Bank Loan Rates Research Articles

Impact of social drinking culture on the cost of bank loans: Rent-seeking or loan-contracting efficiency

This study investigates whether social drinking culture (SDC), as an informal institution, impacts the cost of bank loans to a firm. Studies suggest that SDC influences individual behavior by fostering interpersonal relationships. Few studies have explored the impact of SDC on corporate borrowing. We argue that executives use SDC to obtain bank loans at lower interest rates. However, the mechanism remains unclear. Firms can leverage SDC to engage in rent-seeking from or improve communication with lenders. We tested the hypothesis and the underlying mechanism on a sample of Chinese firms from 2011 to 2020. Results suggest that the SDC lowers bank loan rates for firms and supports the rent-seeking mechanism. Furthermore, firms in strong SDC regions have larger sizes, longer maturities, and more non-collateralized loans but perform poorly in corporate and bank loans. Therefore, strong SDC is used by firms to engage in rent-seeking borrowing, resulting in credit resource misallocation.

Macroeconomic Policy Adjustments on Environmental Protection Effectiveness Research - Based on the DSGE Model

Through the dynamic stochastic general equilibrium model (DSGE model), this article explores the balance between economic development and environmental protection, focusing on the in-depth mutual influence among economic agents such as households, banks, producers, and government in promoting economic growth and achieving environmental protection. The model comprehensively considers factors such as production technology, carbon tax policies, bank loan rates, and government fiscal policies, aiming to analyze the specific impacts of these factors on economic growth, environmental protection, and social welfare. By detailed settings and analysis of consumption, savings, and labor supply decisions of households, the financial intermediary role of the banking sector, and carbon emissions and environmental technology use in the production sector, this study provides theoretical support for an environmentally friendly economic growth path. Through policy analysis, this article reveals the short-term and long-term effects of positive technological shocks, taxation on energy firms' loan rates, carbon tax policies, and government spending on the economy and the environment, providing a theoretical basis and reference for formulating relevant economic and environmental policies. The results indicate that appropriate macroeconomic policies can effectively promote economic growth while reducing carbon emissions and enhancing social welfare.

Unraveling the impact of bank loan spread on corporate innovation: Evidence from China

This research explores the innovation dilemmas inherent in large listed companies and state-owned enterprises that are often marred by suboptimal innovation outputs due to a deficiency of intrinsic motivation. It aims to unravel the intricate role of loan spreads as the cardinal influencers of innovation within such entities. Dissecting the nuances of loan spreads the disparity between corporate bank loan rates and the benchmark rate set by the People’s Bank of China reveals that alterations in loan spreads directly influence firms’ inclinations to launch high-risk, high-reward innovative ventures by manipulating investment trajectories through cash flow modifications. The empirical findings corroborate that ascending loan spreads have a stifling effect on innovation, particularly for firms with high debt or financial leverage.

A Cost Effective Smart Home Automation System Using NodeMcu

Abstract: A smartphone app devoted to agriculture serves the main objective of informing farmers about crops, pesticides, insecticides, the economy, and other topics. It offers advice on which crops are most suited to the farmer's region and which should be grown during each season. Additionally, it provides information on various bank loan rates and ongoing government initiatives to support farmers. Before informing the farmer automatically of the illnesses that are likely to impact that crop, the programme will contain a feature that asks them to pick the crop they have planted. Main objective of our project is to educate the farmer on their work. Farmers are getting loss while doing their old forming techniques; those are not suitable for getting profit according to present weather conditions.

Research on financing strategies of retailers with capital constraints under the effect of showrooms

A supply chain made up of a financially constrained retailer and a well-financed manufacturer is constructed considering the showroom effect. The financing strategy choice of the retailer and the operational decisions of the supply chain members are investigated, in which the retailer can solve the capital constraint problem through a single financing strategy (ML and BL) and a combined financing strategy (MBL and BTL). Meanwhile, the impact of the showroom effect on the optimal decision and profit of supply chain members under different financing strategies and the optimal financing strategy decision is analyzed by numerical examples. The study shows that: (1) the increasing showroom effect has not inhibited retailers' enthusiasm to offer showroom services; on the contrary, it has prompted them to improve the level of showroom services. (2) The price of the products grows with the increases in the showroom effect, but the sales price of the online channel is more greatly affected. In addition, the showroom effect has a greater impact on the sales prices of online and offline channels and wholesale prices under the BL strategy than in other financing strategies. (3) When the showroom effect is small, the optimal strategy for retailers is to choose the ML strategy or the MBL strategy, while the BTL strategy is superior to the MBL strategy only when the equity financing ratio is very small. However, where the showroom effect exceeds a certain threshold, the BL strategy is the optimal funding strategy for retailers. (4) When the bank loan rate is too high, the ML and MBL strategies are better if the retailer's initial capital level is not too low.

The impact of selected internal factors on the profitability of commercial banks in Jordan

This paper analyzes the impact of internal factors on the profitability of commercial banks in Jordan in the period of 2009–2019. Bank size, capital adequacy, bank loans, bank and liquidity risk are taken as explanatory variables, with the rate of return on assets as a dependent variable. EViews software was used for regression analysis. This study highlights a significant and positive effect of f-statistics for SGBJ Bank, Kuwait Bank, Capital Bank, ABC Bank, and Arab Bank – 11.34, 5.46, 5.11, 5,14 and 5.62, respectively. This means that internal factors affect their profitability, there is a positive effect of internal factors on the profitability of SGBJ, Kuwait Bank, ABC Bank, and Arab Bank. SGBJ’s R-squared was 88%.This indicates that any change inthe bank’s profitability is 88% due to a change in internal factors, while R-squared of Kuwait Bank, Capital Bank, ABC Bank and Arab Bank was 78%, 77%, 77%, and 77%, respectively, indicating that changes in the banks’ profitability were caused by internal factors. This is due to the bank loan ratio, where SGBJ’s ratio 48.6 and the bank loan rate were 79% of total assets. Kuwait Bank 29.1, so bank loan rate is 56% of total assets, Cairo Bank 36.3, ABC Bank 11.8, and Capital Bank 16.37; f-statistics of Alethad Bank, Invest Bank, Arab Invest Bank, Housing Bank, Ahli Bank, Commercial Bank, Cairo Bank, and Jordan Bank were 0.75, 2.17, 1.61, 2.48, 2.26, 3.25, and 2.72, respectively. This indicates that internal factors do not affect the profitability of these banks.

Does capital-based regulation affect bank pricing policy?

This paper tests whether a series of changes to capital requirements transmitted to a change to banks’ pricing policy. We compile a rich bank-level supervisory dataset covering the banking sector in the Czech Republic over the period 2004–2019. We estimate that the changes to the overall capital requirements did not force banks to alter their pricing policy. The impact on bank interest margins and loan rates is found to lie in a narrow range around zero irrespective of loan category. Our estimates allow us to rule out effects even for less-capitalised banks and small banks. The results obtained contradict estimates from other studies reporting significant transmission of capital regulation to lending rates and interest margins. We therefore engage in a deeper discussion of why this might be the case. Our estimates may be used in the ongoing discussion of the benefits and costs of capital-based regulation in banking.Supplementary InformationThe online version contains supplementary material available at 10.1007/s11149-022-09448-5.

Macroeconomic factors that influence the bank loans rate in international and Ukrainian practice

The goal of the paper is to disclose the links between the dynamics of macroeconomic indicators and the level of bank loan rates based on international and Ukrainian practice. On the basis of the previous analysis, the paper also aims to identify the key trends in the formation of loan prices in the long run and identify problematic issues related to bank loan rates. The main characteristics of bank lending rates in Ukraine are: a) their high rates; b) sharp changes in the weighted average bank loan rates from year to year; c) higher loan rates for households compared to the cost of bank loans for businesses; d) higher bank loan rates for short- and medium-term loans versus long-term ones; e) lower rates on loans in foreign currency compared to the loans in hryvnia; and f) high share of non-performing loans to households and businesses in bank portfolios. In the context of world and Ukrainian practice, the paper demonstrates the reverse effect between macroeconomic indicators such as GDP per capita, the ratio of loans to GDP, the ease of doing business index and bank loan rates. The article also demonstrates a direct relationship between the dynamics of inflation rate in the country, the dynamics of non-performing bank loans and their rates.

A contingent claim model of life insurer-bank swap default pricing: strategic substitutes and complements

ABSTRACT This paper develops a contingent claim framework to examine swap transactions between a life insurer and a bank that bilaterally price default risks. We show that the insurer (the protection buyer in the swap transaction market) regards the optimal bank loan rate as a strategic complement. In contrast, the bank (the protection seller) considers the optimal insurer guaranteed rate as a strategic substitute. Hedging conducted by the insurer enhances profits but hurts policyholder protection. Bank capital regulation harms policyholder protection. Insurer capital regulation leads to bank risk-taking. Capital regulations, as such, would jeopardize insurer-bank performance from a financial stability standpoint.

Удосконалення фінансового планування на мікрорівні шляхом комплементарного таргетування

The article concretizes dominance of targeting as a phenomenon for keeping inflation at the macro-level, and to improve advertising activities at the micro level. The success of the relevant instrument in anti-inflation and advertising policies actualizes the possibility of targeting key financial indicators of the organization that are important for its owners and financial administration, but are often overlooked on the part of its managers. The article closer defines the theoretical provisions for improving financial planning at the micro level by introducing complimentary targeting in the activities of commercial organizations. An algorithm and a key indicator are proposed, which be the «target» of the corresponding targeting. As such an indicator, the profitability of assets is substantiated, the target value of which in quantitative parameters should exceed the price of using bank loans. It is determined that in modern conditions with regard to commercial organizations in Ukraine, the profitability of assets should be equal to or exceeding 30%. Appropriate targeting at the micro-level is substantiated as a tool for smoothing and harmonization of contradictions between owners of large-scale commercial organizations and their managers of both the medium and the senior level. Ignoring the rule of necessity of exceeding the profitability of assets over bank loan rates is identified in the activities of a number of public joint stock companies that are leaders in terms of tax payments in Ukraine. In addition, the prevalence of the practice of using bank loans by relevant public joint stock companies, even with a «strong» balance sheet and a high level of liquidity and solvency, is specified. The dominance of the use of bank loans in the activities of leading industrial enterprises in the country instead of issuing their own bonds in the absence of exceeding the profitability of the assets of these enterprises over the price of bank loans indicates the underdevelopment of the domestic stock market and further increases the level of relevance of the targeting of the asset profitability indicator.

Competitive Structure and Bank Loan Rate in Pakistan’s Banking Industry

This paper estimates the relationship between loan price and the number of banks in the corporate loan markets of Pakistan. An original data set is constructed that includes loan price (interest rate) and market structure (number of banks) in more than 300 geographical markets across Pakistan. Variation in market structure (number of banks) along with variation in borrower and lender characteristics is employed to identify the factors that affect interest rates in loan markets. The findings based on regression result show that a competitive structure influences market price as loan rates decline when the number of banks increase in a market. Although the statistical evidence goes in favour of the structure conduct hypothesis, the findings are not robust across various functional forms. The detailed analysis of the Credit Information Bureau data and institutional details documented in this paper will be a useful reference for further research on the Industrial Organisation of Banking in Pakistan. JEL Classifications: L10, L11 Keywords: Price-concentration, Loan Price, Industrial Organisation, Banking

Analisis Rasio Keuangan Perbankan Terhadap Profitabilitas

This study was conducted to examine the effect of variable bank size, LDR, NPL, BOPO, NIM, on ROA in the regional development banking industry in Indonesia. The method in data collection, an explanation of the definition of operational variables, and a technical explanation of the analysis will be carried out using quantitative methods. The results of this study support the Bank Loan Rate Mark Up Theory where LDR, NPL and NIM affect ROA, with increasing interest gains can increase ROA.
 Keywords : Financial Ratios; Profitability.

Coal-Electric Power Supply Chain Reduction and Operation Strategy under the Cap-and-Trade Model and Green Financial Background

For reliving the pressure of air pollution and corresponding the sustainability development policy in China, the companies are urging the creation of a highly productive low-carbon supply chain. This work uses price regulation, the cap-and-trade model, and a green financial policy background to establish a strategy for the coal–electric power supply chain with two-level carbon reduction and operation with financial constraints. A Stackelberg model was built to help investigate the rate of thermal order realization, the carbon reduction strategy in the coal enterprise, and the amount of thermal energy ordered in the electric enterprise. Results show that under a green financial background, a high bank loan discount rate for investing in carbon reduction technology equates to large carbon reduction in coal enterprises, large quantities of thermal energy ordered in electric enterprises, and high profit for coal and electric enterprises. However, the realization rate of thermal power ordered decreased when the price regulation become strict, thereby reducing the profit and carbon emission in electric enterprise. Therefore, the thermal price regulation level increased, the profit on both company and the production did not respond with sensitivity, and the government could encourage a low carbon model by controlling the bank loan rate.

Bank Capital, Borrower Power, and Loan Rates

Abstract We examine how bank capital and borrower bargaining power affect loan spreads. Consistent with previous studies, higher bank capital has a negative impact on loan rates, but borrower cash flow has a significant effect on this impact: compared with high-capital banks, low-capital banks charge more for borrowers with low cash flow, but offer greater marginal discounts as these borrowers’ cash flow rises. These effects are largely focused on more bank-dependent borrowers. We find some evidence that low-capital banks charge a higher premium for bank-dependent borrowers’ systematic risk, but not for their total equity risk or default risk. Received January 27, 2015; editorial decision July 7, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

Implications of Financial Intermediation on The Performance of Commercial Banks in Nigeria: 2000-2017

The paper examined the arguments and counterarguments within the scientific discussion on Financial Intermediation and the performance of Commercial banks in Nigeria. Despite a series of reforms and restructuring aimed at enhancing the bank’s ability to provide services effectively, establish branch networks and finance the real sector, there is still insufficient domestic credit to commercial real-estate banks, affecting the success of financial intermediation in the Nigerian commercial banking sector. The main purpose of this study is to examine the impact of financial intermediation on the performance of commercial banks in Nigeria. The data came from a statistical bulletin of the Central Bank of Nigeria. A systematic literary approach to data analysis is regression analysis. In Equation 1, it was found that there is a significant relationship between total lending and the commercial bank lending rate in Nigeria. In Equation 2, it was found that there is a significant relationship between the overall credit ratio and the cash reserve in the commercial banks of Nigeria. In the commercial bank performance equation, it was found that there is a significant relationship between the total assets and the capital involved by commercial banks in Nigeria. In the commercial bank performance equation, it was found that there was no significant relationship between the loan and deposit ratio and the liquidity ratio in the commercial banks of Nigeria. It has also been found in Commercial Banking Performance Equation 5 that there is a significant relationship between gross domestic product and total credit in the commercial banks of Nigeria. Thus, the study authors recommend reducing the commercial bank loan rate so that investors see commercial banks as the number one source of funding, the Central Bank of Nigeria should increase the commercial banks’ minimum reserve in order to facilitate adequate lending to commercial customers by clients/investors. Commercial banks need to make effective use of the capital used to increase profitability. Commercial banks should help increase liquidity to increase their ability to cover customer withdrawals and increase loans and advances to customers. Commercial banks should allocate proper credit to the real sector for productive purposes in order to increase gross domestic product. Keywords: Financial Intermediation, Commercial Banks, Gross Domestic Product, Commercial Bank Credit.

How do Capital Requirements Affect Loan Rates? Evidence from High Volatility Commercial Real Estate

We study how bank loan rates responded to a 50% increase in capital requirements for a subcategory of construction lending, High Volatility Commercial Real Estate (HVCRE). To identify this effect, we exploit variation in the loan terms determining whether a loan is classified as HVCRE and the time that a treated loan would be subject to the increased capital requirements. We estimate that the HVCRE rule increases loan rates by about 40 basis points for HVCRE loans, indicating that a one percentage point increase in required capital raises loan rates by about 9.5 basis points.

How Do Capital Requirements Affect Loan Rates? Evidence From High Volatility Commercial Real Estate

We study how bank loan rates responded to a 50% increase in capital requirements for a subcategory of construction lending, High Volatility Commercial Real Estate (HVCRE). To identify this effect, we exploit variation in the loan terms determining whether a loan is classified as HVCRE and the time that a treated loan would be subject to the increased capital requirements. We estimate that the HVCRE rule increases loan rates by about 40 basis points for HVCRE loans, indicating that a one percentage point increase in required capital raises loan rates by about 9.5 basis points.

Factors Impacting Bank Net Interest Margin and the Role of Monetary Policy: Evidence from Turkey

<p><em>In this study, we investigate factors affecting net interest margin (NIM) of commercial banks in Turkey. Especially, our results highlight the relation between unconventional monetary policy shocks and bank margins. To this end, first, we conduct an identification analysis about which parameters of asymmetric interest corridor framework are important in explaining variations in NIM. Using industry-level data, we show that there exists a pass through from BIST interbank overnight repo/reverse repo market rate and weighted average cost of funding (WACF) to bank loan and deposit rates. As a result of reduced-form Vector Autoregression (VAR) analysis we find the existence of a transmission mechanism from BIST rate and WACF to commercial loan rate, consumer loan rate and deposit rate. Same pass through to loan and deposit rates is also shown in individual bank level with the Panel Vector Autoregression (Panel VAR) analysis in the case of 16 commercial banks in Turkey during the period 2011Q1-2016Q1. After the identification analysis, we examine the relationship between NIM and policy rates through System Generalized Method of Moments (GMM) techniques by controlling bank specific, industry related and macroeconomic factors. We find that a change in the monetary policy rate has significant and positive impact on NIM. Among bank-specific factors, equity ratio and operating expenses are found to be significantly affecting NIM during the sample period. Our empirical findings also stress the significance of lag values of NIM. Estimations conducted with standardized variables indicate that economic significance of lag values and bank specific variables are larger than that of policy.</em></p>

The Role of Information from International Bank Lending in Mutual Fund Equity Investing

Bank loan rates include monopoly rents from private information obtained in the course of lending relationships. Despite insider trading restrictions, some studies using U.S. data suggest that this private information is utilized in managing mutual fund equity portfolios at bank-affiliated funds. This does not hold in the international context. We find that lending bank-affiliated international mutual funds restrict equity holdings in non-U.S. borrowing firms when affiliated banks initiate syndicated bank loans. Reduced bank-affiliated mutual fund equity holdings and more intensive lending are associated with increased monopoly rents in loan rates. These effects are most pronounced for borrowers in emerging countries.

The Effect of Bank Capital Requirements on Bank Loans Rates

A large literature discusses the effects of bank capital requirements on lending. The contribution of this paper is to empirically quantify this effect on the cost of bank credit. On average, banks increased tier one capital ratios by 4 percent from 2008 through 2011. This increase in bank capital raised the cost of borrowing by 20 basis points. I identify this effect using heterogeneity in the timing of banks raising capital. To address endogeneity concerns, I deploy various cuts of the data, control groups, differences in risk weights, and an instrument for changes in bank capital. These various identification approaches consistently estimate that for each percentage point increase in bank capital, bank loan rates increase by approximately 5 basis points.