Bank Deposits Research Articles

Financial outreach, bank deposits, and economic growth

Financial outreach, bank deposits, and economic growth

The Role of the Banking System in National Economy: Empirical Evidence from Romania

The aim of this paper is to investigate the role of banking system in Romanian economy, in 2008-2023 period, focusing on the interlinkages between bank deposit, bank credit and interest rates. Additionally, this paper analyzes the financial intermediation of banking system (measured by domestic credit to private sector by banks as % of GDP) in Romanian economy and its contribution to economic growth and development.

Exploring the Role of Financial Assets in Enhancing the Performance of Nigerian Banks

The study looked at the impact of financial assets (FA) on the financial performance (FP) of Nigerian deposit money banks (DMBs) from 2013 to 2022 (10 years). The study's specific goal is to investigate the coexistence of financial asset measurements [Cash Equivalents (CE), Trade Receivables (TR), Loans and Advance (LAD), and Foreign Bank Deposit (FBD)] and [DMB FP as proxied by Return on Equity (ROE)]. The selected ten banks were picked from the pool of 18 deposit money banks listed on the Nigerian Exchange Group. They were examined through descriptive statistics, correlation analysis, and multiple regression analysis utilizing the OLS method. The findings indicated that capital equity (CE), liquidity asset density (LAD), and financial burden debt (FBD) have minimal impacts on return on equity (ROE); however, total revenue (TR) has a significant impact on ROE. Ultimately, the research revealed a strong correlation between financial assets (FA) and financial performance (FP) of deposit money banks in Nigeria. It is recommended that managers in the banking industry boost their allocation of cash holdings through cash planning (estimated forecast of cash position in the future) in order to maintain an optimal cash position level and improve their FP. Furthermore, treasurers must plan to invest idle capital in short-term investments such as treasury bills and interbank lending, which increases profitability and reduces fund costs.

Central Bank Digital Currencies: Much ado About Nothing?

ABSTRACT Central bank digital currencies (CBDCs) are increasingly becoming a subject matter for a variety of stakeholders in the economy as a whole. In this paper, we will first analyse the nature of CBDCs to show that it is essentially a digital liability of central banks, like today’s settlement balances that banks use in their own transactions. Such a ‘wholesale’ CBDC may exist along a ‘retail’ CBDC, which is the digital version of banknotes that, to date, any non-bank agents can use for their small-value payments. In this perspective, CBDCs are therefore ‘much ado about nothing’, as they just represent the most recent evolution of the form of money. However, in this paper we will also show that such an evolution could have some relevant consequences for monetary policy objectives like financial stability and banks’ solvency if ‘retail’ CBDCs replace banknotes in advanced economies, thereby providing an interesting alternative to bank deposits — particularly if these CBDCs are going to be remunerated by the issuing central banks. The last section will expand on this issue, focusing on the possible reaction of the banking sector, whose aim is and will remain the maximization of banks’ profits over the short run.

Financial development and regional bank instability in the United States: An analysis of bank balance sheet structures

This article demonstrates that financial development in the United States has heightened the vulnerability of both sides of regional banks’ balance sheets to financial market fluctuations, drawing on the concept of financial circulation of bank deposits. It first argues that financial development provides diversified short-term investment channels for non-financial sectors to manage their liquid asset holdings. Since banks intermediate money circulation, changes in liquid asset portfolios inevitably result in sudden inflows and outflows of deposits to these banks. These deposit flows are highly clustered during specific financial phases and are subject to financial volatilities rather than local business cycles, making regional banks’ liabilities volatile with market fluctuations. Second, to mitigate increased deposit instability, regional banks hold a higher proportion of marketable securities to manage liquidity. But the mark-to-market nature of security prices further puts potential instability on the asset side of banks’ balance sheets. Extremely, the sudden volatility in the financial markets could simultaneously cause deposit flights and choke off refinancing capability, causing a bank run.

Utilizing the Error Correction Model to Investigate the Impact of Fluctuations in Bank Deposits on the Money Supply

Utilizing the Error Correction Model to Investigate the Impact of Fluctuations in Bank Deposits on the Money Supply

Assessing the impact of oil prices and inflation on bank deposits in Azerbaijan

Bank deposits are vital for the economy, serving as a primary source of funding for banks that facilitate lending, investment, consumption, and overall economic growth. This article aims to examine how oil price fluctuations and inflation, two critical macroeconomic variables, influence bank deposits in Azerbaijan, an energy-exporting country. The primary purpose is to reveal the extent to which these factors, particularly in the context of Azerbaijan’s role as an energy exporter, affect the stability and liquidity of the banking sector. Using the Autoregressive Distributed Lag (ARDL) model and Granger causality testing, the study analyzes the dynamic relationships among these variables. The findings demonstrate a significant long-term relationship and causal effects between oil prices, inflation, and bank deposits. Specifically, a one-unit increase in oil prices results in a 0.057-unit rise in bank deposits, underscoring the positive impact of oil price increases on banking sector liquidity. Conversely, a one-unit increase in inflation decreases bank deposits by 0.812 units in the long term, highlighting inflation’s detrimental effect on financial stability.

Islamic Banking Muḍārabah Review from Depositors’ Funds Security Perspective

Islamic banks use Muḍārabah to collect money into their saving and term deposit investment accounts. While doing so these banks stipulate in their terms and conditions that the customers as money providers will solely bear the loss. The banks who manage these funds will neither bear the loss, nor guarantee these funds. Additionally, the customers have no course to the profit distribution or investment decisions. The banks quote that these terms and conditions are in line with Muḍārabah Sharῑ῾ah principles. On the contrary, they use the same terms and conditions as an excuse for not providing financing to the customers based on the Muḍārabah. This double standard draws attention of the researchers to analyze the situation with the aim to protect the depositors in Islamic banks. This is a qualitative study that used unrestricted interview methods to collect data. It was found from research that the current banking Muḍārabah has been altered completely and that the banks don’t qualify to continue using same loss terms and conditions. It is inevitable for the financial and social safety of society to update the Muḍārabah terms and conditions to make them comply with Maqāṣid al Sharῑ῾ah. The study recorded the view of few scholars; however, it opened the doors for Islamic banks, regulators and Fiqh councils to further discuss the legitimacy of the banking Muḍārabah terms and conditions to protect relationship with the customers who deposit money in trust of being Islamic and to avoid the usury offered by the interest based conventional banking.

Measuring and analyzing the impact of bank deposits on paid loans and financial investment for the period 2003-2020

The financial system is generally divided into deposit financial institutions and non-deposit financial institutions. The difference between the two types is that the first type relies mainly on deposits and is one of the sources of obtaining funds to use those resources, whether by lending or investing them directly in the banking system. In contrast, the second type relies mainly on its expertise and financial resources. What concerns us in this research is determining the role of deposits of various types in activating and activating investment and the extent of the ability and potential of the Iraqi banking system to employ those deposits, whether at the level of direct investment or the banking system granting those funds in the form of direct loans. The ARDL model was utilized to determine the existence of a joint integration relationship between deposits, loans granted and financial investments. It was found that current deposits occupied the most significant proportion of total deposits, with joint integration between deposits and loans paid on the one hand and financial investments on the other.

Aggregate bank deposit flows in the U.S.

This paper investigates the dynamics of aggregate deposit inflows, outflows, and the reallocation of deposits within the U.S. banking system from 1984 to 2022, with a particular focus on the effects of the COVID-19 pandemic. We find that, on average, deposit inflows are nearly three times larger and twice as volatile as outflows. Larger banks generally attract and retain more deposits than smaller ones, with significant reallocation of deposits to banks that offer higher rates, have lower insolvency risk, and lower capital levels. During the COVID-19 pandemic, total and core deposit inflows increased, whereas inflows of large time-deposits declined. Concurrently, outflows of large time-deposits surged, particularly in large banks. The pandemic also saw a shift in deposit reallocation patterns, with a notable movement of large time-deposits from large banks to smaller banks, reversing pre-pandemic trends. Our findings underscore the importance of understanding deposit flows and depositor diversity for assessing banking stability and highlight market discipline among depositors, who gravitate toward banks offering greater utility.

The Effect of Non-Interest Income on Bank Profitability and Risk: Evidence from Turkey

There are three purposes of this article, the first of which is to investigate the impact of non-interest income (NNII) on the profitability of banks assessed by both return on assets (ROA) and return on equity (ROE). The second one is to investigate the impact of NNII on risk, assessed by the volatility of return on assets (SdROA) and the volatility of return on equity (SdROE). The final one is to analyze the impact of the COVID-19 pandemic on bank profitability and risk. To achieve the above, the dynamic panel technique, a two-step GMM estimator, was used with the data of 25 deposit banks operating uninterruptedly from 2002 to 2021. The empirical results show that the NNII was positive and significantly correlated with ROA and ROE. The effect of NNII on the risk level appears to be negative and significantly related. In addition, during the COVID-19 period, it was determined that profitability decreased and risk increased. This shows that NNII is a vital shock absorber during an external shock. Therefore, it could be said that banks should attach importance to income diversification, and sector regulators should encourage innovation to create non-traditional products. Under the adverse conjuncture created by increasing public intervention and the pandemic, in recent years, Turkish banks have been encouraged to diversify their activities further rather than focus solely on traditional activities. NNII appears to be associated with higher profitability and lower risk.

Quality of Life and Bank Investments of the Population in the Regions of the Russian Federation

Improving the living standards of citizens and improving the investment climate are the key benchmarks of any state.The purpose of this study is to analyze the relationship between quality of life and the growth of bank deposits in the regions of Russia.Materials and methods. The integral index of the quality of life of the population of the Russian regions from 2011 to 2021 was assessed using the method of principal components based on blocks of variables reflecting not only material but also spiritual and moral spheres of society. The authors analyzed the presence of correlation between the integral index of the quality of life and the volume of bank deposits. Assuming that the integral index of the quality of life can have a significant impact on the growth of bank deposits, panel data models with fixed and random effects were constructed and analyzed. The data from the Federal State Statistics Service (Rosstat) and from open Russian Internet resources on banking analytics were used in the paper.Results. The paper shows that despite the presence of a stable correlation between the value of the integral index of the quality of life and the estimate of the volume of deposits, the quality of life does not have a significant impact on the growth of bank investments. Regional inflation is expected to have a negative impact on deposit growth.Conclusion. The increase in free cash stimulates the population to choose the most reliable ways of their preservation and multiplication, for example, bank deposits. However, improving the quality of their lives, the population may begin to consider other, albeit less reliable, but perhaps more profitable areas of investment, such as real estate or mutual funds. In addition, today the compensation for deposits in a bank, in respect of which an insured event has occurred, is paid to the depositor in the amount not exceeding 1.4 million rubles, which encourages agents to consider other investment instruments, if the available free cash exceeds the above amount. In conditions when the growth rates of consumer prices exceed the return on deposits, their real return becomes negative, which means that the population will look for alternative ways of investment. Analysis that takes into account different types of investment by regions of the country is currently a difficult task due to the aggregation and non-transparency of this type of data. We also note that the turbulent period starting from 2022, characterized by a sharp increase in interest rates, requires separate consideration.

FINANCIAL SECTOR DEVELOPMENT AND AGRICULTURAL OUTPUT IN NIGERIA

This paper investigated the impact of financial sector development on agricultural output from 1981 to 2023 both in the short and the long run. The descriptive statistics and stationarity tests were conducted prior to the long run test using the Johansen co-integration and the Vector Error Correction Model (VECM). The Johansen test showed evidence of long run causality among the variables in the model. The serial correlation and the heteroscedasticity tests were conducted in addition. The result revealed the presence of linkage between lending rate, exchange rate and agricultural output. Loan to private sector and loan to agricultural sector as a proxy of financial sector development positively affected agricultural output in the short run. In the long run, lending rate and loans to private sector were negatively related to agricultural output while loan to agricultural sector had positive effect on output. The positive effect was, however, insignificant in the long run. This implies that in addition to finance and credits, peripheral factors such as insecurity, poor infrastructure, supply chain disruptions and low productivity are pervasive in their influence on agricultural performance to agriculture in Nigeria over the long term. The study recommended that the Central Bank of Nigeria through its monetary policy tools should ensure loans through the deposit banks are made accessible to genuine and credit worthy farmers at the lowest possible cost while addressing the insecurity issue. Keywords: Agricultural output, Exchange rate, Financial sector development, Lending rate, Loan to agricultural sector, Loan to private sector, Vector Error correction model

The impact of decentralized finance development on banks deposits variability: PVAR approach

Purpose This study aims to investigate the potential impact of total value locked (TVL) fluctuation in decentralized finance (DeFi) on banks deposits for a sample of 21 countries, including the Eurozone members and the USA, over the period from July 2018 to October 2023. Design/methodology/approach Panel vector autoregression model has been used to analyze the existence of a relationship between TVL and banks deposits. In the second stage, the impulse response function has been exercised to find out the response of banks deposits among each nation. Findings Empirical findings exhibit that while increases in TVL have a significant negative long-run association with banks deposits in a global perspective, the effect is weak, suggesting modest disruption to traditional banking services to date. However, the impact varies between short and long-run effects at the country level. Six nations exhibit substantial negative long-run effects, whereas eight countries experience only temporary decreases in deposits following TVL upticks that rebound over time, reflecting the lack of trust in DeFi services and the engagement in speculative instead of long-term activities. Research limitations/implications This study provides general insights into DeFi’s impact on banking performance and deposit stability. However, it likely has limitations in scope and time frame. Future research could explore long-term effects, specific DeFi protocols and cross-country comparisons. Practical implications This study’s findings provide key insights for policymakers, central banks and bank managers on the impact of DeFi growth on banking performance and deposit stability. The results highlight the need for adaptive regulatory frameworks and investment strategies to address the emerging DeFi ecosystem. At the country level, the observed variations suggest the importance of tailored policy approaches. These insights are crucial for developing effective regulations and strategies in the evolving financial landscape. Social implications DeFi growth may alter financial access and inclusion, raising concerns about consumer protection and literacy. It could shift power dynamics in finance, potentially reducing traditional intermediaries’ influence while creating new forms of inequality. Balancing innovation with social responsibility is crucial for equitable distribution of benefits. Originality/value Although numerous studies have been conducted on the effects of cryptocurrencies on bank deposits and stock performance across various regions, they have largely overlooked the DeFi and its role in influencing deposits as a new competitor to traditional banks services. This study aims to address this gap by examining the influence of TVL developments on banks deposits, and to what extent it can be served as an alternative to banking services.

The determinants of excess liquidity in the Algerian banking system

ABSTRACT The paper investigates the precautionary and involuntary determinants of excess liquidity in the Algerian banking system over the period Q1 1995–Q1 2019. Through the autoregressive distributed lag bounds test approach, the results show that the excess liquidity is a consequence of lagged excess liquidity to deposit ratio, required reserves to deposit ratio and the output gap in the short run. In the long-run, Algerian Banks demand excess liquidity for precautionary and involuntary factors. The precautionary determinants include required reserves to deposits ratio, volatility of currency in circulation to deposits ratio and the discount rate. The involuntary determinants reflect four characteristics of the Algerian banking system. The first is the impact of hydrocarbon revenues in excess liquidity indirectly by financing the State’s expenditures. The second is the development of total bank deposits, which are largely determined by hydrocarbon exports. Third, public companies continue to dominate bank loans at the expense of the private sector share. Fourth, government debt markets are underdeveloped and government intervention continues to force banks to make regular purchases of government bonds. The banks can avoid the cost of excess liquidity by enhancing the credit to private sector.

Impact of Product Innovation and Technological Innovation on Organisational Performance: Evidence from Nigerian Money Deposit Banks

Impact of Product Innovation and Technological Innovation on Organisational Performance: Evidence from Nigerian Money Deposit Banks

Factors Affecting Bank Profitability in Türkiye

The purpose of this study is to examine the factors affecting commercial bank profitability in Türkiye using panel data analysis for the period 2012-2023. In this framework, there are 240 observations of 20 deposit banks in the analysis. Return on assets (ROA) and return on equity (ROE) are used as an indicator of profitability and dependent variables. The results of the analysis show that bank-specific determinants such as bank size, equity size and non-performing loans play a significant impact on bank profitability. Bank size, equity size and inflation play significant and positive role in explain bank profits, while the effect of non-performing loans is negative. It means that the high profitability of Turkish banks is generally associated with well-capitalized banks with high lending capacity and low credit risk with effective cost management is important for the banking system. Finally, the estimated effect of external variables except inflation did not support the significant effect on bank performance.

Do reserve requirements restrict bank behavior?

AbstractThis study aims to examine whether a reserve requirement system constrains bank behavior. In Japan, a system is applied to certain regional banks where required reserve ratios are imposed based on the amount of their deposits. Using a natural experiment, we perform a bunching estimation to examine whether this reserve requirement system decreases bank deposits. To the best of our knowledge, this study is the first to examine the effects of reserve requirement systems through bunching estimation. Our results demonstrate that the reserve deposit system depresses bank deposits, resulting in a decline in total deposits. However, this phenomenon is not observed during periods of unconventional monetary policies. This study highlights an important consideration when discussing changes in the reserve requirement system.

Impact of assets and liability on the efficiency of banks in Nigeria

To demonstrate the extent to which key bank performance indicators influence the bank's net interest margin, the research gauge the assets and liability of bank by use of: capital ratio (BACAR); Bank Loans (BLOAN); Asset Quality (BAQUA); Bank Deposits (BADEP); Deposit Rate (BDERA) and Bank Interest Spread (BISPE). The ex post facto research design was used. Whereas, quantitative data analysis was employed. The design involved the collection of secondary time series data from online data base. The population comprised banks while commercial banks serve as sample. The published CBN statistical Bulletin and World Bank indicators for the financial period of 1993 through 2022 were used. Results show that BACAR, BLOAN, BAQUA and BDERA has significant and beneficial values. BADEP shows negative but not significant values. BISPE confirms negative but not significant values). The regressed model clarifies 62.88% changeability in the net interest margin (R-squared = 0.6288), and the model is statistically significant. Sequel to the results, the study recommends that banks should prioritize increasing their capital base to improve risk supervision and boost profitability. Governing authorities should authorize that banks maintain adequate capital buffers. Banks should seek to increase their loan portfolios by exploring new credit markets and improving the creditworthiness of potential borrowers.

Exploring the Nexus between Macroeconomic Variables and Stock Market Returns in Nepal: An ARDL Bounds Testing Approach

Background: Investors and policymakers must understand how macroeconomic variables (MEVs) affect stock market behavior to maximize portfolios and maintain economic stability. Hence, it is crucial to establish a nexus between MEVs and stock market returns (SMRs). Objectives: This study seeks to assess the effects of MEV on SMRs in the long and short run. Methods: This paper analyzed the cointegrating relationship between MEVs and SMRs using a time series data set from 1994 to 2023. This study used the ARDL bounds testing approach. Results: The results confirm a cointegrating association between MEVs and SMRs in the Nepalese stock market. The error correction (ECT -1) term is significantly negative, suggesting a persistent correlation between the variables. The study also shows that interest rates negatively affect SMRs over time. Real GDP (LRGDP), inflation (LINFR), and exchange rate (LEXR) have negative but statistically insignificant associations with SMRs. However, the money supply (LMS) positively correlates with SMRs. Conclusion: The study’s findings provide practical advice for policymakers. For instance, lower interest rates increase the appeal of stocks by reducing the opportunity costs of holding bank deposits and credit costs. Therefore, policymakers are advised to maintain lower interest rates to cultivate a more appealing investment environment. Furthermore, policymakers should prioritize regulating inflation and preserving a robust foreign exchange rate to boost investors’ SMRs.