Bank Entry Research Articles

The impact of financial regulation on current account balances

Both global imbalances and financial market deregulation feature prominently among the potential causes of the global financial crisis, but they have been largely discussed separately. In this paper, we take a different angle and investigate the relationship between financial market regulation and current account balances, an area for which limited empirical evidence exists. We use a panel of countries over the period 1980–2010 and employ a novel empirical approach which allows us to simultaneously account for model uncertainty, current account persistence and unobserved heterogeneity. We find robust evidence that financial market regulations affect current account balances and that different aspects of these regulations can have opposing effects on the current account. In particular we find that easing bank entry barriers is negatively associated with the current account balance. In contrast, bank privatization and securities market deregulation tend to raise current account balances. Our results also highlight the importance to control for persistence and unobserved heterogeneity. Once we control for these factors, we find robust evidence for a wide range of current account theories in contrast to previous studies accounting for model uncertainty.

Properties of the Mechanosensitive Channel MscS Pore Revealed by Tryptophan Scanning Mutagenesis.

Bacterial mechanosensitive channels gate when the transmembrane turgor rises to levels that compromise the structural integrity of the cell wall. Gating creates a transient large diameter pore that allows hydrated solutes to pass from the cytoplasm at rates close to those of diffusion. In the closed conformation, the channel limits transmembrane solute movement, even that of protons. In the MscS crystal structure (Protein Data Bank entry 2oau), a narrow, hydrophobic opening is visible in the crystal structure, and it has been proposed that a vapor lock created by the hydrophobic seals, L105 and L109, is the barrier to water and ions. Tryptophan scanning mutagenesis has proven to be a highly valuable tool for the analysis of channel structure. Here Trp residues were introduced along the pore-forming TM3a helix and in selected other parts of the protein. Mutants were investigated for their expression, stability, and activity and as fluorescent probes of the physical properties along the length of the pore. Most Trp mutants were expressed at levels similar to that of the parent (MscS YFF) and were stable as heptamers in detergent in the presence and absence of urea. Fluorescence data suggest a long hydrophobic region with low accessibility to aqueous solvents, extending from L105/L109 to G90. Steady-state fluorescence anisotropy data are consistent with significant homo-Förster resonance energy transfer between tryptophan residues from different subunits within the narrow pore. The data provide new insights into MscS structure and gating.

Distance, Asymmetric Information, and Mortgage Securitization

Do lemon problems distort trade on secondary mortgage markets? In this paper, I present new evidence that they do. Using the geographic distance between lenders and borrowers as a proxy for the absence of private bank information, I document a systematic positive link between distance and the mortgage sale rate. Mortgage securitization encourages lending at a ten-foot pole's length, signaling that the originating lender has no private information about the borrower. I show that this effect is stronger for borrowers about whom the lender has greater incentives to acquire information, including low-income (versus high-income) borrowers and loans originated just above the conforming loan-limit (in the illiquid jumbo market where the GSEs are barred from purchasing mortgages). Moreover, I show that mortgage sale rates dropped following the removal of barriers to physical bank entry in the 1990s. The welfare implications are ambiguous: mortgage securitization facilitates credit supply in “unbanked” areas without a local, physical bank presence, but disincentivizes bank information production about loan applicants.

Financial Integration and Growth: Banks' Previous Industry Exposure Matters

We examine whether industry structure of an economy can be affected by its banks’ lending policies. We use US interstate bank-entry deregulations to identify the effect of banking integration on states’ manufacturing sector compositions. We find that states’ under-specialized (with respect to the US) and external-finance-dependent industries grow faster upon entry of banks from states that are overspecialized in the same sectors. We observe growth for industry value added, gross operating surplus, and output per employee, but none for the number of employees, their compensation or wages. Our results are indicative of a banking channel shaping the states’ industrial landscape.

WTO accession, foreign bank entry, and the productivity of Chinese manufacturing firms

After China’s accession to the World Trade Organization (WTO) in December 2001, foreign banks are allowed to enter the Chinese banking market in phases. Using firm-level data from the National Bureau of Statistics of China which cover all state-owned and non state-owned manufacturing firms with sales over 5 million RMB, we examine the relationship between foreign bank entry and the industry-level productivity growth of China’s manufacturing sector. Our empirical results suggest that (a) on average, opening up a region for foreign bank entry has no impact on aggregate productivity growth, (b) however, industries more dependent on external finance grow faster after a region is opened up for foreign bank entry, and (c) these results are due to changes in technical efficiency rather than reallocation. Overall, this paper provides new evidence on the relationship between banking market structure and manufacturing productivity in a fast growing developing country.

Does Foreign Bank Entry Make Chinese Banks Stronger?

China has encouraged its domestic banks to introduce foreign investment since the early 2000s. In the meantime, China has gradually fulfilled its World Trade Organisation (WTO) accession commitment to give foreign banks the same treatment as their Chinese counterparts in the last decade. This research has examined the effects of the two modes of foreign bank entry, namely, minority ownership participation, and setting up branches and subsidiaries, on the performance of Chinese banks. Our results suggest that there is no systematically significant impact of the minority ownership participation on the performance indicators of Chinese banks. However, it appears that the physical presence of foreign banks has been a significant driver for domestic banks to improve profitability and efficiency. Opening the country to foreign banks appears to have made Chinese banks stronger and more competitive.

The Necessity of New Commercial Banks in Bangladesh:

The issue of granting licenses to new banks caused many to raise their eyebrows in last few years. Questions were being asked by authentic experts, bankers and people about the wisdom of allowing more banks, a sector that had been struggling hard to cope with the versatile problems over the years. The impact of inclusion of more new commercial banks on banking sector has been the focus of considerable scholarly effort during the last few years. Only a few studies have approached the impact of structure on bank performance directly by investigating the question: what has happened to bank performance in communities where the structure of the market has been altered? This paper examines the necessity of the entry of new private commercial banks .To achieve this objective, researchers systematically looked at the sector’s current state and future premises through industry analysis. The results indicate that allowing more banks would distort the market, which is already saturated with more than 50 banks in operation.

A Theoretical Study of Phosphoryl Transfers of Tyrosyl-DNA Phosphodiesterase I (Tdp1) and the Possibility of a “Dead-End” Phosphohistidine Intermediate

Tyrosyl-DNA phosphodiesterase I (Tdp1) is a DNA repair enzyme conserved across eukaryotes that catalyzes the hydrolysis of the phosphodiester bond between the tyrosine residue of topoisomerase I and the 3'-phosphate of DNA. Atomic level details of the mechanism of Tdp1 are proposed and analyzed using a fully quantum mechanical, geometrically constrained model. The structural basis for the computational model is the vanadate-inhibited crystal structure of human Tdp1 (hTdp1, Protein Data Bank entry 1RFF ). Density functional theory computations are used to acquire thermodynamic and kinetic data along the catalytic pathway, including the phosphoryl transfer and subsequent hydrolysis. Located transition states and intermediates along the reaction coordinate suggest an associative phosphoryl transfer mechanism with five-coordinate phosphorane intermediates. Similar to both theoretical and experimental results for phospholipase D, the proposed mechanism for hTdp1 also includes the thermodynamically favorable possibility of a four-coordinate phosphohistidine "dead-end" product.

Financial Liberalization and Foreign Bank Entry in Emerging and Developing Economies: What Does the Literature Tell Us?

An important feature of international financial liberalization in several emerging market and developing economies (EMDEs) over the last two decades has been the rising foreign bank participation in their domestic banking systems. While the term financial liberalization has been widely used in literature, it is often not carefully defined. What is the relationship between foreign bank entry and financial liberalization? This paper lays out a simple framework to understand the different components of financial liberalization, its relationship with domestic deregulation as well as foreign bank entry and also surveys the trends and implications of foreign bank entry in EMDEs.

How Does Foreign Bank Entry Affect Financial Inclusion in Emerging and Developing Economies?

An important dimension of the effects of foreign bank entry on financial sector development relates to that of financial inclusion. Despite its policy significance, the empirical literature offers little evidence on the impact of bank competition generally or foreign bank entry specifically on financial inclusion. This paper examines the relationship between foreign bank entry and financial inclusion for a panel of 57 emerging and developing economies over the period 2004-2009. The empirical findings suggest that foreign banks have a positive impact in furthering financial inclusion, though the relationship turns negative when foreign bank entry is followed by greater banking concentration.

Does Foreign Bank Entry Affect Monetary Policy Effectiveness?: Exploring the Interest Rate Pass-Through Channel

This paper explores the impact of foreign bank entry on interest-rate pass-through for a panel of 57 emerging and developing economies over 1995-2009. The paper tests for possible thresholds in terms of foreign bank presence that differentially impact interest-rate pass-through. The empirical results suggest that there are strong threshold effects in that foreign bank entry tends to enhance interest-rate pass-through only in countries with greater degree of foreign bank presence compared to those with limited entry. The paper also finds that when foreign bank entry leads to greater banking concentration, it significantly lowers the extent of interest rate transmission.

Molecular dynamics simulation for the reversed power stroke motion of a myosin subfragment-1

Myosins are typical molecular motor proteins that convert the chemical energy from the ATP hydrolysis into mechanical work. The fundamental mechanism of this energy conversion is still unknown. To explain the experimental results already obtained, Masuda has proposed a hypothesis called the “Driven by Detachment” theory for the working principle of the myosins. This theory insists that the energy used during the power stroke of the myosins does not directly originate from the chemical energy of ATP, but is converted from the elastic energy within the molecule at the joint between the head and neck domains. One method for demonstrating the validity of this theory is a computational simulation using the molecular dynamics (MD) method. The MD software used was GROMACS. The target of the MD simulations was myosin subfragment-1 (S1), for which the initial structure was obtained from the Protein Data Bank entry 1M8Q. The AFM pull code of GROMACS was used to apply an external force of 17 pN at the end of the neck domain in the direction opposite to the power stroke to observe whether the myosin S1 takes the pre-power stroke conformation. The residues assumed to be engaged in the docking with an actin filament were fixed to the space. Starting from exactly the same initial position, 10 simulations were repeated by varying the random seeds for generating the initial velocities of the atoms. After 64ns of calculations, the myosin S1 took the conformation of the pre-power stroke state in which the neck domain was bent around the joint between the head and the neck domains. This result agrees with the prediction expected by the DbD theory, the validity of which may be established by conducting similar simulations for the other steps of the myosin working processes.

How Does Financial Opening Affect Industrial Efficiency? The Case of Foreign Bank Entry in the People's Republic of China

This paper analyzes the effects of foreign bank entry on industrial efficiency in the People's Republic of China (PRC) as a case study of financial opening. The study reveals an overall positive impact on the industry. However, the effects vary across ownership groups: negative for state and collective sectors, positive for private enterprises, and insignificant for foreign-invested firms. These findings are incompatible with predictions based on the “cream-skimming effect” and information asymmetry. We investigate two transmission channels of the policy effects—via an easing of financing constraints and through increased competition. Foreign bank entry, like financial liberalization, reverses the effects of repressive financial policy, which protects the state sector but discriminates against private enterprises. While enhancing bank competition can be an effective way to support private sector development, the state sector deserves close attention in order to ensure a smooth transition. This case study should offer some useful lessons for future financial opening.

Foreign participation and banking competition: Evidence from the Indonesian banking industry

Foreign participation in Indonesian banking has expanded from the establishment of foreign de novo banks into the acquisition of existing local banks. The increase in foreign participation has therefore not been associated with a growing number of banks. This study aims to examine the competitive behavior of foreign and local banks as a competitive banking industry is important in boosting economic efficiency and economic growth. This study also examines the role of modes of entry of foreign banks on competition, either through the establishment of foreign de novo banks or the acquisition of local banks. The recent methodological refinements of the Panzar–Rosse method developed by Bikker et al. (2011) are employed to estimate the level of competition among local and foreign banks. Generally, the foreign banks, particularly foreign de novo banks behaved more competitively than local banks, and their penetration is therefore important in creating a contestable market. This study found that in terms of assets, on average foreign de novo banks were smaller, more efficient, and had lower overhead costs, so they could offer lower loan rates and disburse more loans. The recent consolidation in the Indonesian banking industry may have an adverse impact on competition as it restricts the establishment of foreign de novo banks.

Efficiency Change in Pakistan Commercial Banking Sector: A Pre and Post Digital-Restructuring Analysis

In this study we examine the technical efficiency of commercial banking sector of Pakistan. In recent past Pakistan’s commercial banking is making substantial investment and up-gradation in information and communication technology (ICT) in order to keep pace with global banking industry. Due to financial linearization the entry of the foreign banks with advance technology in the commercial banking sector has been increased that inclines other banks to adopt the new technology in order to earn more of market share. To justify the huge investments in computers and related technologies many question arises about the efficiency & productivity growth of the banks due to ICT. Accordingly, this study analyzes the efficiency of a sample of 11 commercial banks for the period 1998 to 2012. Using data envelopment analysis (DEA) we measure the Malmquist productivity index (MPI) to measure total factor productivity (TFP). In this study the time period (1998-2012) has been decomposed into pre-digital reforms (19982005) & post-digital reforms (2006-2012) period, in order to compare the efficiency change after the adaptation of IT by commercial banking sector. The variables are selected under intermediation approach. The results show that technical efficiency has been significantly increased in post-digital reform era and as a result TFP has also been boosted. The results show that MCB has consistently scored the highest efficiency & Malmquist TFP scores.

Where are All the New Banks? The Role of Regulatory Burden in New Charter Creation

New bank formation in the U.S. has declined dramatically since the financial crisis, from well over 100 new banks per year to less than 1. Many have suggested that this is due to newly-instituted regulation, but the current weak economy and low interest rates (which both depress banking profits) could also have played a role. We estimate a model of bank entry decisions on data from 1976 to 2013 which indicates that at least 75% of the decline in new bank formation would have occurred without any regulatory change. The standalone effect of regulation is more difficult to quantify.

Diagnostic analysis on service quality parameters: a comparison of select banks in Uttarakhand, India

The process of economic liberalisation initiated in India in 1991 paved the way for the entry of private sector banks and foreign banks, which fundamentally changed the structure of the Indian banking industry. Consequently the banking sector today faces an intense competitive environment which is forcing them to adapt to new ways and innovate in their attempt to survive. Financial services, particularly banks, often compete in the market with nearly similar kinds of service. In such a scenario the primary competitive weapon available to them is differentiating themselves based on their quality of service offered by them. The present study applies SERVQUAL instrument to diagnose the service quality of two selected banks for their comparative evaluation. The study revealed that individually both the banks still have a long journey ahead on all the five dimensions of SERVQUAL instrument.

Role of Employee Engagement in Work Outcomes: A Comparative Study on Public Vis-à-Vis Private Banks

The banking sector has been emphasising the focus on Employee Engagement concerns as the competition has emerged with entry of private banks in the industry in terms of services, returns, facilities, working hours, technology etc. during the recent few years. The environmental change has not only been caused a change in the consumer behaviour but also the employee behaviour as well. While Employee Engagement is determined by individual and organisational factors, it determines the work outcomes.

Perception and Behaviour of Mutual Fund Investors

The mutual fund industry in India has emerged as a dominant financial intermediary in Indian capital market. As of April 2014, the industry comprising of 45 Asset Management Companies managed financial assets of Rs. 14000 billions contributed by 80 million investors spread all over the country. Majority of the funds (approximately) 96% of the funds are open-ended type and the remaining 4% of the funds are close-ended type. The assets have been grown at a compounded annualized growth rate of 48 per cent over a period of five decades, 1964–2014 of mutual funds in the country (as per figure available from association of mutual funds in India). The impressive growth can be attributed to the entry of commercial banks and the private players in mutual funds industry coupled with the rapid growth of the Indian capital markets during the last couple of years.

How Has the Global Financial Crisis Affected Syndicated Loan Terms in Emerging Markets? Evidence from China

This paper examines the impact of the recent global financial crisis on the cost of debt capital (syndicated loans) in a leading emerging market, namely China, using difference-in-differences and GARCH approaches. Before the crisis China adopted banking reforms allowing entry of foreign banks and more domestic participation in the syndicated loan market. As a result, during the crisis the volume of syndicated loans grew steadily, in contrast to other countries. In addition, the amount of foreign syndicated loans decreased and average maturity increased compared to the pre-crisis period. Our findings provide useful information to policy makers to devise effective responses to financial crises.