Bank Entry Research Articles

The Impact of Financial (De)Regulation on Current Account Balances

Global imbalances and financial market (de)regulation both feature prominently among the potential causes of the global financial crisis, but they have been generally 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 there is limited empirical evidence. 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 lowering bank entry barriers is negatively associated with the current account balance. In contrast, bank privatisation and securities market deregulation tend to raise current account balances. Our results also highlight the need 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.

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.

Bank Ownership Structure, SME Lending and Local Credit Markets

In this paper, by employing a novel approach, we study the relationship between bank type and small-business lending in a post-transition country. Using a unique dataset on bank branches and firm-level data, we find that local cooperative banks lend more to small businesses than do large domestic banks and foreign-owned banks, even when controlling for the financial situation of the cooperative banks. Additionally, our results suggest that cooperative banks provide loans to small businesses at lower costs than foreign-owned banks or large domestic banks. Finally, we show that small and medium-sized firms perform better in counties with a large number of cooperative banks than in counties dominated by foreignowned banks or large domestic banks. Our results are important from a policy perspective, as they show that foreign bank entry and industry consolidation may raise valid concerns for small firms in developing countries.

The Impact of Financial (De-)Regulation on Current Account Balances

Both global imbalances and financial market (de-)regulation 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 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.

Commercial Bank IPO Underwriting Strategies and the Financial Crisis

The entry of commercial banks into underwriting business has been a subject of extensive research among practitioners and academic scholars. Studies have examined the two opposite sides of the debate. On one hand, there is the certification hypothesis and on the other the issues regarding conflict of interest. Despite the interest in the literature, research on commercial bank underwriting of equity IPOs is somewhat limited. This study examines commercial bank underwritten IPOs using recent data (i.e., from 2005 to 2012). We find that commercial banks, in order to attenuate potential conflict of interest and gain additional certification, co-led and co-managed 77 percent of IPOs they participated in with reputable investment banks prior to the financial crisis, and with investment banks in over 93 percent of their issues after the crisis. This strategy seemed to be effective as the banks not only maintained their share of IPO market during the financial crisis, but they also gained market share, at the expense of investment banks, after the credit crisis. In addition, in response to the credit crisis, commercial banks drastically reduced the number of IPOs where they were sole (only) lead underwriters. We find some evidence that commercial bank sole-led syndicates recorded lower gross spread relative to investment bank sole-led syndicates. Finally, commercial bank underwritten IPOs have lower underpricing than investment bank underwritten IPOs suggesting that the information effect outweighed the conflict of interest effect. Overall, the 2008 financial crisis has had a positive effect on commercial banks’ IPO underwriting business.

A Study on Agewise Satisfaction Level of Customers in Banking Sector

As a sequel to market diversification and deregulation as a part of financial sector reforms, the banking industry has been exposed to a fiercely competitive environment epitomized by the emergence of a ‘buyers market’. The gradual entry of private and foreign banks into Indian banking industry has transformed the hitherto protected and regulated banking environment to a liberalized and highly competitive one. In this changed banking scenario, the importance and significance of the customers has increased manifold. The dictum bank exists because of its customers’ has become more pronounced and relevant in the present context. Banks have to devise suitable systems and mechanisms to satisfy the needs and expectations of various segments of customers for their survival. Against this backdrop, this above matter attempts to introspect about the past, makes an assessment of the present and outlines the strategy for the future in the context of customer service in banks.

A New Perspective on the Effect of Glass-Steagall on Investment Banking and its Impact on Future Legislation

I show that the effect of commercial bank entry into the underwriting market is dependent on whether the offering is shelf registered. Since virtually all public debt is shelf registered today, this provides new evidence on the extent to which prior findings are relevant in today’s capital markets. I find that commercial bank entry reduces fees only for non-shelf offerings. Entry reduces yields for both shelf and non-shelf offerings, but the effect is significantly larger for non-shelf offerings. I also find that bank-underwritten offerings have lower fees and higher yields for non-shelf offerings and lower yields for shelf offerings.

Domestic banks' responses to the entry of foreign banks in China

Purpose – This paper examines the effect that foreign bank entry into China had on transaction fees and service fees charged by domestic Chinese banks. Design/methodology/approach – This paper is an empirical study using financial data for listed Chinese banks collected from the China Stock Market Financial Statement Database. Findings – This paper finds that domestic banks cut transaction fees and service fees shortly before the entry into China of foreign banks, and domestic banks did not cut transaction fees and service fees after foreign banks entered into China. Research limitations/implications – This paper does not examine any non-price strategies employed by local Chinese banks in response to the entry of foreign banks. Originality/value – This is the first study to examine transaction fees and service fees charged by domestic Chinese banks in response to the entry of foreign banks into China.

Product differentiation and efficiencies in the retail banking industry

We empirically quantify the welfare implications of bank entry in the United States between 2000 and 2008. We use a fully structural framework that combines a differentiated demand model with an endogenous product model to investigate the market outcomes. We find no evidence for under- or over-entry. Compared with the socially efficient outcome, there is a mild welfare loss resulting from banks entering wrong locations in product space. Compared with the observed outcome, consumer surplus drops by 20–38% and bank profits decline by 48–59% when banks are homogeneous. Therefore product differentiation significantly improves welfare under free entry.

Free banking and bank entry in Latin America

This article analyzes the impact of free-banking on the banking sector in Latin America in the 19th and early 20th centuries. I use data for seven countries to compare the entry of banks and the growth of bank output prior and after the enactment of free-banking laws to determine whether free-banking (by establishing general requirements for granting note-issuance rights) lowered barriers to entry. The results show that in most Latin American countries the adoption of free-banking laws did not cause in the short run an increase in bank entry and in bank output growth.

Banking Sector Reforms in India

In India, commercial banks are the oldest, largest and fastest growing financial intermediaries. They have been playing a very important role in the process of development. In 1949 RBI was nationalized followed by nationalization of Imperial Bank Of India (New State Bank Of India) in 1995. In July 1969, 14 major commercial banks were nationalized and in April 1980, 6 more were nationalized. Reforms in banking sector have led to the setting up of new private sector banks as well as entry of more foreign banks. As banks are expanding in to virtual banking, supervision and audit will have to be strengthened. Banks will have to pay greater attention to fool proof security arrangements and systems to safeguard against frauds.

Redefining the Role of the Quaternary Shift in Bacillus stearothermophilus Phosphofructokinase

Bacillus stearothermophilus phosphofructokinase (BsPFK) is a homotetramer that is allosterically inhibited by phosphoenolpyruvate (PEP), which binds along one dimer-dimer interface. The substrate, fructose 6-phosphate (Fru-6-P), binds along the other dimer-dimer interface. Evans et al. observed that the structure with inhibitor (phosphoglycolate) bound, compared to the structure of wild-type BsPFK with substrate and activator bound, exhibits a 7° rotation about the substrate-binding interface, termed the quaternary shift [Schirmer, T., and Evans, P. R. (1990) Nature 343, 140-145]. We report that the variant D12A BsPFK exhibits a 100-fold increase in its binding affinity for PEP, a 50-fold decrease in its binding affinity for Fru-6-P, but an inhibitory coupling comparable to that of the wild type. Crystal structures of the apo and PEP-bound forms of D12A BsPFK have been determined (Protein Data Bank entries 4I36 and 4I7E , respectively), and both indicate a shifted structure similar to the inhibitor-bound structure of the wild type. D12 does not directly bind to either substrate or inhibitor and is located along the substrate-binding interface. A conserved hydrogen bond between D12 and T156 forms across the substrate-binding subunit-subunit interface in the substrate-bound form of BsPFK. The variant T156A BsPFK, when compared to the wild type, shows a 30-fold increase in PEP binding affinity, a 17-fold decrease in Fru-6-P binding affinity, and an estimated coupling that is also approximately equal to that of the wild type. In addition, the T156A BsPFK crystal structure bound to PEP is reported (Protein Data Bank entry 4I4I ), and it exhibits a shifted structure similar to that of D12A BsPFK and the inhibitor-bound structure of the wild type. The results suggest that the main role of the quaternary shift may be to influence ligand binding and not to cause the heterotropic allosteric inhibition per se.

A Note on Foreign Bank Entry and Bank Corporate Governance in China

China employs a unique foreign bank entry model. Instead of allowing full foreign control of domestic banks, foreign investors are only permitted to be involved in the local banks as minority shareholders. At the same time, foreign strategic investors are expected to commit to bank corporate governance improvement and new technology support. In this context, the paper examines the effect of foreign strategic investors on Chinese bank performance. Based on a unique data set of bank ownership, performance, corporate governance and stock returns from 2003 to 2007, our regression and event study analysis results suggest that active involvement of foreign strategic investors in bank management have improved the corporate governance model of Chinese banks from a control based model to a market oriented model, and accordingly have promoted bank performance. JEL Classification Code: G21, G28, G34, F23 Keywords: China, Foreign Market Entry, Corporate Governance

Inter-Scale Assessment & Comparison of Customer Loyalty in Banking Industry: An Empirical Study

During the past decade, the financial service sector has undergone significant changes, resulting into a market place that is characterized by intense competition, little growth in primary demand and increased deregulation (Chaudhuri and Halbrook, 2002). Liberalization in banking industry Jed to entry of new private banks (NPBs) which subsequently Jed to greater competition at the market place and fierce fight for customers. Finding a place in this heating sun becomes vital to secure long-range profitability and sustained survival for banks. Customer Loyalty is widely acknowledged as a competitive weapon across most of the highly competitive industries. In banking industry context, customer loyalty can be understood as continued patronage towards a bank over time. According to Yi and Jeon (2003), the degree of customer loyalty can be gauged by tracking customer accounts, over defined time periods and noting the degree of continuity in patronage. To obtain enhanced profits and accelerated business growth, banks need to be aware about their customers and the state of loyalty prevailing among them. Accurate assessment of loyalty can act as a sound base for making decisions and formulating strategies for business growth. Though, the conceptual domain of loyalty is quite rich and the extant literature provides ample knowledge and understanding of loyalty and its various dimensions, its measurement is still an area of Jess explored and least validated concern. Unlike marketing variables, such as service quality, customer satisfaction, etc. customer loyalty still lacks a comprehensive, objective and standardized scale. The present study seeks to contribute to the existing literature of customer loyalty by developing an understanding of the factors responsible for building loyalty among the customers. The study delineates the relationship between diverse marketing variables and customer loyalty. It is therefore of immense significance to appraise the relative strength of different popular scales used to measure customer loyalty. The study compares two distinct measurement tools through survey of retail banking customer namely the ‘Antecedent Based Approach’ which uses antecedents of Customer Loyalty and the ‘RAPID Loyalty Approach’ which is a method of identifying and assessing customer loyalty based on the constituents of retention, advocacy and purchasing.

Identification of Serpin Determinants of Specificity and Selectivity for Furin Inhibition through Studies of α1PDX (α1-Protease Inhibitor Portland)-Serpin B8 and Furin Active-site Loop Chimeras

α1-Protease inhibitor Portland (α1PDX) is an engineered serpin family inhibitor of the proprotein convertase (PC), furin, that exhibits high specificity but limited selectivity for inhibiting furin over other PC family proteases. Here, we characterize serpin B8, a natural inhibitor of furin, together with α1PDX-serpin B8 and furin-PC chimeras to identify determinants of serpin specificity and selectivity for furin inhibition. Replacing reactive center loop (RCL) sequences of α1PDX with those of serpin B8 demonstrated that both the P4-P1 RXXR recognition sequence as well as the P1'-P5' sequence are critical determinants of serpin specificity for furin. Alignments of PC catalytic domains revealed four variable active-site loops whose role in furin reactivity with serpin B8 was tested by engineering furin-PC loop chimeras. The furin(298-300) loop but not the other loops differentially affected furin reactivity with serpin B8 and α1PDX in a manner that depended on the serpin RCL-primed sequence. Modeling of the serpin B8-furin Michaelis complex identified serpin exosites in strand 3C close to the 298-300 loop whose substitution in α1PDX differentially affected furin reactivity depending on the furin loop and serpin RCL-primed sequences. These studies demonstrate that RCL-primed residues, strand 3C exosites, and the furin(298-300) loop are critical determinants of serpin reactivity with furin, which may be exploited in the design of specific and selective α1PDX inhibitors of PCs.

Strategies of Entry Modes: The Case of Greek Banks Entering the Albanian Market

The phenomenon of the globalization of services is increasing at an amazing path and the same has happened to the study related to this issue. Transition from centralized to open market economy has had a great impact in the ways countries of the Western Balkans have developed. This transformation has given many windows of opportunity to some foreign businesses to expand their activities in these countries. More specifically, the beginning of the ‘90s has lead many financial institutions to expand their branches in the Balkan region. Emerging markets are characterized by relatively rapid institutional change and higher rates of economic growth compared to developing countries. Obviously, economic growth in these countries is generally accompanied by trade liberalization measures. However their legal, political and financial institutions are not as mature as those prevailing in the industrialized regions of the world, and this creates an ambiguous and uncertain climate for foreign investors. During the second half of the 1990s the operations of the foreign banks in the emerging market’s banking system have increased dramatically as a result of surpassing the financial repression and stagnant international financial flows. In fact, selecting overseas market and deciding on how to approach these markets are the essential elements of any international strategy. International banks enter and develop into a foreign market in different ways, but the long – term success of the banking industry does not depend solely on transaction management and extensive brand network; but still, it depends on being in the right place at the right time! The aim of this research paper is to provide explanation to the strategic process by which Greek banks cope with the institutional differences in Albania. Specifically, this study was focused in studying issues such as: Greek banks entry modes in Albania; factors motivating their expansion; time of entering the market. To attain answers to this research questions, there were conducted semi-structured interviews with marketing managers of each bank operating in Albania. The result of this study confirms what was previously confirmed from literature and other similar research projects. DOI: 10.5901/ajis.2013.v2n2p321

Increased foreign bank presence, privatisation and competition in the Zambian banking sector

Purpose – This study aims to evaluate the degree of competition in the Zambian banking sector in the wake of dynamic market shifts induced by entry of new foreign banks and privatisation of the state‐owned bank.

Foreign multinational banking in Malaysia: trends, motives and activities

PurposeThe aim of this paper is to analyse and examine the factors affecting the international expansion and market entry of foreign multinational banks (MNBs) in Malaysia. While relevance of the theoretical perspectives is highlighted, the purpose of this paper is to contribute to the understanding of the present‐day phenomenon of emerging multinational banks.Design/methodology/approachThe paper employs multi‐method approaches combining both questionnaires survey data and qualitative interviews.FindingsThe findings reveal the fact that profitability, trade financing, following the customers, diversifying the risk and pursuing new market opportunities are among important factors for the presence of foreign banks in the country.Research limitations/implicationsThe paper highlights relevance of further research on multinational banking and outlines research avenues.Practical implicationsThe paper offers important insight and practical implications for local regulators and policy makers and bankers to understand the behaviour of foreign multinational banking in emerging markets.Originality/valueThe objective of this paper is to fill in some gaps in the literature regarding this research area. The paper provides preliminary research evidence and a framework to suggest hypotheses for further research.

Foreign bank entry in South East Asia

This paper examines the determinants of foreign bank entry in South East Asian countries after significant policy changes following the regional financial crisis in 1997/1998. The results show that manufacturing FDI and bilateral trade exert weak impacts on the decision of entry by foreign banks, providing little evidence for the argument that banks follow their home customers abroad. In contrast, local profit opportunities appear to be the prominent factor attracting foreign bank penetration in South East Asia. The results are robust to different modelling techniques.

On the role of thermal backbone fluctuations in myoglobin ligand gate dynamics

We construct an energy function that describes the crystallographic structure of sperm whale myoglobin backbone. As a model in our construction, we use the Protein Data Bank entry 1ABS that has been measured at liquid helium temperature. Consequently, the thermal B-factor fluctuations are very small, which is an advantage in our construction. The energy function that we utilize resembles that of the discrete nonlinear Schrödinger equation. Likewise, ours supports topological solitons as local minimum energy configurations. We describe the 1ABS backbone in terms of topological solitons with a precision that deviates from 1ABS by an average root-mean-square distance, which is less than the experimentally observed Debye-Waller B-factor fluctuation distance. We then subject the topological multi-soliton solution to extensive numerical heating and cooling experiments, over a very wide range of temperatures. We concentrate in particular to temperatures above 300 K and below the Θ-point unfolding temperature, which is around 348 K. We confirm that the behavior of the topological multi-soliton is fully consistent with Anfinsen's thermodynamic principle, up to very high temperatures. We observe that the structure responds to an increase of temperature consistently in a very similar manner. This enables us to characterize the onset of thermally induced conformational changes in terms of three distinct backbone ligand gates. One of the gates is made of the helix F and the helix E. The two other gates are chosen similarly, when open they provide a direct access route for a ligand to reach the heme. We find that out of the three gates we investigate, the one which is formed by helices B and G is the most sensitive to thermally induced conformational changes. Our approach provides a novel perspective to the important problem of ligand entry and exit.