanese economy and (3) to pave the way for the introduction of more 'transparent' reporting by the banks in April 1998 when a regime of 'prompt corrective action' (PCA).sup.2 was scheduled to commence. This article explains the evolution of bad debt disclosure by the Japanese banking industry and assesses the significance of the latest figures. In particular, it highlights the extent to which 'accounting forbearance' has been, and continues to be, used to mask the true level of the banks' bad debts and refutes the claim that the industry's bad debt burden peaked in 1995. The banking industry's ability to handle the continuing bad debt problem, in the face of a significant impairment of economic capital and the market's relentless drive for full disclosure and transparency, also is assessed. Author Affiliation: (1) Banking and Financial Regulations, Loughborough University, Japan Article History: Registration Date: 09/10/2004

Byline: Robert D. Brooks (1), Robert W. Faff (1), Michael D. McKenzie (1), Yew Kee Ho (2) Keywords: GARCH; beta; stochastic dominance; U.S. bank regulation Abstract: This paper assesses the impact of regulatory change on the risk and returns of the U.S. banking industry. The impact of five major regulatory changes on banking sector risk was assessed using daily data for eighteen major U.S. regional banks, money center banks and savings and loan type depository institutions. Risk in this case was proxied via the use of an M-GARCH model which generates time dependent conditional beta estimates. The evidence obtained suggests that the impact of deregulation and reregulation on banking sector risk is case specific. Further, the results obtained show that the market model incorporating dummy variables, which has proven so popular amongst existing studies, discards important information about the variability of beta which the time varying conditional betas capture. Author Affiliation: (1) Department of Economics and Finance, RMIT University, GPO Box 2476V, Melbourne, Victoria, 3001, Australia (2) Graduate School of Industrial Administration, Carnegie Mellon University, Pittsburgh, PA, 15213, USA Article History: Registration Date: 08/10/2004

Commercial bank debts of developing countries are held by large international banks and smaller domestic banks. This paper investigates how debt concentration--the proportion of a country's debt held by large banks relative to small banks--affects the secondary market price for these loans. We find that countries with higher concentrations have higher secondary-market prices. We explain this empirical finding in a bargaining model that endogenizes the maximum penalty that banks can credibly impose on a recalcitrant debtor. We show that the banks' bargaining power increases with the degree of debt concentration, thus increasing repayment and secondary-market prices.

As Aussies prepare to head overseas for a midyear break, new research from Commonwealth Bank has revealed that more than one in two (58 per cent) travellers will return home [...]

NAB has today announced over $1.6 million in funding for six organisations to assist regional communities enhance the natural environment. Since 2008, NAB, through the NAB Foundation, has provided $12.2 [...]

We develop a new empirical framework to identify and estimate the effects of monetary stimulus on the real economy. The framework is applied to the Chinese economy when monetary policy in normal times was switched to an extraordinarily expansionary regime to combat the impact of the 2008 financial crisis. We show that this unprecedented monetary stimulus accounted for as high as a 4 percent increase of real gross domestic product (GDP) growth rate by the end of 2009. Monetary transmission to the real economy was through bank credit allocated disproportionately to financing investment in real estate and heavy industries. Such an asymmetric credit allocation resulted in the persistently high investment rate and debt-to-GDP ratio. Our findings provide a broad perspective on a tradeoff between short-run GDP growth and longer-run accumulated debt in response to large monetary interventions. JEL classification: E5, E02, C3, C13 Key words: asymmetric credit allocation, endogenous regime switching, debt-to-GDP ratio, heavy GDP, heavy loans, real estate, land prices, GDP growth target, nonlinear effects, I. INTRODUCTION In the aftermath of the 2008 global financial crisis, central banks around the world (Federal Reserve System, European Central Bank, Bank of Japan, and People's Bank of China) [...]