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Financial systemic risk is often assessed by the interconnectedness of financial institutes (FI) in terms of cross-ownership, overlapping investment portfolios, interbank credit exposures, etc. Less is known about the interconnectedness between FIs through the lens of consumer credits. Using detailed consumer credit data in Canada, this chapter constructs a novel banking network to measure FIs’ interconnectedness in the consumer credit markets. Results show that FIs on average are more connected to each other over the sample period, with the interconnectedness measure increases by 19% from 2013 Q4 to 2019 Q4. FIs with more diversified portfolios are more connected in the network. Among various types of FIs, secondary FIs have the notable increase in interconnectedness. Domestic Systemically Important Banks and secondary FIs offering a broad range of loan products are more connected to large FIs, while those specialized in single loan types are more connected to their industry peers. FI connectedness is also significantly related to their participation in the mortgage markets.

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.

In this chapter, the authors focus on the development of the peer-to-peer (P2P) lending industry in China. As a modern borrowing platform, P2P lending allows clients to obtain funding from peer lenders for a multitude of loan purposes, including credit consolidation, personal purchases, and the development of business ventures. However, the speed at which this industry has grown has created numerous problems for regulatory agencies, particularly in China, the largest P2P lending market in the world. This chapter examines how lenders in the Chinese context continue to function as formal institutions regulating this sector continue to grow following a series of highly publicized illegal lending activities in recent years. Additionally, the authors determine whether implemented regulatory measures are providing an overall benefit or detriment to the Chinese P2P lending industry. Finally, the authors highlight the potential for positive social change and social entrepreneurship arising from P2P lending, particularly in terms of the empowerment of traditionally disadvantaged groups by providing access to capital. The authors use the P2P lending industry in the United States, currently the second largest in the world and one operating in a highly regulated financial industry, as a comparison for the Chinese case.

Introduction: The Republic of Moldova’s economy faces risks caused by the war in Ukraine and the economic crisis, proving that citizens’ prosperity is essential for national stability and that financial knowledge influences the standard of living. A minimum financial education provides information, knowledge, and tools to make correct decisions based on informed consent in an increasingly complex financial system. In the financial-banking and academic environment, in-depth research of consumers’ financial education level helps to optimise, streamline, and balance bank–client relations with fairness. This work is the consequence of studying the level of financial education among consumers of financial-banking services, with direct implications for their financial well-being.

Purpose: The main aim of this research is to measure the financial knowledge of consumers of financial-banking services, developing recommendations for measures to improve the situation.

Methodology: To explain the factors of influence, the following research techniques were used: analysis and synthesis of conceptual approaches to financial education; deduction and induction; analysis of the findings of sociological research on the level of financial education of users of financial-banking services; and recommendation synthesis.

Findings: The research validates that enhancing financial education has a positive effect on individuals and the economy, reinstates confidence in financial markets, makes an innovative contribution to accurately assessing consumers’ financial knowledge enabling the implementation of proactive measures.

Implications: This chapter provides insights into consumers’ financial education level, serving as a crucial indicator for institutions and public authorities in formulating and promoting effective educational initiatives to ensure minimal skill gaps.

In seminal work, Den Haan et al. (2007, 2010, 2011) show business loans respond in the opposite direction of what may be intended by monetary policy action in the United States and Canada. Based on various approaches, identification schemes, and samples, we document evidence this loan puzzle is not exclusive to developed economies but is also pervasive in emerging markets. We find business loans generally decline following expansionary monetary policy shocks. A preponderance of statistical and structural evidence indicates important transmissions of this puzzle from the United States to emerging markets.

Introduction: Financial development has a direct impact on the housing market by facilitating access to credit. The increase in housing loans resulting from the relaxation of the credit constraint causes an increase in housing demand and house prices. Purpose: This study aims to examine the relationship between financial development and house prices in Turkey, using the variables: the domestic credit to the private sector and total housing and consumer credits. Methodology: To determine any long-run relationship between financial development and house prices, the autoregressive distributed lag methods are used, covering the selected variables such as real GDP, inflation, mortgage interest rate, and stock price from 2010Q1 to 2020Q2. Findings: The study’s findings show that both variables representing financial development have a statistically significant and substantial positive effect on house prices. Besides, the selected macroeconomic variables have the theoretically expected impact on house prices.

In this chapter, I analyze the behavior of banks in Chile, Colombia, and Mexico between 2005 and 2014. With data from the regulatory institutions of these countries, I show the influence of their institutions on the performance of banks. The World Bank provides two main datasets that measure the institutional characteristics of each country. Their doing business data set computes the ease of doing business while the governance data set measures the effectiveness of government and the perception that people have of their own governments. The results show that voice and accountability, which is a variable that measures the ability of citizens to select their government and participate in society, has a strong effect in the performance of loans. However, these institutional variables seem to have little effect on the volatility of profits.

The Greek sovereign debt crisis had a substantial impact on the real economy and the Greek banking sector. From a period of growth in the economy and high levels of profitability, Greek banks experience a major decrease in demand in the local market, and a large increase in non-performing loans. This had a negative effect on the financing of the Greek firms and households, especially after the PSI and the recapitalisations of the Greek Banks. The Greek banking system has been restructured into four large systemic banking groups and after a long time of depression, the efforts are now being directed into restarting the economy through the financing of firms and individuals. However, the recent and on-going experience with substantial volumes of non-performing loans and strategic defaults, poses many challenges. The same can be said for stricter regulation that was introduced in the aftermath of the financial crisis, business model transformation, developments in the fintech and IT arena, and most recently COVID-19 pandemic, all introducing challenges to bank managers. This chapter provides an overview of these issues.

The chapter looks for the conditions of a contribution of microcredit to poverty alleviation.

It uses socioeconomical hypotheses for defining a direct and fast positive effect of microcredit on the income of the poorest. The contribution raises ten issues or conditions at a micro, meso and macro level.

It is not often that these ten conditions are all completely met. So, the impact of microcredit is generally low as regards the alleviation of poverty. The problems to achieve them are linked to the specificities of the clients and of the prevailing institutions in various sub-Saharan Africa countries.

The chapter clearly identifies the limits of microcredit and their reasons.