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This study examines the impact of making too much provision to write off bad loans by analyzing the consequences on tax and owners' equity. This study also examines that making too much provision has no relation to recovery of bad loans and so questions the rationality of making provision from current profit to write off loans in future. Provision can be kept on the current asset portion, that is, on interest receivable, and bad loans can be written off instantly from equity since it is a capital loss. Since making provision has no impact on collection of bad loans so as to improve the loan loss situation, loans becoming bad should be minimized at the least possible level, which will result in lower loan loss provision, which, in turn will increase the amount of tax payable as well as increase shareholders' wealth.

Three distinct product areas exist for banks — deposit gathering, customer services and loans. Up until now loans have scarcely been marketed. If they have, they have not been viewed in the context of what would create an optimal product mix. Yet a bank's loan mix is a major portion of its product mix and has the same dimensions of width, breadth and consistency as any other product line. It appears that a significant amount of difficulty in developing effective loan mix strategies has been due to the lack of a system to predetermine loan quality objectively. Management's attitude towards risk, the type of community and future economic conditions all play major roles in determining a suitable loan mix. Loan mix strategy should begin with a recognition of attainable goals and end with a defined programme to co‐ordinate the efforts of marketing staff and the loan department. The optimal loan mix will suit customer needs and return the desired levels of profits.

We propose a method for forecasting bank solvency that quantifies bank solvency as the probability that a bank will have more than 0.25 of the cash to total asset ratio. Predictor variables include the ratio of loans secured by farmland to total loans, the ratio of loans to farmers to total loans, and the ratio of commercial and industrial loans to total loans. Loans secured by farmland to total loans significantly predicted the potential for insolvency. To a secondary extent, commercial and industrial loans significantly predicted bank failure. This result was validated with predicted probabilities significantly explaining cash to total assets.

Since 1984 Iranian banks has been operating under Islamic principles. This paper investigates dynamics of loans and the difficulties that this banking system is facing. During the period of Islamic banking in Iran, banks experienced a significant increase in the supply of loans. Many factors could affect the behaviour of lending activities including rate of return, inflation, and government intervention. In this paper, a statistical model is developed to investigate the behaviour of supply of loans in Iranian banks in terms of the causal relationship between the main factors, which affect the supply of loans. The results indicate that government intervention which aims managing of funds has played a more important role than that of economic factors.

While subordinated debt can be used to increase market discipline on banks by playing a corporate governance role in the presence of a federal safety net that encourages risk taking, it also has implications for banks’ loan sales. Using two measures of banks’ loan sales activity, we find greater proportions of subordinated debt increase the likelihood that banks engage in loan sales activity, and are associated with greater proportions of loan sales. Our results have implications about banks’ lending efficiency as well as their transparency and disclosure policies that could play a role in the transmission mechanism of monetary policy.

Studies of Depression-era financial remediation have generally focused on federal deposit insurance and the provision of equity to banks by the Reconstruction Finance Corporation (RFC). This paper broadens the concept of financial remediation to include other programs – RFC lending, federal guarantees of farm and home mortgages, and the elimination of interest on demand deposits – and other intermediaries – savings and loans, mutual savings banks, and life insurance companies. The benefits of remediation or the amounts potentially at risk to the government in these programs are calculated annually and allocated to the various intermediaries. The slow remediation of real estate loans (two-thirds of these intermediaries' loans) needs further study with respect to the slow economic recovery. The paper compares Depression-era remediation with efforts during the 2008–2009 crisis. Today's remediation contrasts with the 1930s in its speed, magnitude relative to GDP or private sector nonfinancial debt, the share of remediation going to nonbanks, and emphasis on securities markets.

Regional rates of return in the United States differed widely following the Civil War and some differences persisted until well after World War II. Our understanding of the evolution of short-term interest rates is based primarily on portfolio rates of return estimated from bank accounting data. This paper uses new national bank loan rate series for 1887–1975 to present a revised view of the evolution of regional short-term interest rates. Two findings are of particular interest. The organization of the Federal Reserve System was accompanied by significant convergence in regional bank loan rates. Rates in the postbellum South were lower than previously thought.

Banking sectors in central, eastern and southeastern European (CESEE) countries have gone through a transformation from state-ownership and central planning to private ownership and market-oriented decision making during the first decade of the 21st century. However, financial markets in these countries are still developing and the private sector is highly exposed to changes in exchange rates, especially in terms of the balance sheet channel. The fact that these banking sectors are predominantly owned by eurozone banks makes them vulnerable to macroeconomic tensions in the European union. This analysis investigates macroeconomic determinants of the realisation of credit risk in the loan portfolio of banks in Serbia using a panel data set covering the period from 2008Q3 to 2012Q2. Three different panel methods were applied separately for loans to households and loans to enterprises. The results indicate that a deteriorating business cycle and exchange rate depreciation led to the worsening of the quality of banks’ loan portfolio in Serbia in the period under review. In addition, statistical evidence indicates that the CPI inflation additionally affected the quality of loans. Furthermore, we find that household loan portfolios are also sensitive to changes in the short-run interest rates. As for policy implications, the importance of international cooperation between regulators is rising. A very important topic for such cooperation should be the risk-taking channel between countries with significant differences in interest rates and degree of riskiness. The interrelationship between the exchange rate and credit risk should be a major focus of both domestic macro- and micro-prudential policy – banks should be motivated to pay more attention to the possible negative spillovers when making credit decisions. Also, further development of the domestic primary and secondary T-bills market would help reducing unhedged FX risks.