Class Of Banks Research Articles

Extremum seeking based on a Hammerstein-Wiener representation

This study is concerned with the development of an extremum seeking (ES) strategy based on recursive least square (RLS) for on-line estimation, and a regression model in the form of a Hammerstein-Wiener model. RLS usually provides a faster convergence than the classical bank of filter estimators, and the consideration of process dynamics allows to take account for the phase-shift and attenuation occurring when increasing the frequency of the dither signal. The resulting ES scheme achieves very significant improvement in convergence speed, as illustrated with a numerical example, and a more realistic application to micro-algae cultures in a photo-bioreactor in simulation.

Skopljanska izvozna banka A. D.

In terms of economy, Skoplje was very important in the Kingdom of Serbs, Croats and Slovenes/Yugoslavia for the southeastern part of the country. For these reasons, a lot of big private banks as well as state banks had their branch offices in this city, and several significant monetary institutions appeared. One of them was Export Bank A.D. Skoplje, founded in 1921. Soon after its foundation and in cooperation with the Central Bank of Leskovac and Electric Society of Leskovac, Export Bank paid for the rights to maintain and use the water supply system and electric power plants in Skoplje. In order to provide the necessary amount of electric energy, the managing board of the bank, in cooperation with the above mentioned institutions and the Municipality of Tetovo, put into action the electric power plant in Tetovo in 1926 and connected it with Skoplje using a 45 kilometre long power line. Export Bank A.D. Skoplje carried out other operations not related to banking such as purchase, parcellation and selling of a significant area of land, as well as buying and storing opium in its warehouse. Although these represented the main activities of the bank, the classic bank operations such as discount bill service were not neglected. The successful work of Export Bank A. D. Skoplje is reflected in a stable dividend which was, except in the first year when it was distributed, constantly 10 %. Agricultural and banking crisis, which took place in the Kingdom of Yugoslavia in the autumn of 1931, affected the work of all monetary institutions in the country, including Export Bank A.D. Skoplje. The bank suffered certain losses due to the moratorium on payment of agricultural debts, whereas the impossibility to carry out regular banking operations was compensated by investing into real estates. That was the business atmosphere in which Export Bank A.D. Skoplje saw the outbreak of the Second World War in the Kingdom of Yugoslavia.

A Review of the Forecast Models for Residual and or Scrap Values Assessment in a Lease Arrangement

Leasing as a mode of financing is gaining popularity as a major mode of financial product and thus replacing the classical bank credit in some way with regards to Equipment financing. A variety of assets has been leased over the last decades and continue to be leased out, it is worthy to know that a huge range of leasing products offered by various independent leasing companies as well as an growing number of banks are also undertaking same. This advancement in the concept of leasing, however, calls for the need for establishing a risk management sector for these institutions offering various leasing products. We by this paper seek to assess a vital parameter which cannot be overlooked in the case of leasing an equipment; i.e, Residual and or Scrap or salvage value of a lease asset. Several models have been reviewed and assessed herein.

THE EFFECT OF MEDIA REPRESENTATION ON THE DEVELOPMENT OF BANCASSURANCE IN THE REPUBLIC OF SERBIA

The intense competition among banks, in terms of narrowing the interest margins, has led to an increase in administrative and marketing expenses and has limited the profit margins of traditional banking products. At the same time, there has been a change in the preferences of bank clients in terms of reduced interest in investing in the classic banking products of the deposits-saving character and an increasing interest in investing in various forms of life and voluntary pension insurance. Accordingly, as well as with a number of other developments in the market for financial services in the last two decades, a connection between banks and insurance companies has been formed. This process is known as bancassurance. Bancassurance in its simplest form represents the distribution of insurance products through the branch network of banks as a sales channel. For banks this is a way to increase customer loyalty, the diversity of offers and the source of additional income in the form of a reimbursement paid by the insurer. In bancassurance, insurance companies see a relatively inexpensive sales channel of insurance compared to traditional channels, which allows them better market positioning and easier access to a higher quantity of clients. The largest success that bancassurance has had, is with the sale of life insurance, keeping in mind the similarity with the traditional deposit banking products. Past results of the implementation of bancassurance in the Republic of Serbia are insignificant in comparison to the value achieved on this basis in most EU countries. Apart from the objective factors, such results are caused by the lack of information among the population about the possibilities of purchasing different types of financial services in one place (in a bank) and numerous benefits which such integrated purchasing offers. The success of bancassurance largely depends on the determination of the participants (banks and insurance companies) to present the sales channel through the joint appearance on the market, continuous advertisement in the media, especially those who have access to the widest part of the population. For that reason, special emphasis is given to the influence of media representation for the faster development of bancassurance, which would result in greater awareness and education of the population on that basis, which can later cause an increase in life and non-life insurance sales, given the size of the client basis and sales capacities of Serbian commercial banks.

Peer-Group Detection of Banks and Resilience to Distress

The paper looks at the importance of the true business model in shaping the risk profile of financial institutions. We adopt a novel indirect clustering approach to enrich the classic bank business model classification on a global data set including about 11,000 banks, both listed and non-listed representing more than 180 countries over the period 2005-2014. A comprehensive list of global distress events, which combines bankruptcies, liquidations, defaults, distressed mergers, and public bailouts, is regressed against financial statement ratios (i.e. proxies for CAMELS) and controlling for macro and sectoral effects using a rare-event logit model. Our findings suggest that individual characteristics along with macro and sectoral factors contribute differently, sometimes with opposite sign, to the likelihood of distress and to the volatility of business models with the exception of liquidity whose contribution appears exogenous to business model choice. By capturing the switching behaviour across groups, we find that business model volatility exacerbates vulnerability and distress, especially if moving from wholesale-oriented to deposit oriented groups.

Bank business models, regulation, and the role of financial market participants in the global financial crisis☆

The recent financial crisis shone a spotlight on several key issues: bank regulation; bank models; and the relationship between traditional banking, the interbank markets and the markets for complex financial derivatives. Indeed, the role that derivatives such as Credit Default Swaps and Collateralised Debt Obligations played in the credit bubble and the subsequent credit crunch may appear to have made this financial crisis unique. However, the fundamental cause of this crisis, which led directly to the worst global recession since the 1930s, is all too familiar: ultimately, too much money was lent to too many people who could not afford to pay it back. It was a classic bank crisis of over lending, but this time on a global scale.

Money Is Debt

This paper uses a new monetarist framework to present and explain the basic elements of a non-monetarist theory of money, classical banking theory, by modeling acceptance banking, the form of banking that was dominant during the 19th century when the theory was developed. The most important principle of classical banking theory is that the money supply must be able to expand to meet unpredictable “needs of trade.” Underlying this approach is the view that the optimal quantity of money is inherently stochastic due to real productivity shocks that are constantly changing the optimal level of economic activity. The basic premise of classical banking theory is that transactions are typically paid for by incurring debt, and that the role of the banking system is the monetization of this transaction-based debt. In this framework bank liabilities are the principal form of money, and they circulate because they are backed by debt that can be repaid by depositing bank liabilities into one’s account. When fiat money is introduced into the model we find that non-banks are willing to carry fiat money from one period to the next because it is a non-interest-bearing asset and reduces the costs of borrowing to transact.The paper also explains how the model can be reinterpreted as a model of the modern banking system.

Looking beyond banks’ average interest rate risk: Determinants of high exposures

Abstract This paper studies the magnitude and determinants of interest rate risk (IRR) of listed U.S. bank holding companies. As our first contribution, we test whether banks avoid exposures to IRR as prescribed in classic bank hedging literature. To do so, we use a state space model and Kalman filter techniques to estimate time-series of interest rate betas from bank stock returns. While the interest rate exposures of banks average close to zero, we find that individual banks at times exhibit high and significant exposures to interest rate risk. As our second contribution, we relate these high betas to lagged bank characteristics from accounting data, applying logit regressions and unconditional quantile regressions. We find that high exposures are partly systemic and comove with bank characteristics like size or leverage. This has implications for the monitoring of interest rate risk by regulators and investors as well as for the ongoing debates on the appropriate capitalization of banks.

What Drives the Interest Rates in the P2P Consumer Lending Market? Empirical Evidence from Switzerland

Traditionally, the lending of money in a bank-based financial system is controlled by banks. The rise of online Peer-to-Peer (P2P) lending markets that unite non-institutional borrowers and lenders is challenging the classical bank loan. By using a unique data set on loan contracts between borrowers and investors from Switzerland, we analyze the determinants of the P2P consumer loan interest rates – a research question that has not yet been analyzed empirically. In addition to the loan-specific and macroeconomic factors that significantly affect the interest rates, we also find some discrimination by the lenders. Furthermore, our results reveal that borrower-specific factors such as its economic status significantly influence lender evaluations of the borrower’s credit risk and thus the interest rates, especially as the market for P2P consumer loans matures.

Looking Beyond Bankss Average Interest Rate Risk: Determinants of High Exposures

This paper studies the magnitude and determinants of interest rate risk (IRR) of listed U.S. bank holding companies. As our first contribution, we test whether banks avoid exposures to IRR as prescribed in classic bank hedging literature. To do so, we use a state space model and Kalman filter techniques to estimate time-series of interest rate betas from bank stock returns. While the interest rate exposures of banks average close to zero, we find that individual banks at times exhibit high and significant exposures to interest rate risk. As our second contribution, we relate these high betas to lagged bank characteristics from accounting data, applying logit regressions and unconditional quantile regressions. We find that high exposures are partly systemic and comove with bank characteristics like size or leverage. This has implications for the monitoring of interest rate risk by regulators and investors as well as for the ongoing debates on the appropriate capitalization of banks.

SHADOW BANKING AS SEEN FROM A BEHAVIOURAL AND NEOCLASSICAL FINANCE PERSPECTIVE

Money is not merely a highly exchangeable commodity or the symbol of value established in exchange by utility-seeking individuals. Private money is a value sui generis that is established by reactions between issuers-shadow banking and users of money. These relations can be explained by the behavioral theory of finance and neoclassic theory of finance.Shadow banking and classical banking relations are characterized by the relations of both cooperation/trust and conflict/struggle, which give private money its value and produce the alternating phases of order and disorder.If the link between the public and the private sector is to be bypassed or severed, should this be seen as an exceptional emergency measure or the first step in radical structural change in the social relations for the production of money? The Neo-institutional answer on this question is that the shadow banking is now in the first phase of its institutionalization. Shadow banking is a fundamental and systemic financial innovation. It encompasses all financial activity, except traditional banking, which requires a private or public guarantee and backing to operate.

How low can you go? — Overcoming the inability of lenders to set proper interest rates on unsecured peer-to-peer lending markets

The lending of money is traditionally handled by banking institutions. The internet has enabled new forms of credit businesses, challenging the classical bank loan. Peer-to-peer lending markets bring together noninstitutional borrowers and lenders. In a typical lending market, borrowers have to present their projects, and lenders decide under what terms they are prepared to provide the requested capital. As many loans are not secured by collateral, the assessment of the creditworthiness of the borrower is the most important task.We demonstrate that investors fail to transform the available information into proper market activities in the absence of hard, quantifiable banking data, threatening the sustainability of this new lending concept.We present a decision-support-tool to support users in the estimation of risk of default. Based on an a-posteriori analysis, we demonstrate that our system is able to price the risk of default adequately and is able to improve investors' return significantly.

An Analytical Approach to Understand Customer Relationship Management in Indian Banking Sector from the Perspective of Customers

In recent years, significant developments have been experienced in the banking sector. With the improved technology, banks have become institutions that offer services for 24 hours through telephone, internet and ATMs. Besides the classic banking services, they have taken over a number of activities such as automatic billing, which facilitate the lives of the customers. To maximize lifetime profitability from valued customers, banks have changed traditional silo mindset and have adopted Customer Relationship Management (CRM) techniques.This paper examines the relationship between thecustomer loyalty and CRM in National Capital Region of India. Methodology of the paper has been designed such that, it abstracts the scales into 5 dimensions related to CRM of banks. This paper uses regression analysis to arrive at a model which explains customer loyalty. This paper also provides insights for the banks which adopt CRM at a strategic standpoint as well as operational standpoint and implement a customer–centric vision.

Assessing competition in the banking industry: A multi-product approach

This paper investigates the competitive aspects of multi-product banking operations. Extending Panzar and Rosse’s (1987) model to the case of a multi-product banking firm, we show that higher economies of scope in multi-product banking are associated with lower Panzar–Rosse measures of competition in the banking sector. To test this empirical implication and determine the impact of multi-production on market power, we use a new dataset on the Brazilian banking industry. Consistent with our theoretical prediction, we find that banks that offer classic banking products (i.e., loans and credit cards) and other banking products (i.e., brokerage services, insurance and capitalization bonds) have substantially higher market power than banks that offer only classic products. These results suggest a positive bias in the traditional estimates of competition in which multi-output actions are not considered.

Quantifying the impact of different copulas in a generalized CreditRisk+ framework An empirical study

AbstractWithout any doubt, credit risk is one of the most important risk types in the classical banking industry. Consequently, banks are required by supervisory audits to allocate economic capital to cover unexpected future credit losses. Typically, the amount of economical capital is determined with a credit portfolio model, e.g. using the popular CreditRisk+ framework (1997) or one of its recent generalizations (e.g. [8] or [15]). Relying on specific distributional assumptions, the credit loss distribution of the CreditRisk+ class can be determined analytically and in real time. With respect to the current regulatory requirements (see, e.g. [4, p. 9-16] or [2]), banks are also required to quantify how sensitive their models (and the resulting risk figures) are if fundamental assumptions are modified. Against this background, we focus on the impact of different dependence structures (between the counterparties of the bank’s portfolio) within a (generalized) CreditRisk+ framework which can be represented in terms of copulas. Concretely, we present some results on the unknown (implicit) copula of generalized CreditRisk+ models and quantify the effect of the choice of the copula (between economic sectors) on the risk figures for a hypothetical loan portfolio and a variety of parametric copulas.

A Model for the Interest Margin of a Risk-neutral Bank. The Role of the Bank Orientation

This paper examines the impact of the bank orientation on classical banking business, distinguishing between shareholder and stakeholder banks, and analyzes the preconditions for positive social welfare effects from the existence of stakeholder banks. For this reason we develop a theoretical bank decision model based on the utility approach and focus on the determination of the interest margin. Vis-a-vis previous studies, we connect to the recent literature on the agency view considering the lessons from recent financial developments. Moreover, we study the influence of the social mission on the bank pricing strategy, merging these two different fields for the first time. The results highlight the fundamental role of a strict and prudential regulation of the social mission as well as of the existence of internal and external control mechanisms, in order to avoid a misuse of stakeholder banks for distorting aims, to increase the system stability and to reduce market failures. Therefore, a correct implementation of these aspects represents a precondition for a positive contribution of stakeholder banks to the social welfare.

Le système bancaire de l'ombre : fruit d'une régulation bancaire trop pesante ou véritable rôle économique ?

L’émergence d’un système bancaire de l’ombre, fournissant à l’image d’une banque classique crédit et liquidité, a suscité des interrogations sur les raisons économiques de son apparition. Est-il le produit d’une stratégie d’évitement en réponse à une régulation bancaire qui aurait entamé la compétitivité des banques ou bien assure-t-il une fonction économique spécifique ? S’il existe bien des éléments empiriques démontrant l’existence d’arbitrages réglementaires et impliquant une responsabilité de la régulation bancaire dans l’essor de ce système bancaire souterrain, ce dernier assume une fonction économique distincte d’une banque classique. Il permet une meilleure diversification du risque en vertu des avantages théoriquement liés à la titrisation. La réalité de cette diversification a cependant été empiriquement contestée au regard de la crise de 2007-2008. Le rôle économique du système de l’ombre tient par ailleurs à la nature de son passif, qui offre à des investisseurs institutionnels, en quête de placements de court terme sûrs, et non éligibles à l’assurance des dépôts réservée aux particuliers, une forme de garantie des dépôts via la dette collatéralisée émise par ces structures, protection qui demeure néanmoins sujette aux variations de la valeur financière du collatéral.Classification JEL : G21, G23, G24, G28.

Die Trennung von Wertpapier- und sonstigem Bankgeschäft: Trennbankensystem, ring-fencing und Volcker-Rule als Mittel zur Eindämmung systemischer Gefahren für das Finanzsystem / The seperation of investment and commercial banking: Dual banking system, ring-fencing and Volcker rule as means to reduce systemic risk for the financial system

Zusammenfassung Die Trennung von Wertpapier- und sonstigem Bankgeschäft hatte vor allem in den USA eine lange Tradition. Seit der globalen Finanzkrise werden entsprechende Vorgaben jedoch weltweit, nunmehr allerdings in veränderten Gestaltungsvarianten rechtspolitisch diskutiert; der deutsche Gesetzgeber hat ihre Einführung kürzlich bereits beschlossen. Während zur Begründung traditionell vor allem institutsbezogene Erwägungen angeführt wurden, sind seit der Finanzkrise Fragen der Systemstabilität in den Vordergrund gerückt. Allerdings ist keineswegs erwiesen, dass die Einführung eines Trennbankenregimes Systemrisiken zu reduzieren vermag. Zudem beschränkt ein solches Regime die institutionelle Vielfalt und droht deshalb, selbst destabilisierend zu wirken. Die Gestaltungsvarianten, die als Alternativen zum klassischen Trennbankensystem diskutiert werden, können diese Bedenken nicht zerstreuen. Eine Aktivitätsbeschränkung nach dem Vorbild der US-amerikanischen Volcker Regel wirft erhebliche Abgrenzungsprobleme auf und lässt überdies eine Zunahme unregulierter Schattenbanken befürchten. Die konzerninterne Spartentrennung, wie sie auf europäischer Ebene sowie in Großbritannien und Deutschland geplant bzw. beschlossen ist, bietet ebenfalls keine aussichtsreiche Handhabe gegen ein Übergreifen systemischer Risiken. Einerseits stehen einzelne Konzerngesellschaften nach geltendem Unternehmensrecht keineswegs völlig unverbunden nebeneinander, sondern befinden sich in einem Konzernverbund; andererseits droht das Anlegervertrauen in den Gesamtkonzern selbst bei Schieflage nur einzelner Sparten erschüttert zu werden. Insgesamt überwiegen daher die Bedenken gegen strukturelle Trennbankenregeln, die maximalinvasiv in gewachsene Bankenstrukturen eingreifen, zugleich aber hochkomplex sind und deshalb sowohl Umgehungsgefahren als auch Risiken nicht intendierter Nebenwirkungen bergen. Als Alternative bietet sich indessen eine anreizorientierte, zielgenauere Regulierung von Wertpapierhandelsgeschäften an.

James Pennington, (1777-1862): Classical Banking, Monetary, and Trade Theorist and Economic Policy Advisor

James Pennington's creativity as a scientific economist is matched only by his obscurity. He exemplifies the pioneering innovator who never gets his due recognition. Alone and with others he launched (1) the idea that checking deposits are money just like coin and notes, (2) the theory of the multiple expansion of bank deposits, (3) the currency principle according to which a mixed paper-metal currency can be made to behave as if it were entirely metallic, and (4) the notion that reciprocal demand fixes the terms of trade between the comparative cost ratios of two trading nations. Any one of these contributions should have made him famous. But they failed to do so and his name, neglected enough in his own time, is virtually unknown today.

Features and Working of Leasing Industry of Germany

Finance leasing is a financing device in the form of a lease. It has been used as an effective alternative to the purchase of equipment. Usually a finance leasing transaction works in the following way. At the request of the lessee, with his specification of the asset and selection of the supplier,1 the lessor enters into a supply agreement with the supplier. The lessor acquires the asset from the supplier, who receives outright payment from the lessor. Then, the lessor leases the asset to the lessee for a term which is usually most of the useful life of the asset, in return for the lessee’s payment of rental. This rental is calculated to cover the capital outlay of the lessor and also to give him a margin of profit. During the lease period, the lessee enjoys the possession of the asset and the profits resulting from the use of it. He also undertakes to maintain it in good order and is responsible for loss or damage to it. At the end of the lease period, either the lessee would continue to hire the same asset for a secondary period and pays a peppercorn rental toward it, or the asset would be sold, often by the lessee on behalf of the lessor, and the lessee would share a substantial proportion of the proceeds of the sale.Leasing is nowadays an established part of commercial life. The realization that wealth is created through the use of an asset rather than through the fact of its ownership has long been recognized. German company managers have an instinctive reverence for the principle of 'mine and thine', so it is hardly surprising that in the early 1960s they were somewhat skeptical about this newfangled alternative to the traditional forms of credit. Since then, however, leasing has become an investment instrument of unrivalled popularity, and today it accounts for just under half of all investments in equipment financed externally (i.e. not paid for out of equity capital, or out of return flows of capital from depreciation). Over the decades, leasing has become the number one alternative to the classical bank loan, and is now recognized as one of the key engines of innovation and economic growth in Germany.