Commercial Loans Research Articles

Commercial banks as monetary policy impetus conduits: Loans to non-financial organizations and the GDP

Subject. This article simulates the impact of commercial banks as conduits of impetus transmitted by monetary policy to the economy, on economic growth in various countries in 2000–2020. The key task of modeling is to identify the impact of variability in the volume of bank loans provided to non-financial organizations on GDP. Objectives. The article aims to contribute to the discussion on the role of commercial banks and bank loans to non-financial organizations in the implementation of monetary policy and the achievement of the goal of economic growth. Methods. For the study, I used a new mathematical apparatus that differs from the classical econometric approach. Results. The article proposes a model of the impact of bank loans to non-financial organizations on GDP, which helps determine two management scenarios: sustainable unidirectional (positive) impact of growth in indicators of bank lending to non-financial organizations on GDP for a certain period or periods; complete absence of control actions. Conclusions. The article concludes that different countries implement either the first management scenario or the second one to achieve the goals of economic growth.

The role of the manufacturers in the activity of the accounting and loan committee at Ivanovo-Voznesensk branch of the Russian State Bank

The article is devoted to the study of the participation of the manufacturers in the activities of the accounting and loan committee for commercial and industrial loans at Ivanovo-Voznesensk branch of the State Bank of the Russian Empire. The article was prepared on the basis of archival materials from the State Archives of Ivanovo Region and, first of all, personal data from the personal files of Mefodiy Garelin and Dmitriy Burylin – the committee’s members. Using the prosopographic method, the typical qualities inherent in the business image of the members of the accounting and loan committee at Ivanovo-Voznesensk branch of the State Bank in the pre-revolutionary period were determined. The committee invited manufacturers with an impeccable business reputation, held in the field of public, representative and social activities. The mechanism of their invitation was regulated by circulars of the State Bank, and the candidates nominated were approved by the Minister of Finance of the Russian Empire. The entrepreneurs who were on the committee were characterised by a good state of property and trade affairs. In addition, the manufacturers were competent in those branches of trade and industry that were of financial interest for Ivanovo-Voznesensky branch of the State Bank. The members of the committee from the entrepreneurial circles of Ivanovo-Voznesensk informed the bank's management about the state of various branches of trade and industry, impartially assessed the creditworthiness of individuals, and were guarantors of the return of borrowed funds to the bank. The branch of the bank, guided by the information received from the manufactures, carried out more economically reliable operations for the accounting of bills and the issuance of loans. The authors conclude that the manufacturers as part of the accounting and loan committee at Ivanovo-Voznesensk branch of the State Bank carried out a socially significant and state-important type of activity.

Impact of Small and Medium Scale Enterprises on Economic Development of Nigeria

Nigeria has made it one of its primary goals in recent decades to develop its industrial base through the formation, maintenance and expansion of small and medium scale enterprises in order to achieve economic development. Fiscal incentives, grants, support and aid from bilateral and international agencies, as well as specialized institutions, have all been used to help the SME sector thrive. However, SMEs in Nigeria have not performed creditably and so have not played the crucial and lively role that they should have in the country's economic growth and development. As a result, the government, citizens, operators, practitioners, and organized private sector groups have all expressed concern about the situation. Using time series data set from 1991 to 2020, this study utilized the Fully Modified Ordinary Least Squares (FMOLS) to analyze the impact of small and medium enterprises (SMEs) on the development of the Nigerian economy. The study found a long-run relationship between small and medium scale enterprise and economic development in Nigeria. Our findings also indicate a unidirectional relationship from gross domestic product to commercial bank loans to SMEs. However, there is no causal relationship between inflation and gross domestic product; interest rate and gross domestic product, while none of the economic growth indicators report a bi-causal relationship. The study hereby recommends that government should assist prospective entrepreneurs to have access to finance and necessary information relating to business opportunities to enable them to reduce their operating costs and be more efficient to meet the market competitions.

Impact of Leveraged Lending Guidance: evidence from nonbank participation in syndicated loans

PurposeThe purpose of this study is to examine the impact of supervisory Leveraged Lending Guidance (LLG) (2013–2014) on risk and structure of syndicated loans arranged by the largest US banks with participation of nonbank lenders.Design/methodology/approachThis study uses supervisory shared national credit loan-level data from 2010 to 2015 and DealScan loan origination data and use linear regressions with clustered standard errors.FindingsThis study finds that the impact of the LLG was mixed. Incidence and risk of leveraged lending declined following the Guidance, as reflected in lower nonbank syndicate participation. However, the covenant protections weakened and loan spreads at origination declined. This study also provides evidence that some risky lending originations shifted to nonbank entities outside of the banking regulatory environment.Originality/valueThis study contributes and expands literature on the impact of regulatory guidance on loan risk, terms and structure, focusing on nonbank participation in syndicated commercial loans.

On the differential response of loans to shocks in the USA

PurposeThe purpose of this paper is to gain insights useful to explain the loan puzzle: the unexpected increase of loans to firms in case of a monetary tightening. To this end, the authors develop the analysis using several loan categories distinguished by lender, scope and borrower. This approach helps to unveil significant differences on how those categories respond to the same shock and allow to evaluate possible alternative explanations for such differences.Design/methodology/approachThe paper is empirical. The analysis is based on a large vector auto-regression, estimated using Bayesian techniques and has as object the US economy.FindingsThe findings support a supply-side explanation of the loan puzzle, i.e. banks reshuffle their portfolio in favor of short-term business loans after a monetary tightening. Moreover, the authors achieve the following results. First, the analysis shows that loans to small firms increase as well, but less than what observed with large firms: small firms stay between large firms and households. Second, considering advances and other loans allows to conclude that finance companies behave very much as banks. Third, some limited evidence suggests that not just industrial and commercial loans to firms might increase but also more long-term loans, such as mortgages.Originality/valueThe authors develop an analysis, based on state-of-the-art Bayesian techniques, that reveals the differential response of well-distinguished loan categories to several shocks; monetary and real shocks in the first place. After showing their heterogenous response, the authors discuss it in detail, with specific reference to supply and demand factors of credit intrinsic to the transmission mechanism. With respect to previous contributions, the authors consider a plurality of loan categories functional to understand the reason behind each specific response. This allows to conclude in favor of supply factors as an explanation of the unexpected increase of loans to corporate firms in case of a monetary shock.

The Role of Credit Risk as Mediating the Effect of Liquidity on Sharia Banking Performance

This study aims to examine and analyze the relationship of the influence of liquidity on bank performance mediated by credit risk. Using data on Islamic banking companies listed on the IDX in 2013-2019. The methodology of this research was carried out to achieve the objectives of this study, namely how the influence of liquidity on the performance of Islamic banking companies in Indonesia which is mediated by credit risk. By processing data from data collected from the pre-pandemic and during the pandemic, this research can prove the proposed hypothesis. The analytical tool used is SEM-PLS with WarpPLS 7.0 application. The results of this study indicate that credit risk can partially mediate the relationship between the influence of liquidity on bank performance. This study succeeded in proving that the influence of liquidity on bank performance is acceptable and can be mediated by credit risk. This is in line with the Commercial Loan Theory which explains that providing loans to short-term and productive customers can minimize customer defaults, so that the company's performance will be maintained. During the current pandemic, it is one of the things that makes companies careful in managing liquidity as well as in distributing credit. Banks must be really selective in choosing loans submitted by customers, in order to avoid defaults that cause a decline in bank performance.

The effect of lenders’ dual holding on loan contract design: Evidence from performance pricing provisions

Examining a sample of U.S. commercial loans originated between 1996 and 2017, we find that the propensity to employ performance pricing provisions (PPPs) in private loan contracts increases by about 10% when lenders are dual holders, that is, when they simultaneously hold equity in the borrowing firm. This finding supports the monitoring efficiency channel and is robust after accounting for the endogeneity bias from lenders’ dual holding. We also observe a substitution effect between PPP usage and covenant tightness, and the strength of this effect in dual-holder loans varies between spread-increasing and spread-decreasing PPPs. Borrowers of dual-holder loans are more likely to improve their accounting performance within one year of loan origination. These findings are consistent with dual holders’ incentive alignment role, which helps reduce monitoring costs, improve lenders’ monitoring effectiveness, and promote managerial flexibility.

Wind potential investigation with turbine siting control for improved energy yield at El-Tor Region, Egypt

The paper presents a detailed study of wind farm sizing/siting at Egypt, EL-Tor Sinai Peninsula. The study is driven by the ongoing Egyptian clean energy policy to utilize wind energy a viable source of renewable electricity within the national new planned energy-mix generation. The wind ample coastal/desert resources in Egypt stimulated the Government of Egypt to initiate the wind expansion program policy in October 2014 using wind and solar/PV renewable sources through the Feed-In Tariff incentive program to be one of the African and Middle Eastern pioneer countries reaching 20% of renewable energy (RE)-based electricity generation by 2022 and reducing the fossil fuel dependency. After presenting the techno-economic investigations of large wind farms in El-Tor area located in Sinai Peninsula of Egypt, the state of the art of defining the near-optimal wind micro-siting of best controlled wind turbines and the relevant technical selection criteria are introduced. The topographical data and wind characteristics in El-Tor area are fully analyzed. Using the WindPROTM software, the wind site optimal selection of controlled wind turbines and layout for maximum energy production are discussed considering the governing risk uncertainties; then finalized in terms of cost-benefit feasibility study during the wind farm life span for the national grid integration. Considering the soft and commercial loan factors, the economic viability of the wind farm implementation with its controlled turbine locations/spacing in El-Tor area is studied in comparison with the conventional power plants neglecting the certified emission reductions benefit. The methodology of this paper illustrates a systematic guided way for the selection and sizing of large wind farms as either standalone with storage battery systems or gas turbine back up or direct interfacing with the electric utility at high penetration levels of 15-20%.

DOMESTIC AGRICULTURAL FINANCING THROUGH GOVERNMENT AND COMMERCIAL BANK’S CREDITS AND AGRICULTURAL OUTPUT PERFORMANCE IN NIGERIA

This study focused on understanding the influence of domestic agricultural financing through government and commercial banks credits and agricultural output performance in Nigeria. The study employed time series data obtained from Central Bank of Nigeria, Statistical Bulletin and National Bureau of Statistics which covered from 1981 to 2019. The data obtained were analyzed using econometric method like the multiple regression technique. Findings revealed that agricultural performance in Nigeria within the reference period was negatively influenced by the value of commercial banks loans and advances to agriculture and positively influenced by the credit allocation to agricultural sector under ACGSF and by government capital expenditure on agriculture among other factors. The study concludes adequate financing of the agricultural sector is imperative for a positive performance to be recorded in the sector constantly. Finance is inseparable from agricultural performance in Nigeria. For more positive performance to be recorded in the agricultural sector, adequate financing of the sector is indispensable. Both Government and commercial banks in Nigeria should effectively support the provision of adequate credit to the agricultural sector such that farmers could transit from subsistence to commercial orientation in a sustainable manner in Nigeria.

On the determinants of regional government debt in Russia

ABSTRACT This paper provides an analysis of the determinants of regional government debt in the Russian Federation using data from 2005–2017. We document that total indebtedness of Russian regions has grown substantially since 2010 and find significant changes in the structure of regional debt, primarily the increased use of budget credits offered by the federal government. Market debt instruments are determined by a different set of factors than non-market instruments. In fact, poorer and less fiscally independent regions have lower access to budget credits and are forced to rely on more expensive market debt instruments, particularly commercial loans. Budget credits and commercial loans are shown to be substitutes, although the nature of this substitution is contrary to declared redistributive goals of public policy. Finally, we find the presence of horizontal strategic interactions in debt issuance across Russian regions: regions react positively to increased debt issuance in the same federal district.

Fostering Agriculture under the Industrializing State: The Caja de Crédito Agrario and Agricultural Credit in Post-Depression Chile, 1926-53

This paper analyzes the role of the Caja de Crédito Agrario (CCA) in the development of the agricultural credit market in post-depression Chile. Employing its official annual reports, reports from the Superintendency of Banks, and Chile’s Statistical Yearbooks, we constructed the first series of CCA’s credit operations, and established trends in the number, the average amount, and the social, geographic, and specific economic activity distribution of all loans. From 1927 to 1952, CCA loans represented 11.5% of all commercial bank loans, and in the latter year the CCA lent more money to agriculture than any other bank. The CCA became Chile’s largest agricultural bank, right before being merged with other institutions to create the State Bank of Chile. The CCA’s credit was decentralized: its operations evolved towards a fairly balanced distribution of loans among Chile’s main agricultural provinces. This was a micro-credit institution that allocated the vast majority of its loans to small farmers, who otherwise would not have access to formal credit. The CCA was a public policy tool for helping small farmers produce food for domestic consumption. Contrary to conventional views, in Chile the industrialization-promoting state did also foster agricultural growth through CCA public credit.

The Wavelet Analysis: The Case of Non-Performing Loans in China

China has accelerated its banking sector reform in recent years, paying particular attention to non-performing loans (NPLs). The paper’s scope is to analyse the relationship between NPLs and macroeconomic variables in China using quarterly data from 2008/Q1 to 2021/Q1 applying wavelet analysis, which allows the study to scan both short- and long-term causal relationships and connections. The analysis produces interesting results. The GDP does not appear to be as important and as much of a driving force in the dynamics of NPLs as in other emerging countries. On the other hand, inflation shows a highly dynamic dependence on NPLs as it varies over time; however, the most interesting data is the relationship between NPLs and economic policy uncertainty. In the short term, the variables are in phase. In the long term, an increase of EPU has a reduction effect on NPLs, indicating that it affects commercial bank loan sizes by reducing enterprise demand for and bank supply of credit resources.

Foreclosure Sales Under the UCC During the Covid-19 Pandemic

Under the Uniform Commercial Code (UCC), “every aspect” of a foreclosure sale must be commercially reasonable. The traditional commercial reasonableness standard was tested during the first year of the COVID-19 pandemic, as the unprecedented circumstances imposed by state restrictions prompted increased judicial scrutiny of UCC foreclosure sales. This occurred most prominently in the context of commercial property mezzanine loan foreclosures. A mezzanine loan is a property loan secured by a pledge of equity interests in the property-owning entity rather than a security interest in the property itself. As state mortgage foreclosure moratoriums restricted lenders’ abilities to foreclose on commercial property, mezzanine lenders initiated UCC foreclosures to circumvent this barrier and take control of their collateral. 
 This Note argues that courts adopted a more probing and holistic analytical approach to commercial reasonableness analyses during the first year of the pandemic. This approach more closely analyzed the procedures employed by foreclosing lenders and contextualized fair price considerations within wider market and societal concerns. This Note then proposes ways for secured creditors to protect their foreclosure sales during future periods of market uncertainty. Although secured creditors cannot fully insulate their foreclosure sales from fair price challenges in a market downturn, they should employ additional procedural safeguards to deflect commercial reasonableness challenges aimed at the alleged procedural irregularities of such sales.

Explaining Aggregated Recovery Rates

This study on explaining aggregated recovery rates (ARR) is based on the largest existing loss and recovery database for commercial loans provided by Global Credit Data, which includes defaults from 5 continents and over 120 countries. The dependence of monthly ARR from bank loans on various macroeconomic factors is examined and sources of their variability are stated. For the first time, an influence of stochastically estimated monthly growth of GDP USA and Europe is quantified. To extract monthly signals of GDP USA and Europe, dynamic factor models for panel data of different frequency information are employed. Then, the behavior of the ARR is investigated using several regression models with unshifted and shifted explanatory variables in time to improve their forecasting power by taking into account the economic situation after the default. An application of a Markov switching model shows that the distribution of the ARR differs between crisis and prosperity times. The best fit among the compared models is reached by the Markov switching model. Moreover, a significant influence of the estimated monthly growth of GDP in Europe is observed for both crises and prosperity times.

The effect of hotel brand affiliation on commercial mortgage loan underwriting in the lodging sector

The main purpose of this study is to investigate the influence of hotel brand affiliation on commercial mortgage loan underwriting. Using a sample of 2443 hotel loans securitized into commercial mortgage-backed securities (CMBS) between 2010 and 2018, the results of this study show a significant effect of hotel brand affiliation on credit spreads, loan-to-value (LTV) and debt coverage ratios (DSCR). More importantly, there is a significant interaction effect between hotel brand and lending on credit spreads. The evidence is consistent with the observation that some hotel brands are less risky than other hotel brands, and therefore, receive favorable lending terms from lenders.

The relationship between banks’ credit quality, credit growth and social capital: evidence from Turkish banking sector

ABSTRACT The aim of this study is to empirically examine the relationship between credit growth, credit quality and social capital of all commercial banks operating in Turkey for a period of twelve years between 2007 and 2018 on the basis of 81 provinces. In order to measure social capital on a provincial basis, the independent variable SC1 was obtained by applying principal component analysis to the variables consisting of 2 network and 2 norm variables. In addition, province-based organ donation rate was used as an alternative social capital variable. Changes in Total Loans (ΔTL), Changes in Real Estate Loans (ΔREL), Changes in Commercial and Industrial Loans (ΔCIL), Changes in Construction Loans (ΔCL), Changes in Non-Performing Loans (ΔNPL), Ratio of Non-Performing Loans to Total Loans (NPL/TL) and Ratio of Non-Performing Loans to Total Assets (NPL/TA) were determined as the dependent variable. The relationship between the level of social capital (SC1) and seven dependent variables on a provincial basis in Turkey was analyzed and measured using panel data techniques. The results of the analysis show that the relationship between the social capital level of the provinces, credit growth and non-performing loans are negative and significant. The results of the study show that the level of social capital is important and decisive in terms of credit growth and credit risk of banks.

Installment Payment Strategy for Online Retailer Platform under Commercial Loan Financing

Recently, online dominant retailers have provided installment sales (IS) to their consumers to alleviate their financing pressure. Meanwhile, the upstream suppliers need financing to fulfill the procurement from their retailers. In this paper, we consider an online dominant retailer as an intermediation, that helps her suppliers get financing from banks, and provides installment payments to consumers simultaneously. In particular, we describe customer's willingness to buy through both consumer's preserved value and income level. By constructing game-theoretical models, we discuss the equilibrium strategies of both commercial loan only scheme(CL) and commercial loan with installment payment scheme. Under information asymmetry between supplier and bank, we find that the interest rate of the supplier's loan decision under CL will be higher than the risk-free interest rate. The retailer under CL will offer a higher wholesale price with IS than without IS due to larger sales under IS. Numerical experiment shows installment payments mode can improve supply chain performance by increasing both supplier's and retailer's profit. And the retailer's profit distribution growth from IS is far greater than that of the supplier.

COMMERCIAL BANK FINANCING AND DEVELOPMENT OF CROP PRODUCTION IN NIGERIA

This study evaluates both short-run and long-run impacts of credit financing facilities provided by commercial banks on crop production development in Nigeria from 1981 to 2020. The study adopts ex post-facto research design and obtains data on the study variables from Central Bank of Nigeria Statistical Bulletin and World Bank Development Indicators. Autoregressive Distributed Lag (ARDL) model approach was employed as an estimation technique. The outcome of the analysis produces significant negative effect of commercial banks loans and advances on crop production development in the short run. In the long run, however, commercial banks loans and advances and labour employment in agriculture sector exert significant positive impact on crop production development in Nigeria. The researchers conclude that commercial banks credit financing significantly increase contribution of agriculture to Nigeria gross domestic product in the long-run while it reduces crop productivity in the short-run.

Capital structure and operational self-sustainability of Vietnam microfinance institutions

This paper analyzes the impact of capital structure on the operational self-sustainability of Vietnam microfinance institutions (2006-2019). We collect data from financial reports of microfinance institutions compiled by MIX Market. Regression results with FE and System GMM models show a positive relationship between capital structure components and operational self-sustainability of Vietnam microfinance institutions (OSS). This positive relationship shows that capital structure plays a significantly important role in the operational self-sustainability of Vietnam microfinance institutions. Besides, we also find a nonlinear relationship, which shows that the main sources of financing have a positive impact on OSS with high proportions of capital structure components. In particular, equity has a significantly positive effect at both high and low ratios, while the others have weak effects. Vietnam microfinance institutions should make the maximum use of operating capital sources (especially savings and commercial loans) to increase sustainability. Although still heavily dependent on equity sources, microfinance institutions tend to focus on market capital sources (deposits, loans) in order to reduce dependence on equity. This is also the basis for us to provide some policy implications to improve the sustainability of Vietnam microfinance institutions at the end of the paper.

Research on Risk Prediction Model of Internet Finance Based on Cloud Computing

With the rapid development of the Internet, the traditional Internet financial risk prediction methods can no longer meet the needs of individuals and enterprises, so the concept of cloud computing arises at the historic moment. Cloud computing has subverted the traditional financial risk prediction method and has been widely studied and applied for its distributed, dynamic and autonomous characteristics. How to efficiently and reasonably schedule the resources of cloud data center and improve the accuracy of financial risk prediction is the focus of current research. How to quantify financial risk and financial risk early warning is one of the urgent problems to be solved. Under the framework of cloud computing, this paper combines the feature extraction and data weighting to study the user’s basic attribute data and a large number of downloaded APP types. After that, linear regression with penalty is used to construct the prediction model to improve insolvency. The accuracy of customer default judgment can realize local optimization, so as to improve the prediction and control of hidden risks of customer commercial bank loans and greatly reduce the default risk of bank loans.