Bank Exit Research Articles

Diversification of the concept of foreign economic activity of russian banks in the new economic conditions Yulia S. Polozhentseva1

Relevance. Russian banks actively participate in international trade and economic relations. However, taking into account geopolitical and economic changes, such as sanctions and changes in trade blocs, banks need to develop strategies for effective expansion of their activities at the international level. Business planning for the geographical development of foreign trade will help banks to adapt to new market conditions, determine optimal strategies and resources for the development of export-import operations, as well as minimize risks and increase competitiveness on the world stage..The purpose is to conduct a comprehensive study of the possibilities of geographical development of the foreign economic activity of Russian banks..Objectives: analyze regional markets for their potential; to determine the main advantages and disadvantages of the activity of foreign trade of Russian banks; will identify the peculiarities of the bank's exit to the new dawn within the framework of foreign trade, draw up a business plan and determine the criteria for the success of the project.Methodology. In the process of research, general scientific methods of logical and statistical analysis, field research, as well as qualitative and quantitative analysis were used.Results. 10 Russian banks, their foreign trade development strategy and future prospects were considered. The regions in which the opening of a bank branch will be the most successful for foreign trade have been identified: Tatarstan, Primorsky Krai, Kaliningrad Oblast, Yekaterinburg. A business plan for entering a new regional market for a bank with a focus on foreign trade has been drawn up, taking into account industry specifics.Conclusion. The foreign trade development strategy allows banks to expand their client base, increase their global presence and provide their clients with access to international financial services.

Predicting corporate restructuring and financial distress in banks: The case of the Swiss banking industry

AbstractThe global financial crisis of 2007–2009 is widely regarded as the worst since the Great Depression and threatened the global financial system with a total collapse. This article distinguishes itself from the vast literature of bankruptcy, bank failure, and bank exit prediction models by introducing novel categorical parameters inspired by Switzerland's banking landscape. We evaluate data from 274 banks in Switzerland from 2007 to 2017 using generalized linear model logit and multinomial logit regressions and examine the determinants of corporate restructuring and financial distress. We complement our results with a robustness test via a Bayesian inference framework. We find that total assets and net interest margin affect bank exit and mergers and acquisitions, and that banks operating in the Zurich area have a higher likelihood of exiting and becoming takeover targets relative to banks operating in the Geneva area.

How to escape from the debt trap: Lessons from the past

AbstractRising public debt everywhere has raised the question of how to reduce debt again in the future. High public debt also seems to be an impediment for the exit of central banks from ultra‐low interest rates and quantitative easing. Historical precedents and proposals have included austerity, haircuts and the generation of inflation. Each way has advantages and disadvantages, including uncertainty about effects and side effects. We approach the issue from an historical perspective, based on case studies of prominent approaches to debt reduction. We analyse debt reduction through economic austerity in Italy, hyperinflation in Germany after World War I, inflation in Argentina since the 1980s, currency reform in Germany after WW II, and financial repression in the United States and the United Kingdom after WW II. Finally, we discuss Ronald McKinnon's order of economic and financial liberalisation as well as the Chicago Plan combined with the introduction of central bank digital currencies as an option for the future.

Do Non-Bank Lenders Mitigate Credit Supply Shocks? Evidence from a Major Bank Exit

Do Non-Bank Lenders Mitigate Credit Supply Shocks? Evidence from a Major Bank Exit

How can a central bank exit quantitative easing without rapidly shrinking its balance sheet?

An important question for the major central banks of the industrialized world is how to design desirable strategies to exit quantitative easing (QE). At the exit, if a central bank needs to reduce rapidly the liquidity created by its balance sheet expansion, issuing new interest-bearing liabilities would be preferable to rapidly shrinking the balance sheet by selling existing assets, both for the stability of those assets' markets and to be able to keep capital losses from being reflected in the balance sheet under amortized-cost accounting. Given that existing assets accumulated during the quantitative easing period have low interest returns, and new liabilities to be issued in the quantitative tightening period would have high interest payouts, the central bank may run a loss that may threaten its solvency, which may force the bank to expand the monetary base above the level that is consistent with the central bank's ideal price stability path. This study considers a central bank that exits QE by issuing liabilities and examines an optimal exit strategy while maintaining the solvency by constructing a simple dynamic optimization model. The model is then applied to the Bank of Japan and the Federal Reserve to examine their possible exits.

Performance Efficiency of Engineering Industries in India

Purpose of the study: To critically analyze the financial growth pattern and the overall performance efficiency of industrial machinery companies in India. Design/Methodology/Approach: The data collected from the financial statement of the companies for 10 years from 2007-2008 to 2016-17 were analyzed with the help of different accounting and statistical tools. Discriminant analysis has been adopted for analyzing and interpreting the quantitative data was carried out using SPSS. Findings: The study revealed that good performance efficiency of the engineering industry over the period 2007-2017, most Indian engineering industries exist with high net profit. The poor performance companies need of the hour to increase profit by reducing costs. Practical Implications: The study has interesting policy implications. It is recommended to encourage foreign banks' presence to enhance the competitive condition of the banking sector thus making sure the exit and entrance of banks in the industry raise the competition. The pursuit of modernization, in fully hardening the resources of information technology should be relentless. It is a field that demands great attention and expertise. Originality/value: This research work is one of its first kind as no study was conducted before focusing on the performance perspectives of the engineering industries in India. Keywords: Financial Performance, Engineering industries in India, Financial statement analysis, Modernization, Discriminate Analysis

Funding liquidity shocks in a quasi-experiment: Evidence from the CDS Big Bang

We use the advent of new credit default swap (CDS) trading conventions in April 2009—the CDS Big Bang—to study how a shock to funding liquidity impacts market liquidity. After the Big Bang, traders are required to pay upfront fees to execute CDS transactions, with the size of the fees depending on the level of CDS spreads. While CDS bid-ask spreads decline in aggregate after the Big Bang, they do so less for contracts that require larger fees. Furthermore, the funding effect is stronger for smaller and riskier firms and for noncentrally cleared contracts. The effect also becomes stronger after Deutsche Bank's exit.

The Side Effects of Shadow Banking on Liquidity Provision

Shadow banks had a negligible presence in the US corporate loan market in the 1990s, but by 2016 they funded about 45% of the outstanding corporate term loans. Consistent with banking theories on liquidity provision, shadow banks remained absent from the credit line business. Nonetheless, they had a negative impact on the liquidity insurance provided by credit lines. The arrival of shadow banks increased competition in the term loan business and triggered a substitution of traditional term loans that amortize linearly with bullet loans that are paid at maturity. These changes led to the exit of banks, in particular those with lower risk appetite, not only from term loans but also from credit lines that are part of the deals containing those term loans. As a result, credit line syndicates have become more concentrated and funded by riskier banks, thereby, reducing the liquidity insurance they offer to corporations.

The Influence of Interpersonal Communication on Relationship Management in Banks in South-East Nigeria

Today’s global market is characterized by numerous changes like the 2008 global economic crisis that led to the exit of many banks across the world, cut-throat competition and customers’ changing demands among others, causing organizations to rethink and remodel business strategies to ensure competitive advantage. Relationship management, a PR tool has been identified as one of the new business strategies employed by organizations for building sustainable relationships with their various publics. The Excellence Theory of public relations which provides the theoretical background for this study explains that an organization can only be deemed to have attained organizational effectiveness when it is able to establish a sustainable relationship between the organization and the various publics on whom its success or failure depends. What the excellence theory advocates is now popularly referred to as relationship management. A major concern for public relations practitioners therefore has been how to develop and maintain long lasting relationships between organizations and their different publics.The overall purpose of this study therefore, was to investigate the extent to which interpersonal communication influences relationship management in Nigerian banks and the realization of their organizational objectives. The study adopted the use of both qualitative (in-depth interview) and quantitative (survey) approaches. The questionnaire and in-depth interview schedule were the instruments for data collection. The questionnaires were administered to 400 customers drawn from 15 selected banks in South Eastern Nigeria. An in-depth interview was also conducted among 15 selected employees of these banks. The employees were senior officers who interfaced daily with customers, like branch service or operation managers, relationship managers, and heads of customer service. Quantitative data generated as well as formulated hypotheses were tested using Pearson’s correlation analysis and chi square, while qualitative data was analyzed using thematic analysis. These were done with the aid of the Statistical Package for Social Sciences (SPSS) and NVIVO. The study established that relationship between banks and their customers is still interpersonal, even in this era of mediated computer and internet banking services, and that interpersonal communication dominates as the most preferred and most popular communication strategy in these banks. Finally, the study demonstrated that interpersonal communication is still very relevant in building and maintenance of sustainable relationships between banks and their customers, and that social media has not after all displaced, but rather complements it. This suggests that this study has answered the excellent question - ‘how, why and to what extent does communication, and in the context of this study, interpersonal communication in the Nigerian banking environment, contribute to the achievement of organizational objectives?’ DOI : 10.7176/IAGS/75-04 Publication date : August 31 st 2019

PENERAPAN SISTEM PEMBELIAN DALAM KAITANNYA DENGAN SISTEM PENGELUARAN KAS TERHADAP EFEKTIVITAS PENGENDALIAN INTERN (Studi Kasus pada PT. Bogor Raya Development)

Purchase transactions generally can be grouped into two, namely the purchase of local and import purchases. Purchase is a purchase from a local supplier in the country, while the import is a purchase from suppliers abroad. In making a purchase of goods at each company, the system of purchase accounting required in the purchase transaction. If the system of purchase does not or not properly controlled, then the company will be instability in the running of day-to-day operations. Purchase system set up ways to do all that is required by the purchase of the company. This system starts from the needs of a goods purchased goods until received.Goal of this research is to evaluate the system of purchase in connection with cash expenditure on service company. Evaluation conducted to determine whether the system is implemented in the purchase of the company is already a minimum of opportunity for cheating to make the purchase, from the goods are required to be purchased with the goods received. In addition, the authors also evaluate how the procedure of cash to pay suppliers in the company can be and avoid cheating. Research conducted by the author is in the PT. Bogor Raya Development, located in Bogor. PT. Bogor Raya Development is a company that functions as a Property Services, Golf Club, Sports Club, and the Event Organizer and the Hotel & Resort.Results of research indicate that the internal control system to the purchase and expenditure of cash on PT. Bogor Raya Development has not been good enough, there are still opportunities to go on cheating the system. Opportunities do cheating can be seen from a company function of purchase with the function of the receipt. In addition, in the accounting and finance, there is waste that is done, print the document, namely the Bank Exit three copies, and two duplicate the same stored in the same department. This is a waste because it is required to print a form that does not cost cheapThe evaluation in this research shows there are some things that do not apply to the PT. Bogor Raya Development, the system does not run the procedure is not written so that sometimes can make employees who are confused whether to go in the responsibility or not. In addition, the supervision of the goods that came has not been effective because it does not separated function of purchase and receipt of goods. Supervision of goods in the warehouse also has not been effective because it held by employees of the purchase. Written procedures that will be easier for employees to know the duties and responsibilities, in addition to the cash expenditure on the system there is waste to form Bank Exit. Thus the internal control system of purchase and cash expenditures can run effectively.Keywords: system purchases, cash expenditures, and internal control

Do financial crises cleanse the banking industry? Evidence from US commercial bank exits

We examine the cleansing effect of financial crises via their contribution to the exit of inefficient US commercial banks from 1984 to 2013. We find a larger increase in the exit likelihood of less efficient banks as compared to more efficient banks in the years of the Savings and Loans Crisis but not during the Global Financial Crisis. We highlight how the magnitude of the shock of the Global Financial Crisis and the subsequent, broad government interventions might explain these different results. Furthermore, we highlight that both crisis periods have a disproportionate effect on young banks regardless of their efficiency levels and that they do not generate any positive spillover effects on surviving banks in the three years post-crises in spite of some reallocation benefits in favor of new entry banks. Our findings highlight that forms of prudential regulation designed to strengthen bank resilience in good times might contribute to mitigating the effects of crisis on the longer-term productivity of the banking industry.

Banks and finance after the crisis: Lessons and challenges

The double-dip recession that hit the Italian economy between 2008 and 2013 has caused severe difficulties for the banking sector in the last few years, which have been aggravated by cases of malfeasance. This speech discusses the response of the Bank of Italy’s supervision and the measures adopted to solve the crises that have concerned some banks. It then examines the questions still open regarding the new European financial regulation framework, especially those concerning State aid and bank resolution, as well as its flaws, including the lack of crisis management rules designed to avoid a disorderly exit of banks from the market. Finally, it looks at the main challenges facing Italy’s banking sector, i.e. recovering profitability and adjusting to changes in the production system and in technology. JEL codes : G21, G33, G38 Keywords :Italy’s banking sector, banking crises, bank resolution

Deposit insurance, bank exit, and spillover effects

Abstract This study resolves a puzzle in the banking literature: why do an increasing number of countries adopt a deposit insurance scheme (DIS) while prior studies have shown that it increases the likelihood of banking crises? Using a dataset of 64 countries over the period 1970–2009, our study shows that the adoption of a DIS is associated with a 2.0–4.7 percentage points higher likelihood of banking crises (the “direct effect”), while it is associated with a 10.1–11.1 percentage points lower likelihood of non-banking financial crises (the “spillover effect”). Since the “spillover effect” is larger than the “direct effect”, a DIS actually increases overall financial stability. Additionally, we analyze the mechanisms through which a DIS affects financial crises. First, we highlight the existence of the implicit guarantee and examine its interaction with an explicit DIS. Second, we investigate the substitution effect between banking crises and non-banking crises.

A horserace or boost in market power? Banking sector competition after foreign bank exits

Recently, massive foreign bank exits have begun to be observed around the world. What is the effect of such trend on the market power of the domestic banks and on competition between them? How do the M&As and bank liquidations affect the banking sector competition? Finally, do the financial crises, and the resultant change in the banking structure increase the power of domestic institutions? We test these questions on a sample of 226 foreign banks' withdrawals, which occurred between 1996 and 2014 in 54 countries. We find that the impact of bank exits on the market power of other banks is non-linear, shaped like a U-curve. We document that the largest increase in market power is when a divested bank accounts for around 10% of market share. After this threshold, the effect diminishes, and banking sector competition increases. In addition, we find that financial crises create opportunities for banks that are probably financially stronger to increase their market power; however, in normal times, all banks participate in a horserace.

The consequences of liquidity imbalance: When net lenders leave interbank markets

The level as well as fluency of capital supply on the interbank market is crucial for banking sector liquidity. However, the dominance of individual players on this market leads to liquidity imbalance and, thus, might increase the risk for other banks. We test how different bank exposures in interbank market translates into other bank liquidity risk and credit supply. To this end, we use 207 bank exits from interbank markets between 1997 and 2013 in 52 emerging and developed countries. We find that the withdrawal of a bank with high net exposure on interbank market leads to a statistically significant drop in the liquidity position of the remaining banks. The effect is also economically significant. Finally, we find that a liquidity imbalance adversely affects the bank credit supply. Our findings suggest that the consequences are more severe for banks heavily relying on the local interbank market, for emerging countries and surprisingly in pre-crisis periods.

Bank loyalty, social networks and crisis

In this paper, we consider how the intensity and channels of the relation between social networks and bank loyalty vary according to the state of the economy. We analyze bank exit over the period 2005–2012 for over 300,000 retail clients of a commercial bank that experienced a bank run in 2008 due to a shock in solvency risk. The unique and rich data we constructed in close collaboration with the bank enables us to distinguish different sorts of family networks from neighborhood networks, while controlling for a wide range of client-level and branch-level characteristics and events. Using a proportional hazards model, we show the importance of family networks. In times of financial distress, family networks become even more important and retail clients take weaker, less direct social relationships into account.

M&A in the Indian Banking Sector: An Analysis of Public and Private Transactions

The growth memes in the Indian economic environment provide an advantage to banks and uniquely accrete value to M&A based transactions proving benefits to bidders unlike in Bank M&A regimes reflected in the Event study literature. This work provides deeper insight into the linkages between Bank M&A and M&A literature with Indian Banking M&A and reviews the evidence. In a study of 24 M&A transactions in Indian Banks during the period 2006-2016, we find convincing evidence for both bidder and target gains that are used to specify points of comparison in Global US and European markets. These gains reflect on the continuing advantage of M&A as a large impact strategy, foreign bank exits from India and global policy imperatives advantaging the banking superstructure. Our study shows foreign portfolio exits are significant opportunity losses for Global players and may not be justified by myopic short term responses to a new policy superstructure. The 2014 Kotak ING merger produces a 13.47% CAR in the 0 to 15 event window and 23.8% in the longer-range window till trading stops in the ING Groups’ India subsidiary. Large Bank mergers produce large Bidder gains that allow a renewed confidence in the merger and acquisitions strategy and deflect from unfortunate advances in theoretical analysis based in earlier analyses reflecting on event studies as a tool and on the effectiveness of M&A strategies for these acquirers based on negative gains in the Event study literature. (Does not include OLS Decomposition of Abnormal Returns)

The Consequences of Liquidity Imbalance: When Net Lenders Leave Interbank Markets

We examine the effect of liquidity imbalances on liquidity risk using 224 bank exits from interbank markets between 1994 and 2014 in 54 emerging and developed countries. We find that bank exits from interbank markets decrease bank liquidity, especially when net placers exit an interbank market. Moreover, we also show that banks try to improve their position by selling the most liquid assets, which due to the limited capital on the market leads to a liquidity crunch. Finally, we find that a liquidity imbalance adversely affects the bank credit supply. Our findings suggest that the consequences are more severe for emerging countries than for developed countries and in pre-crisis periods.

Banking Across Borders With Heterogeneous Banks

This paper develops a model of banking across borders where banks differ in their efficiencies that can replicate key patterns in the data. More efficient banks are more likely to have assets, liabilities and affiliates abroad and have larger foreign operations. Banks are more likely to be active in countries that have less efficient domestic banks, are bigger and more open to foreign entry. In the model, banking sector integration leads to bank exit and entry and convergence in the return on loans and funding costs across countries. Bank heterogeneity matters for the associated welfare gains. Results suggest that differences in bank efficiencies across countries drive banking across borders, that fixed costs are crucial for foreign bank operations and that globalization makes larger banks even larger.

Banking across Borders with Heterogeneous Banks

This paper develops a model of banking across borders where banks differ in their efficiencies that can replicate key patterns in the data. More efficient banks are more likely to have assets, liabilities and affiliates abroad and have larger foreign operations. Banks are more likely to be active in countries that have less efficient domestic banks, are bigger and more open to foreign entry. In the model, banking sector integration leads to bank exit and entry and convergence in the return on loans and funding costs across countries. Bank heterogeneity matters for the associated welfare gains. Results suggest that differences in bank efficiencies across countries drive banking across borders, that fixed costs are crucial for foreign bank operations and that globalization makes larger banks even larger.