Bank Balance Sheets Research Articles

The interactive impact of green supporting factors on bank credit creation: An agent-based stock-flow consistent approach

Low carbon transition requires prudential regulations to incentivize bank’s green financing behaviors. This paper performs a simple and original analysis on the impact of the green differentiated banking requirements on bank’s credit creation. Through a simplified bank balance sheet, this paper incorporates green supporting factors into the framework of prudential regulations, namely the risk-based capital adequacy ratio and the net stable funding ratio respectively, and theoretically quantifies the constraining effect rendered by the green differentiated requirements. By constructing an agent-based stock-flow consistent model of commercial banks, and conducting numerical experiments, we find that the green supporting factors exert interactive impacts on credit creation, which depends on bank’s balance sheet structure characterized by equity to reserve ratios. So that it is necessary to implement different combinations of green supporting factors in order to achieve the target of green credit issuance, thus serving for green economic transition. The results obtained in this paper might facilitate the understandings what financial regulators can do to promote low-carbon transition via the banking system.

A Literature Study for the Spillovers of Quantitative Easing

Quantitative easing, as an unconventional monetary policy, was often adopted by major central banks after the 2008 financial crisis. Different from the conventional monetary policy, that is, the central bank injects liquidity into the financial market by adjusting the benchmark interest rate and open market operations, the core of quantitative easing is to increase the balance sheet of banks in the short term through asset purchases and other behaviors to achieve the purpose of stimulating the economy. From 2008 to 2020, the United States adopted five quantitative easing policies to deal with economic downturn risks. While alleviating its own economic recession, it also had a strong spillover effect on China and other countries. Although quantitative easing has alleviated the economic crisis in the United States in practice, it has had an adverse impact on the entire world economy, making the whole world bear the consequences of the economic crisis together. This article summarizes scholars' research on the role, effectiveness, and spillover effects of quantitative easing policies, and summarizes the factors that affect the size of the spillover effects. Finally, through the analysis of the international transmission theory and transmission channels of inflation, it explores the impact of the US quantitative easing policy on China's inflation rate.

Credit Constraints and Bank Failures: A Macroprudential Perspective on the U.S. Commercial Banking Sector

We examine the impact of economy wide credit tightening on bank failures and investigate the relationship between bank failures and tighter monetary policy while accounting for bank balance sheet variables. Using a sample of U.S. banks from 1984 to 2020, we find the following: i) increases in corporate credit spreads lead to a significant increase in aggregate bank failures; ii) lower aggregate bank return on equity and higher allowances for loan losses are associated with a higher incidence of bank failures; iii) no robust evidence suggesting that tighter monetary policy drives higher bank failures. Finally, we show that lower bank failures, contraction in corporate credit spreads, higher bank profitability, and higher stock market returns contribute to higher economic growth, highlighting the interconnectedness of banking, stock markets, credit availability, and the macro-economy. These results may have potential macro-prudential policy implications.

Studi Literatur: Pengaruh Asset And Liabilities Management Terhadap Perbankan

This study describes Asset Liability Management of the Company through surveyed journals in Indonesia from 2017 to 2022. The purpose of this study is to add and develop research or articles on Asset and Liability Management (ALMA) published in Indonesian journals. The samples obtained were 25 articles. This research uses a systematic literature study method, with a PoP (Publish or Perish) application. From this literature study, we conclude that the operation of the Asset and Liability Management (ALMA) function can optimize the structure of a bank's balance sheet in a competitive financial market environment through bank liquidity management policies while maintaining quota and liquidity status. These include primary and secondary reserves, gap management by managing and controlling the gap between assets and liabilities to maximize net profit margin (NIM), exchange rate management by maximizing exchange rate differential returns, investment management and returns through investment decisions in a bank's fortopolio.

Credit expansion, leverage, and banking distress: the puzzle of interwar Italy

Abstract This study analyses the relationship between lending growth, leverage, and distress at the individual bank level for interwar Italy, which experienced remarkable credit expansion in the 1920s. Novel data from archival research based on banking supervision classified documents reveals a large, albeit forgotten, crisis. A puzzle emerges: regression analysis on individual bank balance sheets indicates that leverage and lending growth are not predictors of distress. Complementary indicators show that the features highlighted in the literature on leveraged credit booms do not apply to Italy. Italy’s credit expansion was not a leverage-fuelled credit boom but a process of financial development.

Extracting implied volatilities from bank bonds

In this work, we explore the information content of senior, subordinated and additional tier 1 (or contingent convertible) bonds issued by euro-area banks. We analyze both the asset volatility implied in senior and subordinated bonds and credit default swap market spreads, and the common equity tier 1 (CET1) ratio volatility extracted from additional tier 1 bonds secondary market spreads in the period from December 31, 2012 to March 31, 2021. Furthermore, we jointly consider the following important bank variables: asset, equity and CET1 ratio volatilities. In doing so, we can obtain the market view on credit spreads, banks balance sheet and capital ratio dynamics on a daily basis even if bank data are released quarterly. The approach can be used to monitor the risk of each bank, as perceived by the market, and to investigate banking fragility at a stand-alone or at a country level. Finally, we compare our estimated equity implied volatilities with the volatilities implied in equity option quotes and we show that this indicator depends on the model and the financial instruments considered in the calibration.

Analysis of Non-Performing Loan at PT Mayora Indah in 2008 -2020

Lending by banks must pay attention to the principles of sound credit, as explained in Article 8 of Law Number 10 of 1998 concerning Banking. Banks are required to conduct thorough research on the nature, ability, capital, reserves and economic conditions of the debtor before providing credit. This study aims to prevent the possibility of bad credit. This research was conducted to find out what factors caused bad credit at PT Mayora Indah Tbk in North Sumatra. The method used in this study is descriptive qualitative using ratio analysis of NPL finance in calculating non-performing loans through the bank's balance sheet. This bad credit is also known as collectibility or bad credit and is common in the global banking industry.

Regulación y concentración bancaria en España: un análisis regional, 1962-1975

In 1962 the Ley de Bases para la Ordenación del Crédito y de la Banca was passed. The purpose of the new law was to put an end to the banking «status quo», liberalising the sector and forcing its specialization. From a banking history point of view, this period has been extensively researched. These studies, however, have mainly focused on the behaviour of the national market, without considering that the relevant market in which private banks compete is the regional and/or local one. The inexistence of data in the balance sheets of Spanish private banks at a regional level for this period would explain this fact. This research analyses the evolution of bank concentration between 1963 and 1975 in all the Spanish provinces, with the aim of determining to what extent the institutional change of 1962 modified the structure of these markets.

Unconventional monetary policy and economic inequality

This paper evaluates the distributional effects of US unconventional monetary policy (UMP) implemented as an additional measure to confront recessions. In line with the literature, the results show that the UMP reduces the unemployment rate, moderately increases prices, and stabilizes financial conditions. Yet, it also increases income and wealth inequality, with a stronger effect on the latter. Central bank balance sheet policies tend to be the key measures that shape its general effects. The UMP raises capital income more than labor earnings, which leads to the relatively higher increase in income at the upper part of the distribution and as a result to the growth of income inequality. Also, the UMP increases stock prices more than house prices, which results in the relatively larger growth of wealth at the top end of the distribution, leading to the rise of wealth inequality. These results indicate the need for complementary fiscal policy measures.

Non-performing loans - a threat to the fi nancial stability of Asia countries

The article deals with one of the complex problems of the functioning of the modern banking system in East and Southeast Asia — a high level of non-performing loans. The accumulation of this debt by credit institutions causes a deterioration in bank balance sheets, limiting lending to the real sector. Despite large country diff erences in this indicator, after a long course of the pandemic, it already reaches a critical level in a number of them. Due to the strong negative impact of COVID-19 on fi nancial stability, regulators are having to develop specific procedures to identify, mitigate risks, ensure adequate liquidity and maintain market confidence. As government support programs, moratoriums and loan guarantee schemes to overcome the crisis consequences of the pandemic end, banks are increasingly beginning to be aff ected by the economic recession. A number of lowincome countries in Asia are already preparing to settle or cancel debts related to COVID-19. The policy of the US Federal Reserve in the fi eld of raising interest rates exacerbates the position of Asian banks, leading to large fi nancial losses. According to experts. after the end of the pandemic, NPL ratios for the bulk of Asian banks will be between the relatively low levels recorded during the global economic crisis and the stress indicators that arose during the 1997 Asian fi nancial crisis. Hidden asset quality risks include a weaker outlook for the corporate sector, a rising share of interest moratoriums in South and Southeast Asia, losses for banks due to stress on China’s commercial real estate sector, and high household debt due to higher interest rates in South Korea.

Econometric modeling as a development tool of Methodologies for analysis of banking indicators

The development of the country's economy without the competent and correct operation of commercial banks is complicated. The activities of commercial banks help the economy develop and meet the needs of customers. One of the main commercial banks in the country is PJSC Sberbank which holds a leading position in the modern banking system of the country. The relevance of the study is determined by the fact that in the conditions of non-stationarity of the economic, social and political systems, it is important to constantly diagnose current banking and financial indicators. The objects of the study are the financial and banking indicators of PJSC Sberbank. The study examines the bank's financial performance under non-stationary external conditions using dynamic and econometric modeling. The Bank is steadily increasing the return on capital and assets, which, first of all, shows the successful solution of management issues. The bank's balance sheet is growing faster than the market average, as Sberbank is the country's largest credit institution.The presented in the study results of financial performance indicators of PJSC Sberbank make it possible to determine its place in the banking services market of the Russian Federation. The study also examines the issues of minimizing risks in banking. The paper also presents some internal and external factors that affect the work of the bank. By means of econometric modeling, the influence of these factors was studied and the form of the relationship between the indicators was determined. In addition, in non-stationary conditions, when it is difficult to predict changes in external data, and most indicators become unexplained variables, it is important to constantly monitor the dynamics of financial indicators to adjust the development strategy. This is necessary to preserve them in conditions of instability rather than to multiply own results.The combination of dynamic analysis when studying financial indicators, analyzing the risks of investing in shares of the banking sector, subject to the presence of economic and social crises in the data, makes it possible to comprehensively study the indicators of the banking sector and draw conclusions that are advisory in nature for the activities of Sberbank. The results of the study can be useful for banking analytics in order to adjust the methods and indicators that can affect the maximization of financial results.

Banking on alternative credit scores: Auditing the calculative infrastructure of U.S. consumer lending

Alternative credit scores have become an increasingly important tool for lenders to assess risk and authorize investment in consumer debt. Using alternative data and processing techniques that leverage machine learning (ML) and Artificial Intelligence (AI), these models are designed to bypass existing barriers to risk-based pricing, which is the idea that financial institutions offer different interest rates to consumers based on their likelihood of default. Through an algorithmic audit of one lender's (Upstart) credit scoring model, I find that alternative data, particularly whether an applicant has a bachelor's degree, strongly impacted loan outcomes. This raises important equity concerns about overhauling lending criteria via opaque models that restructure the logic of risk assessment. In following the logic of risk assessment generated by Upstart's model, I also audit three fintech-bank partnerships and examine the balance sheets of banks providing capital via Upstart's platform. This is done to demonstrate rising capital allocation to these types of loans at banks engaged in fintech-bank partnerships, in one case rising from 0.14% to 15.6% of the banks’ balance sheet over three years. My analysis shows that alternative credit scoring systems function as a key piece of calculative infrastructure, which allows some institutions to bypass barriers to risk-based pricing, and becomes an infrastructural site for tech startups to partner with financial institutions seeking out new sources of revenue.

Deep treasury management for banks.

Retail banks use Asset Liability Management (ALM) to hedge interest rate risk associated with differences in maturity and predictability of their loan and deposit portfolios. The opposing goals of profiting from maturity transformation and hedging interest rate risk while adhering to numerous regulatory constraints make ALM a challenging problem. We formulate ALM as a high-dimensional stochastic control problem in which monthly investment and financing decisions drive the evolution of the bank's balance sheet. To find strategies that maximize long-term utility in the presence of constraints and stochastic interest rates, we train neural networks that parametrize the decision process. Our experiments provide practical insights and demonstrate that the approach of Deep ALM deduces dynamic strategies that outperform static benchmarks.

Central bank balance sheet, money and inflation

Central bank balance sheet, money and inflation

Central Bank Balance Sheet Policies Without Rational Expectations

Abstract We study the effects of central bank balance sheet policies—namely, quantitative easing and foreign exchange interventions—in a model where people form expectations through an iterative level-k thinking process. We emphasize two main theoretical results. First, under a broad set of conditions, central bank interventions are effective under level-k thinking, while they are neutral in the rational expectations equilibrium. Second, when preferences exhibit constant relative risk aversion, asset purchases increase aggregate output if they target assets with pro-cyclical returns but reduce it if asset returns are counter-cyclical. Finally, we empirically show that forecast errors about future asset prices are predictable by balance sheet interventions, a property that differentiates our channel from popular alternatives, such as portfolio-balance and signaling channels.

Information management in times of crisis

How does information management and control affect bank stability? Following a national bank holiday in 1933, NY state bank regulators suspended the publication of balance sheets of state-charter banks for two years, whereas the national-charter bank regulator did not. This divergence in policies is used to examine how the suspension of bank-specific information affected depositors and the portfolio of assets held by banks. State-charter banks benefited, experiencing less deposit outflows than national-charter banks in 1933. Further, the behavior of bank deposits across both types of banks converged in 1934 after the introduction of the Federal Deposit Insurance Corporation.

An examination of the functional analysis of Bank of Baroda with a focus on financial parameters

Banking involves safeguarding money on behalf of others. Banks lend this money, earning interest that contributes to profits for both the bank and its customers. A bank is a licensed financial institution that accepts deposits and extends loans. This study aims to assess the performance of Bank of Baroda over the past five years (2016-2021) using ratio analysis techniques. The analysis provides valuable insights into the financial strength of the bank in terms of Asset Quality, Management Efficiency, and Earning Ratios. Ratios are derived from a thorough examination of the bank's Balance Sheet and Profit and Loss Account. Bank of Baroda has demonstrated an improvement in its financial performance in recent quarters, evident through increasing net profits and enhanced asset quality. Profitability ratios, including return on assets and return on equity, have seen positive developments, indicating that the bank is generating more profit from its assets and equity

Bank and non-bank balance sheet responses to monetary policy shocks

We provide evidence on how banks and non-bank financial intermediaries differ in their response to monetary policy. Our findings are based on a standard empirical macro model for the euro area, augmented with balance sheet data for banks and investment funds. The model is estimated via local projections, using high-frequency methods to identify different types of monetary policy shocks. Short-rate shocks lead to a significant balance sheet response of banks and investment funds, with a slightly swifter and more persistent reaction of banks. Long-rate shocks instead exert only short-lived effects on bank balance sheets, whereas investment fund balance sheets exhibit a stronger and more persistent response. The relative role of different types of financial intermediaries hence emerges as a relevant factor in shaping the transmission process for conventional and non-standard monetary policy measures. • Monetary policy transmits unevenly to bank and investment fund balance sheets. • Non-standard monetary policy affects investment funds more strongly than banks. • Standard monetary policy remains effective, despite the rise in non-bank finance.

Liquidity Dependence and the Waxing and Waning of Central Bank Balance Sheets

Liquidity Dependence and the Waxing and Waning of Central Bank Balance Sheets

Aggregate Lending and Modern Financial Intermediation: Why Bank Balance Sheet Models are Miscalibrated

Aggregate Lending and Modern Financial Intermediation: Why Bank Balance Sheet Models are Miscalibrated