Big Banks Research Articles

The political economy of the G20 agenda on financial regulation

The paper empirically examines the implementation record of international financial regulation of the banking sector. The study finds that the size of the banking sector and the presence of global systemically important banks (G-SIBs) are positively associated with a stronger implementation record. These results suggest that cooperative motives of internalising externalities, creating a level playing field and preserving financial stability play a role in explaining the implementation record. We find evidence that this cooperative behaviour may be driven by the self-interest of global players as the positive record is particularly strong in countries where large banking sectors and big banks are both present, and where regulation only applies to large players. Sectoral concentration, bank health and the share of foreign ownership yield more mixed results as regards their impact on implementation.

STOCK MARKET REACTIONS TO MERGERS ANNOUNCEMENT: AN EMPIRICAL STUDY ON RECENT 2020’S INDIAN MEGA BANK MERGER

Mergers and acquisitions are being used as strategic tools by Indian Corporate houses especially by Indian banking sector during last three decades of post liberalization era. Banking Sector in India has witnessed a mega merger of 10 Indian public banks into four big banks with effect from 1st April 2020 which definitely attract attention of different stakeholder who are interested to know whether these tie up events are really helpful for improving present scenario of banking industry as well as economic condition of the country in long run. But our concern in this study is to figure out the changes that occurred in shareholders wealth of the acquiring firm in short run around the announcement of merger event by detecting the responses of the share prices of acquiring bank through the procedure of event study methodology. For this study, company specific and market specific secondary data have been collected from the official website of National Stock Exchange as these companies are actively traded on said exchange. To accomplish the objective of this study we relied on figure of Average Abnormal Returns (AAR) and Cumulative Average Abnormal Returns (CAAR) for an event window of 41 days from day -20 to day +20. Return values have been statistically tested through cross sectional t-test. The notable finding of the research is that an under-reaction of market is observed before the announcement but the moment the announcement information becomes effective, investors start reacting from day +2 and the stock price jumps up, providing positive AARs to the investors. But after the positive respond to the merger information, finally investors have under-reacted to the event. CAARs figures also indicate the positive pattern of returns in the beginning of the event window but rapidly it becomes negative from day -16 to the last day of window that might be due to pandemic situation running throughout the world. KEYWORDS: Merger & Acquisition, Event Study, Stock Return, Abnormal Return, Banking Sector

Problems with crisis intervention: When the government wants to restrain big banks but punishes small businesses instead

Following the 2008 financial crisis, Congress passed the Dodd-Frank Act (DF) with the intent of reducing systemic risk posed by big banks to the country’s financial system. We empirically show that DF negatively impacted both the numbers and dollar amounts of small business loans issued by small banks. This new finding implies an unintended, counterproductive constraint on American venturing activities, particularly in rural communities. This should be of importance to academics and policymakers alike, considering that entrepreneurial activity is generally regarded as the backbone of the U.S. economy. Without adequate financing to small ventures, the ultimate health of the U.S. economy could be stunted. Our findings offer key insights into the fields of entrepreneurial finance, regulation and economic growth.

Immaculate Deception: How (and Why) Bankers Still Enjoy a Global Rescue Network

Dodd-Frank is an example of counterfeit reform. It is designed principally to benefit very big banks and it has helped these banks to increase their market share greatly during the last 10 years. The Act provides lesser and contradictory forms of costs and comfort to smaller US bankers and taxpayers, foreign bankers (especially the managers of Deutsche Bank), and foreign governments. Small bankers and taxpayers are encouraged to believe that the 2007-2009 US rescue of the world’s biggest banks was a one-time maneuver. But an opposite message is sent through the press as (with great fanfare) the industry absolves and congratulates ex-officeholders: (1) for having transferred massive amounts of subsidized support not just to stakeholders in US megabanks, but also to European bankers and governments, and (2) for keeping the subsidies flowing long past the panic’s expiry date. Genuine reform will require changes in fraud laws and an effort to post on a continuing basis the value of the safety-net subsidies individual megabanks enjoy.

Bank Value at Risk (VAR) disclosures. A missed leading indicator to the Financial Crisis of 2008?

The financial crisis of 2008 led to devastating consequences such as bankruptcies and recession in the US economy. Many big banks were at the forefront owing to their risk exposures and open positions. Prior research documents that bank financial statements did not provide adequate lead indicators on the looming crisis in reducing information asymmetry. However, there is no prior research focused on the sufficiency of risk disclosures around this time period. This paper seeks to address this gap using Bank Value at Risk (VAR), a single number publicly disclosed in the annual reports of banks. Bank VAR attempts to quantify the worst possible loss the bank expects to have on its trading portfolios under normal market conditions. Using hand-collected data from the annual reports of the top twelve US banks, this study documents that the change in VAR was steady and positive until the point of the crisis and then decreased in the years thereafter. A repeated-measures analysis of variance model is used to study whether two indicators of VAR (year-to-year change in VAR and log-transformed ratio of VAR to the total trading revenue) differ from pre-crisis to the post-crisis levels. Both VAR indicators reveal an increasing trend pre-crisis and are significantly higher pre-crisis compared to post-crisis. This opens the possibility that the trend of VAR might have information content as a potential leading indicator of the crisis. The finding sheds light on efficacy of risk analysis in ­­bank trading portfolios and could have implications for governance.

In Too-Big-To-Fail We Trust: Ethics and Banking in the Era of COVID-19

The COVID-19 economic crisis has brought to light something very broken in the American banking system—banks prioritize their own profits over the interests of those they serve and interests of social justice. And they are permitted to do so because they do not owe a fiduciary duty to their customers and are not social welfare maximizing entities.In an effort to support the economy, the US government passed numerous stimulus acts, which included, among other things, a Paycheck Protection Program (PPP), and the distribution of relief checks to consumers. To effectuate the massive distribution of liquidity on an expedited basis, the government relied on big banks. But instead of prioritizing the public welfare, the banks were focused on their bottom lines and thus did not carry out the true intent of the stimulus. For example, with respect to the PPP, although the Small Business Administration was required to process the loans on a first-come, first-served basis, the banks were not. And absent that requirement, the banks prioritized richer and bigger customers. As a result, women and minority-owned small businesses, as well as peripheral area-based small businesses, found themselves facing more barriers to getting loans. Similarly, with respect to the direct distribution of relief checks to consumers, banks prioritized their own interests over those of their customers. For example, in an effort to collect bank debt, banks froze and seized the funds from government relief checks deposited into consumer accounts before the consumers that needed those funds received them. Consequently, various state attorney generals and courts had to intervene, and mandate that the consumers be permitted to use the funds as the government had intended—for necessities like food and shelter.There are several techniques we can employ to modify banks’ ethical behavior and cultural norms. This Essay discusses such methods, which include (i) a top-down regulatory approach; (ii) the creation of market-led initiatives; (iii) an interpretive fix, offered by the judicial system; and (iv) a public criticism and shaming semi-regulatory approach.

Neobancos Nuevo Reto en el Mercado Financiero Peruano

Competition between Traditional Banks with Electronic Banks Fintech, Shadow Banking and Neobanks is an intense scenario in The European Union, USA, Japan, Brazil and Argentina. Neobanks allied to Big Banks of The USA and Europe have been transformed into Transnational Banks. They may appear in Peru year 2020. Three of them have already asked for license to Peruvian Supervising Autorithy SBS. Present research has investigated 17 Neobanks finantial operations, mainly innovative and successful in developed markets. Research sources have been International Consulting Firms in Banking and Finance.

A Comparative Study of Banks: With Special Reference of SBI and ICICI Banks

Banking is a most important institution for our society. The sector plays an important role in economic development of a country. It is a pillar for any strong nation economy. An efficient banking system is recognized as the prime requirement for the overall progress of any nation. The banking system of India is featured by the large network of bank branches, providing more services not only customers but to the nation also. Banks are most important institutions for our financial and non-financial requirements. Actually bank provides more facilities for our life. In India networking of bank branches are very large. According to Narasimham committee “Private sector bank should be allowed to be established in India these new private sector banks will complement the overall financial sector reforms”. SBI and ICICI are most popular banks, SBI is a very big bank in government sector on the other hand ICICI is a most second largest bank in private sector. Both are cooperated with peoples for his necessity or needs, but SBI is an oldest and ICICI is a private newly bank, so this study based on the most powerful banks comparison between SBI governments sector and ICICI private sector bank and this comparison is most important for our peoples and customers.

Roundtable on the Pandemics of Racism, Environmental Injustice, and COVID-19 in America

Roundtable on the Pandemics of Racism, Environmental Injustice, and COVID-19 in America

Political regimes and bank interest margins

The political determinants of banks' profitability are yet to be fully explored in the political economy of finance literature. This article brings politics to the theoretical discussion and the empirical analysis of bank interest margins, arguing that differences in political regimes are crucial in accounting for variations in banking profits across countries. The paper argues that we should expect lower margins from financial intermediation in autocracies than in democracies because of an inherent credibility problem and a lack of oversight in the former. Limited by state-owned banks or regulations favoring cronies, the room for financial elites to develop independent political power to threaten the government should be lower in autocracies than in democracies. I test this hypothesis with nonparametric (matching) and parametric analyses, where the former is used to estimate the latter to lower model dependence. The results consistently show that banks' interest margins in autocracies are lower by some amount between -0.4 and -1.3. This association is also confirmed indirectly when we analyze the impact of banking competition. The existence of big banks in democracies is positively related to banks' profits from intermediation, while the opposite is true for autocracies.

The Effectiveness of Strategic Management of Banking: Statistical Assessment

The analysis in focused on the factors and tendencies at the bank services market, determining the importance and necessity of investigating the issues related with performance enhancement of commercial banks. It reveals that an underlying condition for building a well-established and effective domestic bank system is orientation on satisfying the needs of the real economy and the population in bank products and services of high quality. A study of issues related with practical implementation of the mechanism for performance enhancement of commercial banks in Ukraine becomes necessary in view of the integration of the Ukrainian financial system in the global community in the conditions of the saturated market of financial services, the increasing level of consumer demands and requirements to bank products, the strengthening competition in the bank sector, and the coming of big Western banks with high standards of services to the domestic market. All the factors with impact on the commercial bank performance should be taken into account in elaborating tools, processes and actions embedded in the mechanism for performance enhancement of banking. The main phases of strategic management are highlighted. A comparative analysis of the main strategies of the commercial banks operating on the financial market of Ukraine is made. The dynamics of indicators measuring the structure of the banks’ resource base is analyzed. The phases of strategic management of the commercial bank operation and ways of improving the performance enhancement mechanism based on client orientation are discussed. The core tendencies and dynamics of interest rates on loans are analyzed. It is emphasized that the domestic bank market is characterized by low quality and concentration of assets. The inevitable process of market consolidation will widen the opportunities for larger market agents, on the one hand, and increase the competition, on the other hand, which will have favorable effects for quality parameters of the bank system as a whole.
 Results of the analysis of the current performance of the bank sector in Ukraine enabled the author to highlight main tendencies with impact on the commercial bank performance. The financial results of the bank’s operation and its capabilities to increase investment in the domestic economy and widen the range of services to clients are largely conditional on ways, terms and costs of raised funds, and on the size of bank’s own assets and the structure of bank’s resources.

Does bank integration contribute to insolvencies and crises?

Purpose This paper aims to construct a measure of integration among global banks and examine its impact on bank insolvencies and bank crises. Design/methodology/approach The authors apply principal component analysis to measure a bank’s degree of integration to the global banking market. Moreover, they test whether bank integration affects bank insolvency risk, in which they treat the equity of individual banks as a call option. Findings The authors find that the banking industry has become more globally integrated over the past two decades. At the individual bank level, results indicate that banks with higher integration levels have more assets, more nontraditional banking services and more interbank businesses. Overall, they find that a bank’s integration level is negatively associated with insolvency risk, which suggests that greater integration with global markets diversifies a bank’s risk. At the country level, banking systems with less integrated big banks, or more integrated smaller banks, are more stable and hence less likely to suffer a banking crisis. Originality/value The authors construct a novel measure of integration among global banks and examine its impact on bank insolvencies and bank crises.

Big Bank Theory: A Study of Amalgamation Plan of 10 Public Sector Banks into 4 Entities

The Indian government on 30th August 2019 unveiled a plan to merge 10 public sector banks (PSBs) into four, reducing the number of state-owned banks from 18 to 12, in a bid to create “next-generation” financial institutions with stronger balance sheets and bigger risk appetite. Having done two rounds of bank consolidation earlier, this is what Government wants to do for a robust banking system and a $5-trillion economy. Punjab National Bank will take over Oriental Bank of Commerce & United Bank of India to become the country’s largest lender after State Bank of India in terms of business. Canara Bank will subsume Syndicate Bank; Andhra Bank and Corporation Bank will merge with Union Bank of India; and Allahabad Bank will become part of Indian Bank. The key factors for the mergers were: Technological platform, customer reach, cultural similarities, and competitiveness. In 2017, India had 27 PSBs, but the National Democratic Alliance government implemented two rounds of mergers in its previous tenure. One was the merger of five associate banks and Bharatiya Mahila Bank with SBI (from April 2017); second, Dena Bank and Vijaya Bank merged with Bank of Baroda to create the country’s third-biggest lender, which came into effect from April 1 this year. The present paper is based on the study of Public Sector banks total business, deposits and Non-Performing Assets (NPA). The paper also studies the Government’s plan to amalgamate the 10 public sector banks into four large institutions as a part of its attempt to bolster the capital base of these lenders. The paper in the end, studies the impact of PSBs Merger and how customers are likely to be impacted.

Ordoliberalism 2.0: Towards a New Regulatory Policy for the Digital Age

In the light of several ongoing antitrust investigations in the E.U. and the U.S., the following research paper analyzes whether ‘big tech’ – same as the big banks – need special regulatory (and economic -political) attention and if so, how an updated form of regulatory policy for the digital era could look like. It does so by utilizing – and reviving – the normative and business -ethical ideals of German ‘neoliberalism’, also known as (classical) ordoliberalism. Especially, Walter Eucken’s work has the potential to inform and enrich the current debate concerning the regulation of big tech. The main goal of the paper is to outline a potentially new regulatory framework – one that combines (and revises) Eucken’s ordoliberalism with the competition policy of the European Union.

Mergers of Banks in Economy – Indian Scenario

Banking area possesses a significant spot in each economy and is one of the quickest developing sectors in India. The challenge is very high and tough from the worldwide player’s i.e. International banks. On the counter part, both public and private banks are also facing strong competition among themselves to reach the targeted audience. But the worrying factor is Non performing assets are also increasing simultaneously with core business. The result is mergers in the banking sector in order to reduce the NPA. The most recent and largest merger in the history of banking industry took place on April 1, 2017 i.e., State bank of India and its associates banks. And, now the govt. of India announces India’s biggest and largest mega banks merger on august 30, 2019, i.e., merging of 10 public sector banks into 4 large banks. These banks are oriental bank of commerce and united bank of India merging with Punjab national bank; Syndicate bank with Canara bank; Andhra bank and corporation bank merging with Union bank of India; and Allahabad bank merging with Indian bank; This merger will bring nearly a half yearly of all outstanding loans in Indian’s banking sector. This big bank merger will be a good move from the central govt. to reach $5 trillion economy in next 5 years. This merger will help to give some boost to the Indian economy, which is suffering with high rate of NPA’S. In this research paper an attempt is made to know the impact of banks performance after merger will really give acceleration to the economic growth rate or not.

Risk-adjusted efficiency and bank size in a developing economy: an analysis of Vietnamese banks

PurposeThere is ample empirical evidence to show that larger banks are more efficient than smaller banks in developed countries. However, there is very little empirical evidence to show that in small developing economies, such as Vietnam, bank size is associated with increased risk, especially credit risk. This paper aim to provide empirical evidence to fill in this gap. This paper employs a slack-based directional distance function using the intermediation approach in measuring the inefficiency of banks in Vietnam during the period 2006–2015. Non-performing loans are used as an undesirable output to capture credit risk. The results show that small banks are more efficient than large banks at the mean level and across the entire distributions of inefficiency of the two groups. Input waste, output shortage and risk surplus of big banks are nearly three times higher than those of small banks. The results are robust under constant and variable returns to scale for production technologies. The study’s empirical results contribute to the ongoing debate on the merits of enlarging bank size in a small transitional economy and suggest that policy makers should pay attention to the risk and inefficiency of large banks to enhance the performance of Vietnam's banking system as a whole.Design/methodology/approachThis paper uses the non-radial slack-based directional technology distance function developed by Färe and Grosskopf (2010) to estimate the efficiency of banks using the data envelopment analysis technique. Data for 44 commercial banks are used.FindingsThe empirical results of the paper contribute to the ongoing debate on the merits of enlarging bank size in a small transitional economy and suggest that policy makers should pay attention to the risk and inefficiency of large banks to improve the performance of Vietnam's banking system as a whole.Originality/valueThis paper extends the extant literature by examining whether efficiency is associated with size in a typical transitional developing economy. The classic Cournot model, the structure-conduct-performance and the efficiency structure hypotheses state that larger banks are more efficient than smaller banks (Bikker and Bos, 2008). Empirical studies of Berger (2003), Mester (2005), Wheelock and Wilson (2012) lend support to the statement in developed countries. However, not much empirical literature focuses on small developing economies such as Vietnam to show that bank size is associated with increased risk, especially credit risk. The study’s empirical results show that size enlargement is not positively associated with risk-adjusted efficiency. Input waste, output shortage and risk surplus of big banks are nearly three times higher than those of small banks. The results are robust under constant and variable returns to scale for production technologies.

A community bank’s digital transformation: Process, people and branding — implementing a purposeful digital banking strategy that puts people first

When faced with expanding digital service offerings, community banks tend to fall into one of three categories: do nothing, do only what their core processor allows for or do what helps bolster the bank’s client experience. Unfortunately, the third option is used by the fewest banks. Client needs are what should drive technological upgrades. That requires clearly identifying client expectations and objectives, as well as utilising an agile, fast-fail workflow approach. From there, banks must ensure people within the organisation are positioned to embrace each new digital offering, allowing findings to funnel and inform the brand’s ideal customer journey. This paper analyses how community banks’ digital offerings can compete with those of both big banks and FinTechs. The paper describes how banks must define clear objectives based on meeting customer needs. It recommends using a client-centric approach with digital transformation.

Revising Democratic Socialism: C. A. R. Crosland and Pluralistic Economic Democracy

Revising Democratic Socialism: C. A. R. Crosland and Pluralistic Economic Democracy Gary Dorrien Democratic socialism, an idea boasting a rich European history and a slight American history, is making a remarkable resurgence in the United States. No democracy can perpetually survive gross disparities in economic and social condition, so the United States is witnessing a surge of democratic socialism, despite lacking much of a tradition of it. Social Democracy has created the world’s most humane societies, where health care and the rights of liberty are universal for all citizens, elections and higher education are publicly financed, and grotesque levels of inequality are not tolerated. The United States never achieved more than a modicum of social democratic decency, and now even the modicum is endangered. The surge for democratic socialism reflects a widespread recognition that neo‐liberal capitalism works only for a minority and that liberals do not fight for social justice. “Democratic socialism” summarizes what is lacking. But no movement for democratic socialism can afford to ignore the ambiguous history of the struggle for it. Social Democracy is battered and reeling almost everywhere that it exists. Social Democratic and worker parties are consumed by the battle to save the welfare states they created, no European socialist party has dismantled the culture of white supremacy in which it developed, and every Social Democratic party has been absorbed into the global capitalist system. Europe’s only national scale attempt to democratize major business enterprises, the Meidner Plan in Sweden, was abandoned in 1992, just as economic globalization threw Social Democratic parties on the defensive. Since then the historic Social Democratic commitment to economic democracy has been put aside. But economic democracy is precisely what the American surge for democratic socialism is demanding, in this case on elementary issues: universal health care, a $15 minimum wage, higher taxes on high incomes, expanding the cooperative sector, and turning the big banks into public utilities. Here, the European experience is instructive. Charles Fourier, in France, and Robert Owen, in England, propounded the original idea of socialism in the 1820s. It was to achieve the unrealized demands of the French Revolution, which never reached the working class. Instead of pitting workers against each other, a cooperative mode of production and exchange would allow them to work for each other. Socialism was about organizing society as a cooperative community. Soon there were many kinds of socialism conceived by Pierre‐Joseph Proudhon, Mikhail Bakunin, Karl Marx, Ferdinand Lassalle, Georgi Plekhanov, William Morris, Karl Kautsky, Sidney Webb, Eduard Bernstein, Rosa Luxemburg, V. I. Lenin, and G. D. H. Cole. The founders blamed capitalism for all of society’s ills, but religious socialists did not, so there were Christian and Jewish versions of socialism. Every kind of socialism retains the original idea of organizing society as a cooperative community, yet there is no core that unites the many schools of socialism or democratic socialism, and democracy is as complex and variable as socialism. I believe that the best candidate for an essential “something” in democratic socialism is the ethical passion for social justice and radical democratic community. This ethical impulse retains the original socialist idea in multiple forms, inspiring struggles for freedom, equality, recognition, and democratic commonwealth. Democratic socialism, though linked historically to revisionism, is not another name for it. “Revisionism” names the periodic necessity of adjusting the socialist idea to real‐world circumstances. Eduard Bernstein, the quintessential revisionist, rocked the German Social Democratic Party (SPD) in 1898–1899 by contending that Marx got many things wrong and the party’s Marxist ideology was less credible and democratic than its reformist practices. In Sweden, a similar watershed occurred in 1928 under Per Albin Hansson, who committed the Social Democratic Party to the Bernstein approach and built a political powerhouse. In Britain, the parallel benchmark came in 1955 when Hugh Gaitskell’s revisionist faction won control of the Labour Party, seeking to replace Fabian Collectivism with pluralistic economic democracy.1 Each of these revisionist episodes was a creative response to a stagnant orthodoxy and a blow to the conviction that “socialism” names something definite and credible. The British experience is especially relevant to the U.S. context because Britain has...

THE DETERMINANTS OF SYSTEMIC RISK: EVIDENCE FROM INDONESIAN COMMERCIAL BANKS

This paper examines the determinants of systemic risk across Indonesian commercialbanks using quarterly data from 2001Q4 to 2017Q4. Employing four measures ofsystemic risk, namely value-at-risk (VaR), historical marginal expected shortfall(MESH), marginal expected shortfall from GARCH-DCC (MESdcc), and long-runmarginal expected shortfall (LRMES), we find that bank size is positively related tosystemic risk, whereas banks and economic loan activity are negatively related tosystemic risk. These findings suggest that the government needs to regulate loanactivities and to monitor big banks as they have significant impacts on bank systemicrisk.

Banking on refugees: Racialized expropriation in the fintech era

Fintech and digital financial services involve the delivery of financial products and services through technology. Fintech companies are part of a financial lending infrastructure claiming to offer an alternative to ‘big banks’, and are often touted as digitally disruptive technology that is rapidly reshaping financial inclusion agendas and improving the lives of the poor. For many refugees living in camps and informal settlements in Kenya, fintech is often the only viable option for credit or microfinance aid. While refugees are often excluded from credit, the spread of fintech as a solution for direct peer-to-peer aid transfers from the Global North to refugees has resulted in the uneven distribution of credit access and livelihood support. Through fintech, private citizens and groups in the Global North are able to disrupt and subvert refugee assistance, deeming some worthy of aid while others face ongoing exclusion. While fintech remains a hopeful source of greater efficiency and empowerment, the direct transfer of aid money masks profit and corporate power by only extending assistance to those refugees who are appropriately entrepreneurial, that is to say those who will start small businesses and pay back their loans. This paper argues that processes of financial inclusion carried out by and through fintech are still distinguished largely by exclusion. In so doing, this paper highlights a theoretical position that refugee governance is embedded in racial forms of capital accumulation and expropriation.