Search

"Zombie lending" remains a widespread practice by banks around the world. In this paper, we exploit a series of large-scale on-site inspections made on the credit portfolios of several Portuguese banks to investigate how these inspections affect banks' future lending decisions. We find that an inspected bank becomes 20% less likely to refinance zombie firms, immediately spurring their default. Overall, banks seemingly reduce zombie lending because the incentives to hold these loans disappear once they are forced to recognize losses. This paper was accepted by Tomasz Piskorski, finance. Funding: D. Bonfim and G. Cerqueiro acknowledge financial support from Fundação para a Ciência e a Tecnologia [Grants PTDC/EGE-OGE/30314/2017 and UID/GES/00407/2013]. H. Degryse acknowledges financial support from Fonds Wetenschappelijk Onderzoek. S. Ongena acknowledges financial support from the Horizon 2020 European Research Council [Grant ERC ADG 2016 - GA 740272 lending]. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2022.4452. [ABSTRACT FROM AUTHOR]

Introduction. The peculiarities of the manifestations of credit, market and currency risks, liquidity risks and risks of "state failure" for the functioning of the banking system of Ukraine in the conditions of martial law were examined the article. Recommendations are offered for minimizing existing risks and restoring the functionality of the banking system in the context of performing financial intermediation functions. Methods. Traditional methods of scientific knowledge were used in the article. In particular, methods of analysis and synthesis, as well as a graphic method for visualization and comparison of trends of certain indicators, were used to study the main trends of the risks of banking activity under martial law. Methods of generalization and abstraction were used to formulate recommendations for minimizing banking risks during martial law. Results. In the course of the study, it was proved that the credit risk in the conditions of martial law is minimal for the banking system of Ukraine, because as a result of ineffective monetary policy, the credit burden on the national economy is minimal and insufficient for its recovery. The negative impact of currency and market risks on the functioning of the banking system of Ukraine is substantiated. It is proved that due to the use of the monetary regime of inflation targeting, the banking system of Ukraine has lost the ability to implement the investment function and the functions of financial intermediation in general. Disscussion. As a result of the state of war and the negative expectations of economic agents, the short-term deposit base of banks will increase, and the volume of deposits will decrease, which may lead to a liquidity crisis in the banking system, however, the uninterrupted functioning of the banking system of Ukraine in terms of settlement and cash services will be preserved due to the high level of concentration of capital and banking assets owned by the state. In order to minimize the negative impact of banking risks, the NBU should resort to the use of mechanisms for targeted cheap long-term refinancing of banks under specific economic development programs, which will allow restoring the intermediary functions of the banking system. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to investigate the relationship between money creation process and banking performance for Tunisian listed banks, particularly in the context of increased economic policy uncertainty. Design/methodology/approach: In the relevant literature, there are two theories of money creation. The theory of money creation out of nothing, by using the central bank for refinancing and the theory of financial intermediation, from which money creation is made from preexisting savings. In this paper, the authors utilize a panel data for a sample composed of 11 Tunisian banks during the period of study from 1999 to 2019. Findings: The study's empirical analysis show that both forms of money creation have a positive impact on bank profitability as measured by the return on assets (ROA) and return on equity (ROE) ratios. However, the same analysis shows that the channel of money creation out of nothing is the most profitable for banks. Also, the authors show that economic policy uncertainty negatively influences the relationship between money creation and banking profitability only when credit creation is derived from savings. Originality/value: This paper contributes to the literature by explaining the nexus between money creation and Tunisian banking performance which depends on the implementation of stable and conducive economic and political environment. Also, this link requires the implementation of monetary measures to encourage savings and develop an efficient capital market and judicious monetary policy enabling the central bank to inject more liquidity into the economy. [ABSTRACT FROM AUTHOR]

Refinancing of commercial banks is one of the instruments of monetary policy and is based on the functions of the central bank as a "lender of last resort". Its essence at the micro level is to maintain the liquidity of banks, and at the macro level - to expand the money supply in the country's economy. In most cases, refinancing is secured by domestic government bonds. As generally known, this type of securities is considered to be the most highly liquid collateral. This guarantees to the Central Bank in the repayment of refinanced funds, in particular in the case of classifying the borrowing bank as insolvent. This is especially relevant given the recent crisis in Ukraine and leading to the loss of banking institutions. During 2014-2018, the National Bank of Ukraine initiated the filing of 115 lawsuits to repay insolvent banks' debts under refinancing agreements. The total amount of claims is UAH 37 billion. Almost half of the cases have already been approved and are being enforced. However, some legal contraventions regarding the procedure for the sale of mortgaged property under refinancing agreements (in the case of classifying the bank as insolvent), significantly complicate the process, lead to re (under new circumstances) consideration of cases and delay the repayment of previously provided funds. This, therefore, has a negative impact on the state and size of gold and foreign exchange reserves of the National Bank of Ukraine. The analysis of various aspects of the implementation of the monetary policy of the state, including the features of refinancing of commercial banks, has become the object of attention of many both domestic and foreign scientists. However, today there are still some problems, regarding the priority of application of the norms of various legislative acts in the procedural issues of repayment of such funds in case of classifying the borrowing bank as insolvent. This highlights the need for further scientific research in the appropriate direction. The methodological basis of the study were modern methods of cognition: formallogical, analytical-synthetic, logical-legal and others. The formal-logical method was used to analyse court practice, as well as regulations governing relations related to refinancing banks and the insolvent bank's fulfilment of its obligations to creditors. Logical-legal method revealed inconsistencies in the current legislation of Ukraine the field study and justify suggestions for their elimination. In the analysis the authors concluded that the courts in disputes over the fulfilment of their obligations to creditors by an insolvent bank, which introduced a temporary administration and / or liquidation procedures implemented, should take into account the priority of the Law of Ukraine "On the Individual Deposit Guarantee System" in relation to other legislative acts of Ukraine in such legal relations. During the analysis, the authors came to the conclusion that courts in disputes over the performance of an insolvent bank, which introduced a temporary administration and/or liquidation procedure, its obligations to creditors, should take into account the priority of the Law of Ukraine "On Deposit Guarantee System" concerning other legislative acts of Ukraine in such legal relations. [ABSTRACT FROM AUTHOR]

The article presents the results of a study of the banking system stability under the conditions of increased financial support from the state during the financial and economic destabilization. The banking system stability in the euro zone has been analyzed to assess the prospects for monetary and financial development in Ukraine. The European experience proves that strengthening relations between banks and the state amidst the financialization process is harmful. The author of the article treats this relationship as a closed-loop problem of public and financial liquidity circulation, which leads to financial bleeding in the real economy and destabilization of the financial system, as a whole. This problem requires to be fixed by reducing banking transactions with government securities. The article gives facts proving that the search for solutions to this problem made in the European financial space has become one of the factors of financial and institutional transformations in the euro zone and the EU, in general, and has led to the creation of a banking union. The newly introduced legal framework has manifested itself as unable to stimulate efficient financial distribution. It has also been demonstrated that due to the public and financial liquidity circulation the banking system becomes subject to profound redesigning, thus losing its ability to conduct effective financial distribution in the real sector of economy. [ABSTRACT FROM AUTHOR]

The importance of analysing the effects of changes in liquidity spreads for long maturities on both costs and wealth increases with the increasing importance of capital market-based refinancing by banks. The present study proposes a present value based approach for middle-sized banks. It enables to measure the impact of the extreme change in the institution's own liquidity and spreads on the current liquidity situation by investigating the entire maturity horizon to a dangerous extent. Different scenarios for refinancing alternatives due to the different developments of the liquidity spreads can be analysed straightforwardly. This enables a rapid assessment of the risk situation over the modelled time. In the dynamized version, which covers the planning horizon, the interest rate effects arising over time are also made visible. The result of the model approach is suitable for strategic decisions in planning the refinancing structure under alternative conditions. [ABSTRACT FROM AUTHOR]

Using estimates of the Basel III leverage ratio (LR), we show that banks in the euro area were largely in compliance with the preliminary 3 per cent threshold already in 2013 and that they continued improving their ratio up to an average of 4.7 per cent in 2016. Contrary to predictions that the new requirement might interfere with the implementation of monetary policy, the evidence shows that, in a context of extraordinary monetary policy stimulus, this conflict has not materialized. First, the LR discourages participation in central bank refinancing operations only to a very limited extent and for a specific category of banks. Second, the surge in central bank reserves created by the Asset Purchase Programme has not prompted banks to deleverage by reducing other asset classes. Finally, although banks' balance sheets report a decrease in outstanding repos and reverse repos, the overall activity outside reporting dates does not seem to have decreased as much. [ABSTRACT FROM AUTHOR]

Copyright of Zeitschrift für Öffentliche und Gemeinwirtschaftliche Unternehmen (ZÖgU) / Journal for Public & Nonprofit Services is the property of Nomos Verlagsgesellschaft mbH & Co. KG and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This work is a presentation of the Excel software containing 15 computing sheets and proposed problems in order to improve the students' abilities to perform calculus about banking specific area. Thus calculus related to bank deposits, taking a loan, refinancing a credit and leasing operations are provided. [ABSTRACT FROM AUTHOR]

The author analyzes measures of monetary policy in Russia. It is shown that along with positive directions, such as the decision to increase the banking sector's liquidity and decrease the mandatory reserve standard, there were also restraining measures, such as raising the refinancing rate and withdrawing ruble liquidity through current exchange transactions. [ABSTRACT FROM AUTHOR]

The article reports on the availability of the refinancing of credit lines to meet utilities' day-to-day cash needs. It stated that Moody believes that the present loan is better than the previous and a huge amount of refinancing is about to overtake the market. It mentions that the banks are not the only source of credit. It emphasizes that those who do not renew their loans or who do but with onerous terms could face a credit-rating downgrade.

We consider a model of repeated (relationship) lending in which some contingencies that are relevant for a bank’s decision to finance a project cannot be described contractually. The hazards related to this lack of contractibility can be magnified by actions taken by an entrepreneur. The continuation value of a lending relationship induces borrowers to take actions that minimize the ex-post conflict of interests resulting from contractual incompleteness. The optimal lending relationship is stationary on the equilibrium path. A robust feature of an optimal lending relationship is that the action schedule (as a function of project types) adopted by the entrepreneur is either a constant or a step function. Hence, the bank imposes to the entrepreneur a finite set of decisions from which he can pick his action, bounding his discretion over decisions. This leads to lower interest rates charged by the bank and to efficient refinancing in a lending relationship when compared to arm’s length financing. [ABSTRACT FROM AUTHOR]

Abstract: Decentralization can complement market liberalization by strengthening incentives of agents to respond to market signals. However, in China banks centralized lending authority following financial reforms in the mid-1990s. We present a new theory of financial decentralization in which centralization provides a credible commitment not to refinance bad projects by reducing available information. Using data from Chinese rural financial institutions, we empirically assess the determinants of decentralization and the likelihood of collateral seizure, strongly confirming the predictions of the refinancing model. We conclude that weak institutional environments may limit the efficiency of financial intermediation despite financial market liberalization. [Copyright &y& Elsevier]

Mortgage refinancing activity reached unprecedented high levels during 1990–2001. Using GARCH to control for heteroskedasticity and separating the data into regimes to control for potential structural changes over time, we estimate a model explaining changes in mortgage refinancing activity over the period studied. We find changes in refinancing activity to be negatively related to current as well as past changes in the 30-year mortgage rate with a declining significant lag over time. Similarly, there is a significant lagged dependent variable with a declining lag. Moreover, mortgage refinancing activity is a substitute for other investments during certain regimes. These results offer evidence that home owners cash out the mortgage for other investments. The lags suggest that the process is delayed for a variety of reasons. The declining lag signals a faster response by consumers. The reasons for a faster response include a consumer perception that interest rates have “bottomed out,” the presence of an increase in consumer sophistication, and improvements in technology and market coordination that facilitate and reduce the cost of the refinancing process. [ABSTRACT FROM AUTHOR]

Banks offering credit to borrowers are faced with uncertainty about their creditworthiness. If banks obtain information about borrowers after lending to them, they are able to reject riskier borrowers when refinancing. Potential entrant banks will face an adverse-selection problem stemming from their inability to distinguish new borrowers from old borrowers who have been rejected by their previous bank. We analyze the effects of asymmetric information on the market structure of the banking industry. We characterize the equilibrium under Bertrand competition with two banks, and show that an equilibrium where a third bank enters does not exist (blockaded entry). [ABSTRACT FROM AUTHOR]