Bank Characteristics Research Articles

Liquidity creation channel of monetary policy transmission in India: Do bank characteristics matter?1

AbstractIn this paper, we examine the effect of monetary policy on liquidity creation (LC) by banks in India. We also study the role of bank characteristics in the transmission of monetary policy to LC. We apply static and dynamic panel regressions to bank‐level data from India, spanning the period 1999–2020. We find a negative impact of monetary policy tightening on total as well as on‐balance sheet LC. We also find that the capital, size and profit of banks support the monetary policy transmission to LC. Finally, the LC channel seems to operate for both public sector and private sector banks. Our findings suggest that the monetary policy authority must closely monitor bank‐level characteristics to improve the efficacy of the LC channel of monetary policy.

A Smithian Reading of Chilean Free Banking

Abstract In the second half of the nineteenth century, the Chilean free banking system worked similarly to how Adam Smith describes the eighteenth-century free banking system in Scotland. The characteristics of free banking that Smith identifies as conductive of successful outcomes—free entry, unlimited liability, and convertibility on demand—are present in both Scotland and Chile. And the Chilean system failed for similar reasons to the worries Smith had about the Scottish system: inconvertibility, legal tender, involvement with government borrowing, and lobbying. The Chilean experience of free banking appears to follow Smith's account of free banking.

Evaluating the Interaction of Bank Characteristics and Unexpected Crises on Nonperforming Loans in Malaysia

Evaluating the Interaction of Bank Characteristics and Unexpected Crises on Nonperforming Loans in Malaysia

Measuring Liquidity Risk and Its Determinants in Commercial Banks of Bangladesh: An Empirical Investigation

This study analyzes the determinants of liquidity risk in the banking sector using panel data from 28 banks and three different models: Pooled, Fixed Effect, and Random Effect. The results show that leverage has a consistently positive effect on liquidity risk, while the regulatory environment and bank size have a negative effect. Return on assets (ROA) and capital adequacy ratio (CAR) have varying impacts depending on individual bank characteristics. Real GDP has a consistently negative relationship with liquidity risk. These findings provide valuable insights for policymakers and bank managers on how to manage liquidity risk in the banking sector.

Analyzing Effects of Institutional Quality on Banking Stability: Evidence from Asean Countries

Purpose: The aim of this study is to examine the effect of institutional quality on bank stability using bank-level data from 2010 to 2020. Theoretical framework: The study considers institutions from the perspective of governance institutions. Accordingly, the concept of government institutions is related to the country's organizational foundation in terms of governance, implying institutional quality. Design/methodology/approach: The study uses GMM method and also choose the Zscore as the primary variable for bank stability. Findings: The results show that institutional quality increases the stability of banks. Moreover, with the threshold model, the results show that countries with institutional quality above the threshold will increase the stability of banks. In addition, macroeconomic and banking characteristics variables such as total assets, income diversification, quality of control, inflation, and GDP growth rate have a high significance in the model. Research, Practical & Social implications: The study shows The study's empirical results have specific policy implications for the Government in implementing policies related to institutional quality to improve bank stability. Originality/value: there are not many researches done to investigate institutional quality to improve bank stability. Moreover, from economic crisis, the matter of banking stability is among main concerns of many researches. Second, previous researches just focus on the aspect of corruption and ignore other aspects or other factors. That’s why authors conduct this research.

Fintech, macroprudential policies and bank risk: Evidence from China

We explore the relationship between fintech, macroprudential policies, and commercial bank risk-taking. Based on system generalized method of moment modeling on a panel data of 114 commercial banks in China from 2013 to 2020, results show that there are functional differences in the impact of fintech on bank risk-taking. Payment and settlement technology (PST), capital raising technology (CRT) and investment management technology (IMT) are positively correlated with bank risk-taking. In contrast, market facility technology (MFT) negatively correlates with bank risk-taking. We also find that macroprudential policies weaken the promotion effect of CRT on bank risk-taking and strengthen the inhibition effect of MFT on bank risk-taking while having no significant moderating effect on PST and bank risk, IMT and bank risk. Further, the micro characteristics of banks (capital adequacy ratio, asset scale, liquidity level) affects the moderating strength of macroprudential policies. Various robustness tests confirm our conclusions.

Risk-Averse Behaviour in Emerging Markets: The Role of Economic Indicators, Bank Characteristics and Developed Markets

Risk-Averse Behaviour in Emerging Markets: The Role of Economic Indicators, Bank Characteristics and Developed Markets

Estimation of bargaining effect in the decision of monetary compensation of executive in investment bank: Evidence from China.

Though numerous empirical and theoretical studies have been conducted on the determinants and effects of executive compensation, empirical evidence regarding the bargaining effect on the monetary compensation decisions of executives, especially in a large emerging economy such as China, remains scarce. In this study, a two-tier stochastic frontier and endogenous correction model was developed to quantitatively estimate the bargaining effect on the monetary compensation decisions of investment bank executives. Our study is the first to provide comprehensive empirical evidence that bargaining between investment banks and executives in China significantly affects the compensation decisions of executives. In the bargaining process, investment banks are more proficient than executives, and the comprehensive bargaining effect tends to lower the negotiated compensation of executives. The bargaining effect exhibited obvious heterogeneity in the characteristics of executives and investment banks. When these characteristics tend to augment the bargaining power of executives, the negotiated compensation exhibits a limited decrease; when these characteristics augment the bargaining power of investment banks, the negotiated compensation decreases substantially. Our results provide deep insight into factors that determine executive compensation and help compensation designers of investment banks better understand and design executive pay packages.

Rural banking spatial competition and stability

This study empirically examined the spatial competition and stability of rural banks. Using detailed quarter-balanced panel bank-level data on rural banks in Indonesia, this study investigated spatial competition and bank stability using a spatial autoregressive model (SAR) constructed by weight matrices based on the inverse distance between a bank and its neighboring banks to measure market power using the adjusted-Lerner index. The significant characteristics of rural banks were discussed, and a unique dataset was used, such as provincial GDP, inflation, and forex. The results showed that banks exerted some pricing power with an existing inverted U-shaped relationship, which was consistent with the monopolistically competitive structure of the industry. This supported the competition-fragility hypothesis. In addition, the evidence showed that bank stability increased with a decrease in the stability of neighboring banks.

The highs and the lows: bank failures in Sweden through inflation and deflation, 1914–1926

Abstract This paper revisits the Swedish banking crisis (1919–1926) that materialized as post-war deflation replaced wartime inflation (1914–1918). Inspired by Fisher’s “debt deflation theory,” we employ survival analysis to “predict” which banks would fail, given certain ex-ante bank characteristics. Our tests support the theory; maturity structures mattered most in a regime of falling prices, with vulnerable shorter-term customer loans and bank liabilities representing the most consistent cause of bank distress in the crisis. Similarly, stronger growth in (1) leverage, (2) weaker collateral loans, and (3) foreign borrowing during the boom were all associated with bank failure.

A DISCOURSE OF SHARIA BANKING SUPERVISION MODELS IN ACEH

The Helsinki MoU gave Aceh the privilege to regulate the banking sector independently. Then the Qanun of Islamic Financial Institutions (LKS) instructed Aceh to have a single banking system, meaning that Aceh only knows Islamic banking. One of the characteristics of Islamic banking is sharia supervision. The purpose of this article is to discuss the banking sharia supervisory model in Aceh. The method used in this study is qualitative with a descriptive approach, documents published and not compiled are then classified into several segments which are then analyzed both deductively and inductively. The study results show that Aceh's specificity through the Helsinki MoU and the implementation of the LKS Qanun has not been seen in the banking sharia supervision there. Banking sharia supervision is still carried out by the Financial Services Authority (OJK) and the National Sharia Council (DSN). The formation of the Aceh Sharia Council has not delivered any meaning in banking supervision in Aceh. Therefore the authors provide three alternatives so that banking sharia supervision in Aceh is by the Helsinki MoU and the LKS Qanun.

Long‐term relationships between seed bank communities and wildfire across four North American desert sites

AbstractIt is well documented that the recovery of dryland plant communities following wildfire can be variable, and that legacies of fire can have long‐lasting effects on aboveground plant communities. However, our understanding of the degree to which dryland soil seed banks, or the viable seeds in situ, are impacted by fire and their subsequent postfire succession remains extremely poor. To address this important knowledge gap, we used a time‐since‐fire approach to investigate soil seed bank community changes approximately 15 and 30 years after wildfire and to determine the influence of microsites (e.g., shrub vs. interspace) on seed bank composition. We assessed soil seed bank metrics across four North American deserts, including two cold desert sites (Colorado Plateau and Great Basin) and two warm desert sites (Chihuahuan and Sonoran). In greenhouse emergence trials, we found that seed bank characteristics diverged between warm and cold desert sites, such that warm desert sites had seed banks dominated by annual plants while our cold desert sites had seed banks with greater proportions of perennial species, regardless of fire history. In cold desert sites, fire significantly altered seed bank species composition even 30 years after fire. Shrub versus interspace microsites had no observed influence on seed bank composition in any desert. However, seed bank species richness was greater under shrubs in both warm deserts. Non‐native species were present in the seed banks of all deserts and some were particularly abundant in the burned sites. Despite the presence of native species in both burned and unburned seed banks, the presence of non‐native species suggests some degree of vulnerability to future disturbances because fire can create amplifying feedback with many non‐native plants. Our results highlight strong differences in fires' relationship with seed banks for warm and cold desert sites and lend insight into how fire relates to the composition and diversity of the seeds that play a fundamental role in future plant communities.

Impact of economic integration on banking performance in Vietnam

Through the collection of secondary data, the study was conducted to understand the impact of economic integration on banking performance in Vietnam. The data of the article is taken from 21 commercial banks in Vietnam from the period 2010 - 2021. The research results show that economic integration has an impact on banking performance through economic freedom indexes and financial freedom. Besides, the results also show that many factors related to the internal characteristics of banks also have an impact on bank performance including bank size, diversification of banking products, cost of banking activities, and equity ratio. Economic environmental factors also have an impact on bank performance. GDP has a positive and statistically significant relationship with banking performance. From the research results, the article proposes governance implications for managers of Vietnamese commercial banks. The obtained results have contributed more empirical evidence on the impact of economic integration on the banking performance of developing countries

The Impact of COVID-19 on Bank Profitability: Cross-Country Evidence

Abstract Using data from 5474 banks located in 23 OECD countries over the period 2019Q2–2022Q1, we study the influence of COVID-19 on bank profitability (before and during the COVID-19 vaccination period). Our results show a negative impact of the COVID-19 pandemic on bank profitability, especially at the onset of the health crisis. In addition, we find that vaccination against COVID-19 had a positive effect on bank profitability, not yet sufficient to compensate for the losses generated at the beginning of the pandemic. Finally, we show that these effects depend on the characteristics of banks (notably size and capital) before vaccination and on the severity of the crisis across countries. Overall, we provide the first evidence of the influence of vaccination on bank behavior in terms of profitability.

Securitization of assets with payment delay risk: A financial innovation in the real estate market

AbstractWe study a new type of securitization that deals with banks' processing time, mortgage‐receivable‐backed securities (MRBSs) issued by real estate developers. Unlike traditional mortgage‐backed securities (MBSs), the major risk of underlying assets of MRBSs is payment delay instead of default and prepayment. Using unique loan‐level data, we estimate proportional hazard models and detect factors that affect the risk of underlying assets of MRBSs, including bank characteristics, property–loan–household characteristics, local market conditions, and macroeconomic conditions. Especially, we find that the effects of house prices and loan‐to‐value ratios on MRBS risk are the opposite of those on traditional MBS risk. Based on the estimates, we simulate cash flows of an underlying‐asset pool and analyze the shortfall risk of the corresponding security tranches. We find that the securitization process imposes a natural adverse selection on the underlying assets.

Alternative Analysis of Bank Lending Channel in Turkey After 2010

Traditional bank lending channel in the monetary transmission explains the relationship between monetary policies of Central Banks and the bank lending behavior. In this article, the existence of traditional bank lending channel and an alternative analysis of bank lending in the monetary transmission of Turkey is investigated between 2011 and 2018 using bank level data and GMM method. Additionally, we indicate whether the reaction of banks differ according to their bank specific caharacteristics. Asset quality, capital adequacy, liquidity ratio, asset size and profitability rates are used as bank characteristics. Since Central Bank of Turkey began to use multiple monetary policy tools to cope with financial stability issues at the end of 2010, the choice of an indicator for the monetary policy is important. In this article, we revise the analysis of bank lending view as the key assumptions of traditional bank lending are not valid. Different from prior research, to analyze the change in credit supply we use both monetary policy rates and actual interest rates (BISTREPO and weighted average cost of Central Bank of Turkish Republic) as monetary policy indicators. Using monetary policy rates, our findings indicate that traditional bank lending channel does not work. Using BISTREPO as monetary policy indicator, our findings indicate that it is significant in the credit supply change. Taking the bank characteristics into account only bank size is significant in mitigating the negative effects of monetary policy shocks. This finding shows that banks that have larger asset size may find different funding alternatives and continue to lend during monetary policy shocks. Additionally, when weighted average cost of the CBTR funding are used as a monetary policy indicator, our findings show that this rate is also significant in the credit supply change and similar to prior results higher bank size may mitigate the negative effects of monetary policy shocks.

Упровадження цифрової валюти центрального банку в Україні: аналіз і перспективи

The aim of the article is to analyze the prospects for the introduction of the central bank’s digital currency in the Ukrainian economy. The e-hryvnia can become an alternative to traditional payment transaction instruments, providing a simpler, more secure, and more reliable ability to make payments for services, goods, and various transactions. The article discusses the introduction of the e-hryvnia as a digital currency of the central bank in Ukraine. The issues related to the economic essence of the e-hryvnia are considered, the evolution of forms of money is studied, the main characteristics of the central bank’s digital currency are highlighted, the state of the payment infrastructure in Ukraine and the possibility of its use for the introduction of the e-hryvnia are evaluated. On the basis of the carried out analysis, the following conclusions are made regarding the prospects for the introduction of the e-hryvnia in Ukraine. The infrastructure for cashless payments in Ukraine is well developed. The country has a large number of means for transactions with payment cards, including payment terminals in retail and service networks. Neighboring Poland and Romania have a larger number of terminals per 100 people, while Ukraine has a larger share of cashless payments compared to these countries. And the volume of these non-cash transactions is constantly growing. This is due to the fact that Ukraine has a well-developed infrastructure for card-to-card payments, which does not require additional equipment for payment card transactions. A comparatively smaller number of funds for payment card transactions may not be considered an indicator of a less developed payment infrastructure. In Ukraine, there is an increase in the number of contactless cards and tokenized cards. Taking into account these factors, it can be concluded that the payment infrastructure is sufficiently developed for the introduction of a central bank’s digital currency, which will be the e-hryvnia. The introduction of the e-hryvnia in Ukraine is realistic and can have a positive impact on the development of the economy and financial system of Ukraine.

Board of directors' configurations and the performance of banks: lessons learned from the global financial crisis

Our paper analyses the characteristics of the boards of directors of the best performing listed Italian banks during the last global financial crisis (from 2008 to 2015). Through a fuzzy-set qualitative comparative analysis (fsQCA), the study identifies three different board configurations (archetypes) that these banks adopted: a committee-based board, a gender diversity-based board, and a large size-based board. Although different in some of their characteristics, these configurations share the rationale of favouring the advisory services that the board can provide to managers in their decision-making activities. These services, in turn, are particularly valuable in a time of high risk and uncertainty for banks. With its results, the paper contributes to the literature on the relationship between board characteristics and organisational performance and to a better understanding of the configurations that can best serve when firms' decision-making, for various reasons, becomes particularly complex and can benefit from board support. Our results also contribute to further detail the governance characteristics of banks in the Italian context.

Board Structure and Financial Technology in Banks: Gulf Countries

This study examines the impact of board composition on the financial technology of banks listed on the stock exchanges of the Gulf Cooperation Council (GCC) countries. The study focuses on the size of the board, the independent members, the number of board meetings, and their impact on mobile banking, automated teller machines, point-of-sale terminals, and Mada Atheer, which are used as proxies for financial technology. In addition to the Ordinary Least Squares (OLS) method, the study uses the Generalized Method of Moments (GMM) system to control the endogeneity and heteroscedasticity issues. The sample consists of all banks listed in the GCC over eleven years from 2010 to 2020. The study found that the size of the board, the independent directors, and the number of board meetings are all positively and significantly associated with banks' financial technology. Regarding the financial characteristics of banks, the study found that banks' age and financial performance are positively and significantly associated with financial technology, while financial leverage is negatively related to financial technology. The findings of this study have implications for boards of directors of banks, which should continue to invest in banks' financial technology to improve their profitability and competitiveness. KEYWORDS Banking sector, board composition, corporate governance, financial leverage, financial performance, fintech

Soil Seed Bank Characteristics of the Mbe and Nguela Shrub Savannas, and Implications for the Reforestation, Republic of Congo

Soil Seed Bank Characteristics of the Mbe and Nguela Shrub Savannas, and Implications for the Reforestation, Republic of Congo