Bank Entry Research Articles

Does Competition Reduce Racial Discrimination in Lending?

This paper examines whether increases in bank competition reduce discriminatory practices in mortgage lending. Lenders are significantly less likely to approve black applicants' loan applications despite facing similar credit risk. However, following the relaxation of interstate bank branching laws in the 1990s, increases in local lending competition reduced the approval differential between potential white and black borrowers by roughly one quarter. The reduction was driven both by incumbent lenders altering lending policies to avoid losing market share and by the entry of new banks. The results suggest strong complementaries between direct regulation and the competition mechanism. In particular, direct regulation is effective against large lenders where statistical proof problems are less severe, while competition provides incentives to smaller, harder to regulate lenders.

Do local banking market structures matter for SME financing and performance? New evidence from an emerging economy

Abstract This paper investigates the relationship between local banking structures and SMEs’ access to debt and performance. Using a unique dataset on bank branch locations in Poland and firm-, county-, and bank-level data, we conclude that a strong position for local cooperative banks facilitates access to bank financing, lowers financial costs, boosts investments, and favours growth for SMEs. Moreover, counties in which cooperative banks hold a strong position are characterized by a more rapid pace of new firm creation. The opposite effects appear in the majority of cases for local banking markets dominated by foreign-owned banks. Consequently, our findings are important from a policy perspective because they show that foreign bank entry and industry consolidation may raise valid concerns for SME prospects in emerging economies.

Functional and Structural Characterization of a (+)-Limonene Synthase from Citrus sinensis.

Terpenes make up the largest and most diverse class of natural compounds and have important commercial and medical applications. Limonene is a cyclic monoterpene (C10) present in nature as two enantiomers, (+) and (-), which are produced by different enzymes. The mechanism of production of the (-)-enantiomer has been studied in great detail, but to understand how enantiomeric selectivity is achieved in this class of enzymes, it is important to develop a thorough biochemical description of enzymes that generate (+)-limonene, as well. Here we report the first cloning and biochemical characterization of a (+)-limonene synthase from navel orange (Citrus sinensis). The enzyme obeys classical Michaelis-Menten kinetics and produces exclusively the (+)-enantiomer. We have determined the crystal structure of the apoprotein in an "open" conformation at 2.3 Å resolution. Comparison with the structure of (-)-limonene synthase (Mentha spicata), which is representative of a fully closed conformation (Protein Data Bank entry 2ONG ), reveals that the short H-α1 helix moves nearly 5 Å inward upon substrate binding, and a conserved Tyr flips to point its hydroxyl group into the active site.

The Japanese consumer finance market and its institutional changes since the 1980s

We assert, in this article, that the joint transformation of public perception about households’ over-indebtedness and financial deregulation had important implications on the government decision to reform overall consumer credit between 2005 and 2010. On the one hand, the development of collective actions by groups of lawyers to defend borrowers from moneylenders’ abusive practices represents a source of change in the public opinion about over-indebted individuals in the context of long economic stagnation. A systematic press article analysis from 1977 to 2006 shows that the rising number of these collective actions since the early 1990s may have gradually increased the political salience of social issues related to the unsecure loan market. On the other hand, financial deregulation has been a source of change by allowing banks to enter the consumer finance market since the early 2000s. Banks entry into this market transformed the logic of complementarity among traditional consumer credit actors (Shinpan, credit card companies and sarakin) in a general context of legal consumers’ protection reinforcement. Thus, evolution of Japanese consumer finance's regulation is particularly relevant to illustrate the forces of institutional change and its consequences.

DAMPAK KRISIS EKONOMI DAN MASUKNYA BANK UMUM PADA PASAR KREDIT USAHA MIKRO KECIL TERHADAP KINERJA BANK PERKREDITAN RAKYAT (BPR) DIY

The economic crisis and the entry of commercial banks in the small micro-credit market is estimated to have an impact on rural banks (BPR) business. By using time series data, and using performance measures such as the performance of rural banks lending, third-party funds (savings and deposits), lending rates, and spreads, the study concluded that the entry of commercial banks in the small micro-credit markets do not interfere (negative affect) the performance of BPR DIY. In terms ofthe economic crisis, the response performance of BPR DIY show mixed reactions. In terms of lending and third-party funds, the economic crisis actually makes BPRis able to raise his credit and increase the ability to collect deposits. While in the case of the determination of interest rates, the crisis negatively affect the interest rate (lower lending rates). Similarly, for a variable spread, the crisis also have negative impacts, which means that with the economic crisis, the ability of BPR take spread decreases.Keywords: rural bank, micro and small enterprises credit, crisis economy

Foreign Bank Entry and Corporate Investment Efficiency: Mitigating Financing Constraints or Inhibiting Agent Conflicts?

Foreign bank entry will not only alleviate corporate financing constraints, but also reduce the agent conflicts.Then how does foreign bank entry affect corporate investment efficiency? Based on the data of Shanghai and Shenzhen A-share listed companies in China from 2005 to 2015, this paper finds that foreign bank entry can significantly increase corporate investment efficiency, and this effect is more significant in large corporations, showing the obvious cherry-picking effect.Compared with state-owned enterprises, the effect of foreign bank entry on corporate investment efficiency is more significant in private companies, especially large private companies.Further study finds that, foreign bank entry overall improves corporate investment efficiency through the mitigation of financing constraints and the inhibition of agent conflicts, and the role in mitigating financing constraints is more significant.In addition, in private companies, foreign bank entry improves corporate investment efficiency mainly through the mitigation of financing constraints; in state-owned enterprises, foreign bank entry improves corporate investment efficiency mainly through the inhibition of agent conflicts.This paper not only supplements the relevant researches of factors affecting corporate investment efficiency, but also sheds light on how to guide foreign bank entry better and play its positive role better.

Evolution of Strategic Groups amongst Public Sector Banks in India

As a result of reforms, competition has led to the expansion of banking markets. With the entry of new private and foreign banks, the competition has affected the conduct of public sector banks. Our objective is to determine whether conduct of public sector reveals that there are strategic groups amongst Public Sector Banks. We have estimated the growth rates of the PSBs as a sector, as well as, two strategic groups, viz., SBI Group and Nationalised banks. Using paired t-test on the data for 1992 and 2016, we have compared the conduct of the two strategic groups, for four conduct variables. All four conduct variables, namely, advertising expenditure, operating expenditure, diversification, and investment in government securities show the presence of strategic groups amongst public sector banks. The paper also establishes that strategic groups are a part of conduct, not structure. It is well established through a set of t-test that in the case of public sector banks, strategic groups, to begin with, did not exist. However, with the emergence of competition, public sector banks chose to polarize as to distinct strategic groups through a process of dynamic formation of such groups namely, SBI group and Nationalised group. We establish through this paper that evolution of strategic groups amongst public sector banks have taken place over the time period.

Determinants of Profitability of Private Sector Bank Old and New in India

Banking sector in India has under gone major transformation after the Liberalization, Privatization and Globalization polices of Government of India, in early nineties. These reforms have rationalized the banking system, by way of opening of new generation commercial banks, entry of foreign banks, prudential norms for quality of asset, deregulation of interest rates. The present study analyses profitability determinants of private sector banks in India as a whole, including new and old groups. Private sector new and old bank group profitability performance has been analyzed for evaluating respective peer group performance. The study focuses on selected eight private sector (4 new and 4old) banks in India for the period of fifteen years, from year 2000–01 to 2014–15. Study used the correlation and regression analysis to find out significance of relationship of bank specific variables with profitability measure ROA. The Global banking profitability measure ROA is considered as dependent variable and bank specific five variables were taken as independent variables. Correlation and regression analysis were made to examine the degree of relationship of determinants with profitability indicator ROA. The study concluded that new private sector banks have strong determinants of profitability namely net interest margin, non interest income and lower intermediation cost. The study proved that selected determinants were having significant influence on profitability of bank group.

Determinants of Bank Foreign Direct Investment Inflow in India: A Dynamic Panel Data Approach

India received highest foreign direct investment (FDI) in the world during the first half of 2015, leaving bigger economies like the US and China behind. In the process of globalization, India has liberalized all its sectors and invited FDI in most of the sectors, albeit with a sectoral cap. Internationalization of banks is perhaps the best example of India’s globalization. There are 44 foreign banks with 300 branches operating in India having a cap of 74 per cent and 20 per cent foreign investment in private and public sector banks, respectively. The present study aims to determine the motives behind bank FDI inflow into India. To accomplish that, a county-wise panel was constructed and bank FDI data from 2001 to 2013 was analyzed through generalized method of moments, a dynamic panel data model. The result of the study shows that bank FDI follows overall FDI, indicating that foreign banks follow their clients from their home country to serve them in the host country. However, locational advantages offer them profit-making opportunities and thus play a limited role in drawing bank FDI, which contribute to the development of the Indian economy. The argument that bank FDI inflow increases during a period of crisis is not relevant in the Indian context. The study suggests increasing the FDI cap in banking sector to attract more FDI and further relax the current restrictive policy on entry of foreign banks in India.

Competition, Barriers to Entry and Inclusive Growth in Retail Banking: Capitec Case Study

This case study examines barriers to entry in retail banking in South Africa, informed by Capitec’s experiences as an entrant in this concentrated and highly regulated sector. Capitec’s entry and growth in transactional banking sparked a competitive response from incumbents. Across all four incumbent banks, the fees for low-cost accounts have come down in nominal terms. It is unlikely that these effects would have occurred if the status quo had continued without a disruptive entrant, or if Capitec had been acquired by one of the incumbents early on. Capitec overcame barriers to entry including customers’ reluctance to switch, complex regulation, and the largely self-regulated payments system, in order to grow, in a sector populated by incumbents with some market power. The case study considers measures that could lower barriers for future entrants.

Highly Dynamic Anion-Quadrupole Networks in Proteins.

The dynamics of anion-quadrupole (or anion-π) interactions formed between negatively charged (Asp/Glu) and aromatic (Phe) side chains are for the first time computationally characterized in RmlC (Protein Data Bank entry 1EP0 ), a homodimeric epimerase. Empirical force field-based molecular dynamics simulations predict anion-quadrupole pairs and triplets (anion-anion-π and anion-π-π) are formed by the protein during the simulated trajectory, which suggests that the anion-quadrupole interactions may provide a significant contribution to the overall stability of the protein, with an average of -1.6 kcal/mol per pair. Some anion-π interactions are predicted to form during the trajectory, extending the number of anion-quadrupole interactions beyond those predicted from crystal structure analysis. At the same time, some anion-π pairs observed in the crystal structure exhibit marginal stability. Overall, most anion-π interactions alternate between an "on" state, with significantly stabilizing energies, and an "off" state, with marginal or null stabilizing energies. The way proteins possibly compensate for transient loss of anion-quadrupole interactions is characterized in the RmlC aspartate 84-phenylalanine 112 anion-quadrupole pair observed in the crystal structure. A double-mutant cycle analysis of the thermal stability suggests a possible loss of anion-π interactions compensated by variations of hydration of the residues and formation of compensating electrostatic interactions. These results suggest that near-planar anion-quadrupole pairs can exist, sometimes transiently, which may play a role in maintaining the structural stability and function of the protein, in an otherwise very dynamic interplay of a nonbonded interaction network as well as solvent effects.

Customer Expectations and Performance of Banks : An Empirical Analysis

The Indian banking industry is getting competitive day by day due to entry of new foreign banks and new licenses released by RBI for domestic players. Retail banking in India has evolved from offering mere deposits to a range of products and services. At the same time, different banks are creating various avenues like mobile banking, online banking, and so forth to enhance their respective customer experience. The customer base of these banks is different, and that's why they have different priorities in terms of service requirements. So, this paper tries to bring out various insights into the priority of customers for different services offered by different types of banks and thus help the banks to re-orient their strategy using the importance-performance analysis. Retail banks may use the approach followed in this study to improve their service level considering the priority of their customers. The findings could help the retail banks to identify the competitive dimensions within their organizations that are effectively-resourced, under-resourced, or over-resourced and re-align deployment of resources accordingly.

Banking Across Borders With Heterogeneous Banks

This paper develops a model of banking across borders where banks differ in their efficiencies that can replicate key patterns in the data. More efficient banks are more likely to have assets, liabilities and affiliates abroad and have larger foreign operations. Banks are more likely to be active in countries that have less efficient domestic banks, are bigger and more open to foreign entry. In the model, banking sector integration leads to bank exit and entry and convergence in the return on loans and funding costs across countries. Bank heterogeneity matters for the associated welfare gains. Results suggest that differences in bank efficiencies across countries drive banking across borders, that fixed costs are crucial for foreign bank operations and that globalization makes larger banks even larger.

Banking across Borders with Heterogeneous Banks

This paper develops a model of banking across borders where banks differ in their efficiencies that can replicate key patterns in the data. More efficient banks are more likely to have assets, liabilities and affiliates abroad and have larger foreign operations. Banks are more likely to be active in countries that have less efficient domestic banks, are bigger and more open to foreign entry. In the model, banking sector integration leads to bank exit and entry and convergence in the return on loans and funding costs across countries. Bank heterogeneity matters for the associated welfare gains. Results suggest that differences in bank efficiencies across countries drive banking across borders, that fixed costs are crucial for foreign bank operations and that globalization makes larger banks even larger.

Synthesis and Kinetic Analysis of Two Conformationally Restricted Peptide Substrates of Escherichia coli Penicillin-Binding Protein 5.

Escherichia coli PBP5 (penicillin-binding protein 5) is a dd-carboxypeptidase involved in bacterial cell wall maturation. Beyond the C-terminal d-alanyl-d-alanine moiety, PBP5, like the essential high-molecular mass PBPs, has little specificity for other elements of peptidoglycan structure, at least as elicited in vitro by small peptidoglycan fragments. On the basis of the crystal structure of a stem pentapeptide derivative noncovalently bound to E. coli PBP6 (Protein Data Bank entry 3ITB ), closely similar in structure to PBP5, we have modeled a pentapeptide structure at the active site of PBP5. Because the two termini of the pentapeptide are directed into solution in the PBP6 crystal structure, we then modeled a 19-membered cyclic peptide analogue by cross-linking the terminal amines by succinylation. An analogous smaller, 17-membered cyclic peptide, in which the l-lysine of the original was replaced by l-diaminobutyric acid, could also be modeled into the active site. We anticipated that, just as the reactivity of stem peptide fragments of peptidoglycan with PBPs in vivo may be entropically enhanced by immobilization in the polymer, so too would that of our cyclic peptides with respect to their acyclic analogues in vitro. This paper describes the synthesis of the peptides described above that were required to examine this hypothesis and presents an analysis of their structures and reaction kinetics with PBP5.

Structure of a Novel Phosphotriesterase from Sphingobium sp. TCM1: A Familiar Binuclear Metal Center Embedded in a Seven-Bladed β-Propeller Protein Fold.

A novel phosphotriesterase was recently discovered and purified from Sphingobium sp. TCM1 (Sb-PTE) and shown to catalyze the hydrolysis of a broad spectrum of organophosphate esters with a catalytic efficiency that exceeds 10(6) M(-1) s(-1) for the hydrolysis of triphenyl phosphate. The enzyme was crystallized and the three-dimensional structure determined to a resolution of 2.1 Å using single-wavelength anomalous diffraction (Protein Data Bank entry 5HRM ). The enzyme adopts a seven-bladed β-propeller protein fold, and three disulfide bonds were identified between Cys-146 and Cys-242, Cys-411 and Cys-443, and Cys-542 and Cys-559. The active site of Sb-PTE contains a binuclear manganese center that is nearly identical to that of the structurally unrelated phosphotriesterase from Pseudomonas diminuta (Pd-PTE). The two metal ions in the active site are bridged to one another by Glu-201 and a water molecule. The α-metal ion is further coordinated to the protein by interactions with His-389, His-475, and Glu-407, whereas the β-metal ion is further liganded to His-317 and His-258. Computational docking of mimics of the proposed pentavalent reaction intermediates for the hydrolysis of organophosphates was used to provide a model for the binding of chiral substrates in the active site of Sb-PTE. The most striking difference in the catalytic properties of Sb-PTE, relative to those of Pd-PTE, is the enhanced rate of hydrolysis of organophosphate esters with substantially weaker leaving groups. The structural basis for this difference in the catalytic properties between Sb-PTE and Pd-PTE, despite the nearly identical binuclear metal centers for the activation of the substrate and nucleophilic water molecule, is at present unclear.

Do Bank Regulation and Supervision Stabilize the Banking System? A Cross-Country Systematic Risk Analysis

This paper conducts a cross-country assessment of the impacts of bank regulation and supervision on the stability of banking sectors. We find that in normal time more private monitoring of banks significantly reduces both the tail beta and the ordinary beta. Greater capital stringency reduces the ordinary beta, but increases the tail beta. Official supervision, bank activity restriction, or banking entry requirements do not have significant impacts on either of them. Finally, during the financial crises, only the restriction on the new entry of banks can significantly reduce the tail beta of the banking sectors.

What Determines the Composition of International Bank Flows?

This paper studies how frictions to foreign bank operations affect the sectoral composition of banks’ foreign positions, their funding sources and international bank flows. It presents a parsimonious model of banking across borders, which is matched to bank-level data and used to quantify cross-border frictions. The counterfactual analysis shows how higher barriers to foreign bank entry alter the composition of international bank flows and may reverse the direction of net interbank flows. It also highlights that interbank lending and lending to non-banking firms respond differently to changes in foreign and domestic conditions. Ultimately, the analysis suggests that policies that change cross-border banking frictions and, thereby, the composition of banks’ foreign activities affect how shocks are transmitted across borders.

Post-crisis regulatory reforms and bank performance: lessons from Asia

Based on a large dataset from eight Asian economies, we test the impact of post-crisis regulatory reforms on the performance of depository institutions in countries at different levels of financial development. We allow for technological heterogeneity and estimate a set of country-level stochastic cost frontiers followed by a deterministic bootstrapped meta-frontier to evaluate cost efficiency and cost technology. Our results support the view that liberalization policies have a positive impact on bank performance, while the reverse is true for prudential regulation policies. The removal of activities restrictions, bank privatization and foreign bank entry has a positive and significant impact on technological progress and cost efficiency. In contrast, prudential policies, which aim to protect the banking sector from excessive risk-taking, tend to adversely affect banks’ cost efficiency but not cost technology.

The relationship between competition and risk-taking behaviour of Indian banks

Purpose Under the traditional franchise value paradigm, competition in banking markets is considered to be risk enhancing because of its tendency to raise interest rates on deposits. Taking a contrarian view, Boyd and De Nicolo (2005) have argued that competition in the loan market can lead to lower interest rates and hence reduce bank risk-taking. Following these contradictory theoretical results, the empirical evidence on the relationship between risk and competition in banking has also been mixed. This paper analyses the competition–stability relationship for the Indian banking sector for the period 1999-2000 to 2012-2013. Design/methodology/approach Banking competition is measured using structural measures of concentration, namely, five-bank concentration ratios and the Herfindahl-Hirschman Index as well as a non-structural measure of competition – the Panzar-Rosse H-Statistic. Panel regression methods are used to estimate the relationships. Findings Our results show that while concentration leads to lower levels of default, market and asset risks, it exacerbates the levels of capital and liquidity risks. Practical implications These results have interesting implications for banking sector policy in emerging economies. For instance, any strategy on entry of new banks has to be carefully coordinated with supervisory efforts and macro-prudential policy to derive the benefits of greater competition in the banking industry. Originality/value This is the first paper that analyses the competition – stability relationship using a large number of alternative measures for the banking sector, an emerging economy.