Search results

1 – 10 of over 17000
To view the access options for this content please click here
Book part
Publication date: 24 October 2013

Hongyi Chen, Qianying Chen and Stefan Gerlach

We analyze the impact of monetary policy instruments on interbank lending rates and retail bank lending in China using an extended version of the model developed by Porter

Abstract

We analyze the impact of monetary policy instruments on interbank lending rates and retail bank lending in China using an extended version of the model developed by Porter and Xu (2009). Unlike the central banks of advanced economies, the People’s Bank of China (PBoC) uses changes in the required reserve ratios and open market operations to influence liquidity in money markets and adjusts the regulated deposit and lending rates and loan targets to intervene in the retail deposit and lending market. These interventions prevent the interbank lending rate from signaling monetary policy stance and transmitting the effect of policy to the growth of bank loans. Since the global financial crisis, the PBoC’s monetary policy has gone through a full cycle. The combining effects of using different policy instruments simultaneously within a short period of time were quite effective in bringing the credit and money growth in line with its desired level. Most recently steps have been taken to speed up the interest rate liberalization. Effective July 2013, the PBoC removed the floors of the benchmark lending rates.

Details

Global Banking, Financial Markets and Crises
Type: Book
ISBN: 978-1-78350-170-0

Keywords

To view the access options for this content please click here
Article
Publication date: 9 September 2019

Niklas Arvidsson, Sara Jonsson and Lotta Karin Snickare

The purpose of this paper is to apply a capability perspective to investigate the shift from relationship lending to transaction lending in a bank’s corporate segment. The…

Abstract

Purpose

The purpose of this paper is to apply a capability perspective to investigate the shift from relationship lending to transaction lending in a bank’s corporate segment. The authors investigate the impact of three operational capabilities: assisting corporate clients in funding and business operations, management of customer relationships and internal cooperation on performance in relationship and transaction lending.

Design/methodology/approach

The primarily empirical material comprises longitudinal survey data, collected on three occasions during the period 1998 throughout 2001 from one of Sweden’s largest banks. Data are analyzed using factor analysis and OLS regression.

Findings

Results show that the effects of the three capabilities are contingent on the type of lending strategy: In relationship lending, assisting corporate clients has no significant direct effect on performance; however, it has an indirect effect on performance via the management of customer relationships. In transaction lending, assisting corporate clients has a direct effect on performance, and this effect becomes stronger as the transaction strategy is further implemented. The results also show that the direct effect of the management of customer relationships and cooperation on performance is significant in both strategies; however, the relation is stronger in relationship lending compared with transaction lending.

Originality/value

The findings indicate that the choice of lending strategy is more complex than a choice between a strict relationship strategy and a strict transaction strategy and that a strategy that leads to competitive advantage includes elements of both strategies.

Details

Managerial Finance, vol. 45 no. 9
Type: Research Article
ISSN: 0307-4358

Keywords

To view the access options for this content please click here
Article
Publication date: 14 November 2016

Huajing Hu, Yili Lian and Chih-Huei Su

The purpose of this paper is to examine whether prior bank lending relationships affect firms’ liquidity management.

Abstract

Purpose

The purpose of this paper is to examine whether prior bank lending relationships affect firms’ liquidity management.

Design/methodology/approach

The authors mainly work on evaluating first, whether prior lending relationships affect corporate cash holdings? and second, whether the cash flow sensitivity of cash varies systemically with lending relationships. Three different ways are used to define lending relationships, including the lending relationship dummy, a firm’s maximum relationship intensity in terms of number of deals across all lenders and a firm’s maximum relationship intensity in terms of dollar amounts across all lenders. In addition, the paper applies two-stage least squares (2SLS) to address the concern of endogeneity between firms’ liquidity management and banking relationships.

Findings

The authors find that firms with lending relationships maintain a lower level of cash holdings and save less cash out of cash flow. Furthermore, the effect of lending relationships is more profound for firms with high cash flow. The results suggest that prior lending relations alleviate information asymmetry, lower the cost of capital and therefore affect firms’ propensity to retain cash and maintain a high level of cash holdings.

Research limitations/implications

This paper contributes to both the liquidity management literature and the literature on the value of maintaining lending relationships with banks. Researchers should take into consideration the lending relationships built over the course of the lending when assessing firms’ cash policies.

Social implications

Bank lending relationship mitigates the information asymmetry problem, one type of market friction, and facilitates firms’ future external financing, thereby affecting firms’ cash policies and giving more flexibility in liquidity management. The value of lending relationships distinguishes bank loans from public bonds. Therefore, firms, especially those facing more information asymmetry issue, should take into account the benefits from lending relationships in their future debt financing.

Originality/value

Extant literature examines how firm characteristics affect firms’ cash holdings. This paper introduces a new factor that could explain corporate cash policy.

Details

Review of Accounting and Finance, vol. 15 no. 4
Type: Research Article
ISSN: 1475-7702

Keywords

To view the access options for this content please click here
Article
Publication date: 4 June 2018

Peter Öhman and Darush Yazdanfar

The purpose of this study is to investigate the Granger causal link between bank lending and housing prices.

Abstract

Purpose

The purpose of this study is to investigate the Granger causal link between bank lending and housing prices.

Design/methodology/approach

Several econometric methods, including Granger causality tests based on a vector error correction model, were applied to analyse monthly time series data in the Swedish context. The data cover bank lending, apartment prices, villa prices, mortgage rates and the consumer price index from September 2005 to October 2013.

Findings

The results indicate that bank lending and housing prices are cointegrated. According to Granger causality tests, bidirectional relationships exist between bank lending and each of apartment and villa prices, confirming the financial accelerator mechanism. However, earlier shocks arising from housing prices themselves account for the greatest variation in future prices.

Originality/value

To the authors’ knowledge, this study represents the first analysis of the causal link between bank lending and the housing market in terms of apartment and villa prices in the Swedish context.

Details

International Journal of Housing Markets and Analysis, vol. 11 no. 3
Type: Research Article
ISSN: 1753-8270

Keywords

To view the access options for this content please click here
Article
Publication date: 1 March 2003

John K. Ashton and Kevin Keasey

This paper examines the Competition Commission report on the provision of small and medium‐sized enterprise (SME) banking services in the UK. The examination will centre…

Abstract

This paper examines the Competition Commission report on the provision of small and medium‐sized enterprise (SME) banking services in the UK. The examination will centre on the perceived clash between the ‘remedies’ proposed by the Competition Commission and the present forms of lending decision making, a key function in business banking. It is concluded that the Competition Commission assessment of the provision of banking services by clearing banks to small firms, directs scant attention as to how banking services are ‘manufactured’ or banks actually make decisions and operate in practice.

Details

Journal of Financial Regulation and Compliance, vol. 11 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

To view the access options for this content please click here
Article
Publication date: 6 June 2016

Victor Ekpu and Alberto Paloni

The purpose of this paper is to investigate the importance of business lending as a source of bank profits in the UK banking system. The paper also examines whether the…

Abstract

Purpose

The purpose of this paper is to investigate the importance of business lending as a source of bank profits in the UK banking system. The paper also examines whether the profitability of business lending is mostly driven by heterogeneous characteristics of individual banks or whether it is affected by systematic characteristics such as bank size and ownership structure.

Design/methodology/approach

The study uses bank level data from BankScope for a total sample of 83 UK banks and building societies. The period under consideration extends from 2005 to 2009. Econometric estimation is by panel fixed effects.

Findings

Our empirical results show that business lending is a statistically significant determinant of bank profits. However, this average effect masks important systematic differences among banks. In particular, we find strong size effects: the profitability of business lending is considerable for small banks but negligible for large banks. In contrast, we could not detect any ownership effects for domestic and foreign banks. These findings persist when the occurrence of the financial crisis is accounted for.

Research limitations/implications

Interestingly, our study relates these findings to the process of financialisation. Yet, the extent of the latter and its impact on various groups of banks (i.e. large, small, domestic and foreign banks) have not been examined. Further research in this area would make an important contribution to the literature.

Practical implications

Our findings suggest that business lending is not a driving factor of profitability for large banks. One possible policy implication – which may be of interest especially to regulators and policy makers – is that capital injections into the larger banks per se are unlikely to lead to an expansion of credit to business.

Originality/value

There is very little research in the literature on the questions addressed in this paper, especially for the UK banking system. Moreover, the process of financialisation, which motivates the enquiry of this paper, is a growing area of research. Thus, the contribution of this paper is twofold.

Details

Studies in Economics and Finance, vol. 33 no. 2
Type: Research Article
ISSN: 1086-7376

Keywords

To view the access options for this content please click here
Article
Publication date: 11 November 2020

Zied Saadaoui and Hichem Hamza

The purpose of this paper is to check if there is a procyclical lending behaviour in dual banking systems of the Golf Cooperation Council (GCC) countries. The study also…

Abstract

Purpose

The purpose of this paper is to check if there is a procyclical lending behaviour in dual banking systems of the Golf Cooperation Council (GCC) countries. The study also tries to control for the role of Islamic banks in amplifying or mitigating the procyclicality of dual banking systems.

Design/methodology/approach

Estimation of a dynamic panel model using annual observations on a sample of 81 banks based in the GCC countries between 2005 and 2018. The study uses two business cycle indicators as dependent variables, namely, output gap and oil price gap.

Findings

The system generalilzed method of moments (GMM) estimator and robustness checks confirm the procyclical lending pattern of dual banking systems in the GCC. Estimation outputs also indicate that this procyclicality is more pronounced during economic slowdowns. However, it is found that Islamic bankslending is less procyclical, giving support for the stability view of Islamic banking systems. The authors think that the implementation and conduct of macroprudential policies are very challenging for banking authorities when Islamic banks and conventional banks operate under the same regulatory framework.

Research limitations/implications

The research paper may suffer from some limitations. Indeed, exploring panel data instead of country-case data may lead to a problem of heterogeneity that may underpin the credibility of the econometrical estimations. To deal with this problem by introducing a set of bank-specific and time-specific dummies. Furthermore, small N samples (N = number of individuals) may affect the reliability of the tests for the validity of instruments and autocorrelation used under the GMM estimator, leading to inefficient results. Consequently, the number of selected banks is extended as much as possible (81 banks), becoming important comparing to the time dimension of the panel.

Practical implications

Policymakers and regulators are incited to embed the perspectives of Islamic finance regarding lending cyclicality in dual banking systems, which promote the efficiency of resource allocation to the financing of assets and by consequence enabling financial stability. The stability view of the Islamic banking system could prompt policymakers and regulators to encourage the implementation and development of Islamic banks.

Originality/value

The present paper tries to overcome the lack of empirical studies on the procyclicality of dual banking. The study contributes to this novel literature in two ways. First, it focuses exclusively on GCC banking systems. In fact, compared to other emerging markets, business cycles characterizing GCC are specific because of the role played by the oil and gas revenues in the economic growth and financial system is crucial. Second, this paper brings into evidence the procyclicality of GCC banking systems also when the oil price is taken as a business cycle indicator.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 9
Type: Research Article
ISSN: 1759-0817

Keywords

To view the access options for this content please click here
Book part
Publication date: 28 September 2020

Yuki Masujima

This chapter investigates a shock transmission path between a home country (a country where globalized banks’ headquarters are located) and a host country (Indonesia as…

Abstract

This chapter investigates a shock transmission path between a home country (a country where globalized banks’ headquarters are located) and a host country (Indonesia as the emerging market) through the lending channel of global banks’ local branches (i.e., the internal transfer channel). Using novel data of monthly individual foreign bank’s balance sheet in Indonesia, the author finds the evidence that shocks to a parent bank and a home economy are transmitted to a host economy through the foreign banks’ internal capital market. With the Indonesia banks’ capital injections and their difficulty in financing dollar funds without risk premiums since the 1998s crisis, the foreign banks’ dollar lending in Indonesia is a good showcase of internal capital markets. A change in a home stock market index and industrial production appears to have a negative effect on growth rates in foreign currency loans of foreign banks in the host market. On the other hand, high growth rates in the parent bank’s stock price in the home market lead to an increase in foreign banks’ US dollar lending in the host country. This effect does not appear in local currency lending because limited hedging instruments against foreign exchange risk results in immobility of bank capital in the local currency.

Details

Emerging Market Finance: New Challenges and Opportunities
Type: Book
ISBN: 978-1-83982-058-8

Keywords

To view the access options for this content please click here

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

To view the access options for this content please click here
Book part
Publication date: 8 November 2010

John O’Keefe

Purpose – This chapter investigates the influence of bank loan underwriting practices on loan losses and identifies potential determinants of lending practices for five…

Abstract

Purpose – This chapter investigates the influence of bank loan underwriting practices on loan losses and identifies potential determinants of lending practices for five categories of loans: business, consumer, commercial real estate, home equity, and construction and land development loans.

Methodology/approach – Using data on the riskiness of lending practices obtained from the U.S. Federal Deposit Insurance Corporation (FDIC) bank examiner surveys from January 1996 to March 2009, I fit a two-step treatment effects model to measure the effects of underwriting practices on loan losses, controlling for the potential endogeneity of lending practices.

Findings – In the selection step, I find that for business loans, the likelihood that bank management will adopt low-risk lending practices increases with bank financial performance and management quality hierarchical complexity and decreases with market competition. Results for the selection of lending practices for consumer loans and three categories of real estate loans are similar to those found for business loans but show weaker statistical relationships to all explanatory variables. In the loss determination step, I find that lower (higher) risk underwriting practices are generally associated with lower (higher) gross loan charge-offs (as percentage of gross loans and leases) for five categories of loans: business, consumer, commercial real estate, home equity, and construction and land development loans.

Originality/value of chapter – This is the first study to model the determinants of loan underwriting practices with the practices being characterized in terms of their risk to the bank. In addition, this is the first study to consider the effects of the riskiness of lending practices on loan losses, controlling for the endogeneity of practices.

Details

International Banking in the New Era: Post-Crisis Challenges and Opportunities
Type: Book
ISBN: 978-1-84950-913-8

1 – 10 of over 17000