Loan Rates Research Articles

Macroprudential regulatory policies with a dominant-bank oligopoly and fringe banks

This paper develops a model in which a handful of dominant banks mutually engage in head-to-head rivalry while acting as loan-quantity-setting leaders vis-à-vis numerous fringe banks. Under the most likely calibration of parameters governing behavior of the two groups, we find that increases in capital requirements substantially reduce equilibrium loan volumes and raise the market retail loan rate, while increases in tax rates tend to raise the market loan rate but not in a way that significantly alters aggregate lending. Key parameters influencing outcomes in alternative calibrations are the number of dominant banks and the market loan demand elasticity.

Effects of the Carbon Credit Policy on the Capital-Constrained Manufacturer's Remanufacturing and Emissions Decisions.

Considering the effect of carbon emission factors on financing, a carbon credit policy was introduced to explore the capital-constrained manufacturer's remanufacturing and carbon emission decisions. Meanwhile, this paper also explored the bank's optimal strategy according to the manufacturer's decision feedback. The results showed the following: (1) The restraining effect of the carbon threshold will directly affect whether the carbon credit policy can positively affect manufacturers' remanufacturing and carbon emissions. (2) When the carbon savings level of remanufactured products is higher, the carbon credit policy can better promote remanufacturing activities and effectively control total carbon emissions. (3) The bank's optimal preferential interest rate for loans is inversely correlated with the carbon threshold. Moreover, under a given carbon threshold, a higher preferential interest rate for loans is also conducive to manufacturers carrying out more or a more extensive range of remanufacturing activities while banks maximize total profit. Based on these findings, this paper also provided managerial insights for manufacturers and policy implications for policy-makers.

Inflation dynamics in South Africa: The role of public debt

Orientation: Inflation targeting requires prudent fiscal policy to achieve desired results.Motivation for the study: Since the 2007–2008 financial crisis, fiscal authorities in South Africa have implemented an aggressive fiscal stimulus that has resulted in an acceleration of public debt, accompanied by a sustained government deficit. At the same time, the economy has continued to struggle with achieving significant growth to assist the government with its ever-growing expenditure obligations.Research Purpose: This study set out to investigate the relationship between inflation dynamics and the stance of fiscal policy, with a focus on public debt, in South Africa.Method: This study employs a New Keynesian dynamic stochastic general equilibrium (NKDSGE) model with financial frictions calibrated on South African data.Main Findings: The results of this study showed that when fiscal authorities put a relatively small weight on the control of public debt, inflation significantly increases in response to economic shocks. As a result, the cost channel of monetary policy transmission dominates the demand channel even if the loan rate pass-through is complete.Practical/Managerial Implications: The results of this study highlight the importance of fiscal discipline and its potential adverse effects on monetary authorities’ ability to achieve price stability as set out in their monetary framework.Contribution/Value added: To the best of our knowledge, this is the first study to analyse inflation dynamics and public debt in South Africa using modular experiments in a structural model derived from micro-economic foundations of constrained decision-making.

Did quantitative easing reduce the borrowing costs of firms? The risk‐taking channel

AbstractThis paper examines the effect of the Federal Reserve's quantitative easing (QE) on the cost of bank loans and documents large heterogeneous effects across different firms. In QE1, the average loan spread is 22.7 percent lower compared to the non‐QE period. This effect falls in QE2 and OT and then rises in QE3 and the tapering period. The rates of riskier loans are restrained more than less risky loans during QEs as banks take more risks by offering lower rates to attract risky borrowers. The Fed mortgage‐backed securities purchases have a larger impact in narrowing the borrowing cost difference between riskier and safer loans than the Fed Treasury purchases. Our results are robust to borrower, year‐quarter and bank fixed effects. Overall, our findings support that the risk‐taking channel of QE plays a significant role in the corporate bank loan market.

Loan Remodelling and Financial Performance of Commercial Banks in Kenya

The implementation of loan remodelling for a bank particularly during a pandemic is aimed at providing favourable terms that allow borrowers to repay and enable the banks to avoid high rates of non-performing loans. This study’s general objective was to examine the effect of loan remodelling on the financial performance of commercial banks in Kenya. The theories underpinning the study included Financial Intermediation, Innovation Diffusion, Credit Risk, Modern Portfolio, and Modern Monetary Theory. An explanatory research design was espoused in the study. The 36 commercial banks operating in Kenya constituted the target population. The study used a census approach by collecting data from all the banks operating in Kenya. The study used secondary data from the 2016 to 2021 period drawn from the financial statements of the banks. Data analysis included descriptive and inferential statistics. A panel linear regression model was developed and analysed using STATA. The study findings from the regression analysis showed that digital lending had a positive and significant effect on financial performance (β = 0.0822, p-value = 0.003), loan loss provision had a negative but non-significant effect on banks' profitability (β = -0.0255, p-value = 0.301) while business model adjustment had a positive but a non-significant effect on the financial performance of the banks in Kenya (β = 0.0915, p-value = 0.415) during the period under study. Based on these findings, commercial banks should employ technology and innovate more digital products, especially those that facilitate digital lending to enhance their profitability. Banks should continue provisioning for loan loss in compliance with International Financial Reporting Standards and caution against non-performing loans for the sustainability of their business operation. Banks should continue diversifying their investment portfolio and adjust their business model to a point that it would significantly impact their profitability, by creating more non-interest income opportunities. Finally, the Central Bank of Kenya should continue providing a regulatory framework geared towards facilitating lending and improving the profitability of banks. Keywords: Loan Remodeling, Digital Lending, Loan Loss Provision, Business Model Adjustment, Financial Performance        

Bank credit and corporate innovation investment: The role of government risk sharing

AbstractThis paper builds a difference‐in‐difference model (DID) to study the impact of government risk sharing policies on corporate innovation investment. High‐tech firms are used as the experimental group to test the effect of policy shocks. It is shown that government risk sharing may ease financing constrains, which will increase corporate innovation investment. The results suggest that the effect of government risk‐sharing policies on bank credit is short‐run, while the effect on corporate innovation investment is more sustainable. In addition, the government risk‐sharing ratio is inversely proportional to the loan rates and the success rate of innovation.

Study on the Impact of Digital Finance on Non-Performing Loan Rate of Chinese Commercial Banks

Affected by COVID-19, global economic growth is in recession, geopolitical conflicts are continuing, commercial banks' credit risk is climbing and profitability is facing severe changes. There are new opportunities in the crisis. Recently, with the development of the digital economy, digital finance is increasingly used in commercial banks, which can better meet regulatory needs and information needs, and effectively improve the bank's ability to control risks. Based on the development of digital technology and commercial banks, we collect panel data from 30 provinces and cities from 2011-2020 and use a two-way fixed effects model to explore the impact of digital finance on commercial banks' NPL rate. The results show that modern technology can effectively suppress the credit risk of China’s commercial banks. In addition, due to the existence of financial exclusion and development differences between the east and west, there is a heterogeneity of fintech in different dimensions and power points in different regions. Based on the research results, we put forward relevant suggestions on how to create a good financial environment, increase the supply of financial technology and grow the advantages of it, which are of great practical significance to reduce systemic financial risks and build up a good financial ecological environment.

An empirical assessment of the constraints affecting farmers’ livelihood security in the North-Eastern region of Nigeria

Any government interested in the welfare state of its citizen, the subject of improving livelihood security for the people of the North-Eastern part of Nigeria is an issue of great importance. Food and livelihood security is an important need, as it is indispensable for the maintenance of human life. This research focuses on the empirical assessment of farmers’ livelihood security in the north-eastern region of Nigeria. The objectives of the study were to identify the socio-economic characteristics of farmers and identify the constraints militating against livelihood security among farmers in the study area. Data were collected from 435 randomly selected farmers in three states of the North-Eastern region with the aid of structured questionnaires. Data analyses were carried out using descriptive statistics involving the use of frequency distribution, percentages, mean and standard deviation, and inferential statistics involving the use Garret ranking technique. The results revealed that male farmers constituted the majority (73.17%) of the respondents, married with a mean age of 41 years. Most of them (78%) had formal education. The respondents were mostly small-scale farmers, and they cultivated an average of 3.5 hectares of farmland using personal savings. The results of the garret ranking technique revealed that a wide range of constraints militates against the livelihood security of the farmers in the study area. These include variability of rainfall, shortage of labour, and inadequate farm credit facilities as the first three production constraints. Lack of good roads, poor storage facilities, and lack of mobility were rated the 1st, 2nd, and 3rd as the infrastructural constraints. Inadequate access to credit and high-interest rate charge on the loan and high rate of tax were rated the highest among the financial constraints. The study recommended thatfarmers should be aided with sound irrigation facilities and the formation of cooperative organization that will ease the accessibility of infrastructural, financial and production facilities.

АДАПТАЦІЙНА МОДЕЛЬ УПРАВЛІННЯ КРЕДИТНИМ РИЗИКОМ ВІДНОСНО ЦІНИ КРЕДИТНИХ РЕСУРСІВ

The purpose of the article is to substantiate the need to use the adaptation function of the relationship between the volume and interest on loans as the basis for credit risk management and building an appropriate model for assessing these processes. The theoretical basis of the study is the scientific works of domestic scientists on the problem under study, the method of analysis and synthesis in the study and generalization of domestic experience in generalizing the price of credit resources as the basis of credit risk management; parametric measurement methods, abstract – logical – in substantiating theoretical generalizations and conclusions. The article conducts studies of credit risk management in relation to the price of credit resources, namely, the application of the function of the relationship between the volume and interest on loans granted, which determines the functional relationship between the analyzed values, which may look different for a certain type of loan granted, may reflect the variation of the share of problem loans weighted by the volume of loans granted, or the rate of their growth during the study period, etc. Such credit risk management in relation to the price of credit resources can be considered as adaptive. The generalization of the price of credit resources as the basis for credit risk management and the construction of an appropriate model for assessing these processes is substantiated, which will allow to objectively analyze different situations in terms of the relationship between the analyzed parameters: the volume of loans granted, the loan rate and the value of credit risk, as well as the absolute volume of problem loans. The adequacy of the built model is possible when using and analyzing the necessary statistical data and the ability to objectively analyze different situations in terms of the relationship of the analyzed parameters. General proposals for credit risk management are considered, the essence of which is to disclose the principles of generalization of the price of credit resources as the basis for credit risk management and the construction of an appropriate model for assessing these processes to improve the efficiency of the bank's credit activities.

Prediction intervals of loan rate for mortgage data based on bootstrapping technique: A comparative study

<p style='text-indent:20px;'>The prediction interval is an important guide for financial organizations to make decisions for pricing loan rates. In this paper, we considered four models with bootstrap technique to calculate prediction intervals. Two datasets are used for the study and <inline-formula><tex-math id="M1">\begin{document}$ 5 $\end{document}</tex-math></inline-formula>-fold cross validation is used to estimate performance. The classical regression and Huber regression models have similar performance, both of them have narrow intervals. Although the RANSAC model has a slightly higher coverage rate, it has the widest interval. When the coverage rates are similar, the model with a narrower interval is recommended. Therefore, the classical and Huber regression models with bootstrap method are recommended to calculate the prediction interval.</p>

A study of bank credit strategy based on logistic model

This thesis is based on logistic model and multivariate linear programming, using MATLAB to study the lending strategies of banks to MSMEs. We first analyzed the factors that can affect the credit risk of enterprises, and studied the influence of four factors on the credit risk of enterprises, namely, profit, development potential, supply and demand, and credit rating, and then used the data to measure the above four factors, and predicted the default risk index of each enterprise through logistic model, and to make the results more intuitive, we introduced the credit score A=100 × (1 - default risk index), thus providing a quantitative analysis of the credit risk of the enterprise. Then, we determined the interest rates of bank loans to enterprises with different credit ratings, and finally, we determined the credit strategy by considering the credit score. At the same time, we considered the case where there is no credit rating of enterprises, and to develop credit strategies for different enterprises, we first need to derive the credit score of each enterprise using the logistic model above, and then adjust the credit strategy by dividing the rating of each enterprise according to the ratio of each credit rating and the credit score above. The loans given to the enterprises of grades A, B, and C are taken as unknowns, and the total number of 100 million and each enterprise can only lend 100~1 million yuan are taken as restrictions, and the maximum value of the profit is solved by using multivariate linear programming to derive the loan amount for each grade of enterprises. Finally, the credit strategy is determined by ranking the enterprises in terms of their development potential and credit score, and lending the loans to each enterprise in turn.

Credit strategy of micro, small, and medium enterprises with known reputation risk: Evidence from a comprehensive evaluation model

With poor financial information transparency, and relatively weak profitability and asset strength stability, Small, medium and micro enterprises started late in China. This makes commercial banks need to bear more risks when providing loans to small, medium and micro enterprises than large enterprises. Big. When commercial banks do not have credit records of certain small, medium and micro enterprises, this will increase the risk that banks need to bear when lending to these small, medium and micro enterprises without credit records, and will also increase the difficulty of credit loan for small, medium and micro enterprises in commercial banks.First of all, we should comprehensively analyze the credit risk of enterprises, establish the TOPSIS comprehensive evaluation model, and then establish the constraint conditions according to the data given by the topic, calculate the interest rate of bank loans to each type of enterprises, so as to determine the bank’s credit strategy. The paper seeks the bank’s credit strategy for these enterprises when the annual total amount of credit is fixed. We use AHP (Analytic Hierarchy Process) to normalize the credit rating, and then get the relevant data ranking of enterprises with credit records through TOPSIS comprehensive evaluation model. Through cluster analysis, we divide them into nine categories, and make the optimal credit strategy from the perspective of interest rate and credit line.

ПРОЦЕНТНА ПОЛІТИКА БАНКІВ У СИСТЕМІ РЕГУЛЮВАННЯ РОЗВИТКУ РИНКУ ФІНАНСОВИХ ПОСЛУГ

The article defines the goal of the NBU's interest policy, which consists in achieving a balance between the levels of inflation, the official discount rate, economic growth and the fulfillment of indicators of monetary security of the country. The article analyzes the dynamics of changes in the official discount rate, overnight loan and deposit rates of the NBU. Their unidirectional movement with the possibility of a slight lag in time lags is shown. A comparison of the average annual values of the NBU discount rate with the level of inflation and the exchange rate of the national monetary unit was made. A closer correlation-regression relationship between the discount rate and exchange rate compared to inflation has been established. Disadvantages of the interest policy related to the negative level of the discount rate relative to inflation are shown. The negative consequences of this situation are related to the formation of false monetary impulses in the market of financial services, distorted expectations regarding the value of real interest rates on loans and securities. Periodization of the interest rate policy of the NBU was carried out, with the allocation of nine stages according to the following characteristics: the trend of changes in the NBU discount rate (reduction, increase), the level of inflation (low, average, high), the change in the hryvnia exchange rate (absent, average, significant), the deviation of inflation from discount rate (positive, negative). The characterization of expansive, restrictive, and crisis stages of the monetary policy of the NBU has been performed. In order to strengthen the effectiveness of the interest rate channel of the transmission mechanism, it is proposed within the framework of inflation targeting: to ensure a closer connection between the level of the discount rate and the change in current and projected inflation in terms of the vector of changes and the positive level in order to form among the subjects of the financial services market the correct guidelines for the long-term trend of change cost of loans, deposits, capital. The following will contribute to the reduction of real interest credit rates: the formation of an investment climate in the state, the development of a competitive environment in the market of financial services, the improvement of legislation on the protection of the rights of their consumers, the overcoming of corruption and the improvement of judicial practice in the field of financial and credit relations.

FORECASTING OF ECONOMIC RISKS IN THE CONTEXT OF STRATEGIC DEVELOPMENT PROGRAMS

Despite the non-coordinated trends of technological modernization of various sectors of the economy, the problem of structural reforms of the economy has not yet been resolved. The continued instability of the global economic system and the uncertainty about its development prospects, combined with the decrease in resources available to the state, and the decrease in profitability in the production sectors, make it more difficult to predict the future. The high interest rates of loans given to non-financial organizations also make it difficult to solve the priority problems of the development of the industrial branches of the economy. There is a slowdown in the growth rate of loans to non-financial organizations, as well as a decrease in investments in fixed assets. The programs implemented in the high-tech industry and services sector, although they contribute to the rapid development of the relevant sectors of the economy, are still not able to contribute to the rapid growth of the GDP due to the still underdeveloped nature of the mentioned sectors and insufficiently high competitiveness of their products.

Research on financing strategies of retailers with capital constraints under the effect of showrooms

A supply chain made up of a financially constrained retailer and a well-financed manufacturer is constructed considering the showroom effect. The financing strategy choice of the retailer and the operational decisions of the supply chain members are investigated, in which the retailer can solve the capital constraint problem through a single financing strategy (ML and BL) and a combined financing strategy (MBL and BTL). Meanwhile, the impact of the showroom effect on the optimal decision and profit of supply chain members under different financing strategies and the optimal financing strategy decision is analyzed by numerical examples. The study shows that: (1) the increasing showroom effect has not inhibited retailers' enthusiasm to offer showroom services; on the contrary, it has prompted them to improve the level of showroom services. (2) The price of the products grows with the increases in the showroom effect, but the sales price of the online channel is more greatly affected. In addition, the showroom effect has a greater impact on the sales prices of online and offline channels and wholesale prices under the BL strategy than in other financing strategies. (3) When the showroom effect is small, the optimal strategy for retailers is to choose the ML strategy or the MBL strategy, while the BTL strategy is superior to the MBL strategy only when the equity financing ratio is very small. However, where the showroom effect exceeds a certain threshold, the BL strategy is the optimal funding strategy for retailers. (4) When the bank loan rate is too high, the ML and MBL strategies are better if the retailer's initial capital level is not too low.

Asymptotic analysis for stock loans near maturity

In this paper, we derive the asymptotic expressions of the scaled value function and the optimal redemption boundary of stock loan with dividend-paying near maturity. Using the equation satisfied by the derivative of the value function at the exercise boundary, we set up the asymptotic expression for the boundary. When the risk-free rate r is smaller than the loan rate ?, i.e., r < ?, the boundary tends to Ke?T0 in parabolic-logarithm form, this case is the main result. For the case r ? ?, the corresponding problem returns back to a usual American call option with interest-free rate r ? ? and the existing results can be utilized to make proper adjustments for the stock loan. The matched expansion for the value function is performed with a small parameter. Numerical examples are provided to demonstrate the effectiveness of the proposed method.

What are the Determinants Affecting the Financing Risk in Indonesian Sharia Rural Banks?

Rapid and dynamic changes in the financial and economic systems are posing various risks and instabilities to Islamic banking institutions. Therefore, this study aims to investigate the impact of macroeconomic factors and bank abilities on financing risk in Indonesia. In this analysis, the 2005-2019 sharia banking statistics at 92 rural banks were emphasized in the country. A panel data regression was also employed with the fixed effect method during the experimental procedure. The results showed a negative and significant relationship between economic growth, FDR (financing to deposit ratio), and CAR (capital adequacy ratio) toward financing risk. Moreover, a positive and significant relationship was found between the benchmark loan rate on financing risk, although inflation had no significant effect. Economic growth was also a key factor influencing financing risk in the sharia rural banks sector. Based on these results, banking regulators were found to operate according to sharia principles, to selectively optimize and carefully monitor financial distribution and activities with high financing risk.

MACROECONOMIC FACTORS AS TOOLS FOR STIMULATION OR DESTIMULATION OF AGRIBUSINESS LOANS IN CRISIS SITUATION

The study attempts to identify changes in the loan market for agribusiness enterprises, including farms in Poland, during the COVID-19 pandemic. The research used data from the Central Statistical Office and the Credit Information Bureau for 2017-2020. In the course of research, an econometric model was constructed explaining the volume of loans to the above-mentioned entities by commercial and cooperative banks in Poland during the pandemic. The program Statistica 13.3 was used. The analysis covers all loans granted in Poland on a monthly basis in 2017-2021. During this period, banks granted a total of 307 012 loans to individual farmers, and their volume amounted to almost PLN 30 billion. In the course of the research, it was found that in the years 2017-2021, the volume of loans for agribusiness entities, including farms, was decisively influenced by such factors as refinancing loan rate (stimulant), rediscount rate (destimulant), and general economic climate in manufacturing index (stimulant). The set of explanatory variables in the models may be a premise for the introduction of specific improvements in the credit policy of banks servicing agribusiness in the form of tightening or liberalizing credit requirements. The research results can also be used by banks to effectively plan future sales targets and interest income from these loans.

The interrelationship between unemployment and indicators of socio-economic development

Unemployment is a complex socio-economic phenomenon in which a part of the economically active population does not have a job or income. Unemployment has negative socio-economic consequences, among which the main ones are: the growth of marginal population groups, the criminalization of society, the psychological depression of the unemployed is expressed by suicide, alcoholism, drug addiction, and as a result, a decrease in natural population growth and life expectancy. Such a complex and multifaceted phenomenon as unemployment depends not only on the economic indicators of the countries' development, but also on the indicators of the social development of societies. Therefore, the purpose of the work will be to identify the interrelationships of unemployment and socio-economic indicators of the countries' development. For the analysis, data was obtained from the open databases of 2 organizations "The World Bank" and "The Heritage Foundation". Based on this, 162 countries and 84 indicators of socio-economic development were selected. The data was prepared for modeling, the optimal number of clusters was determined. As a result of simulation, 9 different clusters were obtained. During the analysis of clustering results, it was found that countries with a higher index of economic freedom usually have a lower unemployment rate than countries with a lower level of economic freedom. The indicator of economic freedom is only a reflection of state policy at various levels: citizens' rights, judicial efficiency, tax policy, freedom of labor, business and investment, etc. Therefore, in order to reduce the unemployment rate in the country, it is necessary to introduce laws to prevent the improvement of judicial efficiency. It was also found that countries with a higher ratio of GDP per capita have a lower level of unemployment. A lower level of unemployment in countries is also observed with a lower percentage of the self-employed population. The self-employed population has less and less room for work due to new technologies and a very high entry threshold for many activities, such as production, distribution, etc. Positive migration is also interconnected with a decrease in unemployment. A lower unemployment rate is followed by lower loan rates. Lower interest rates on bank loans stimulate business to expand and develop. Along with the decrease in the percentage of the employed population in agriculture, the decrease in the percentage of unemployment in the country is followed. Rather, it is related to a more general and complex process of development of the industrial system of society and scientific and technical development. The presented results can be the basis for further research. For example, developing a factor analysis or building a regression or multifactor model for the countries of the same cluster.

DETERMINANTS OF THE VOLATILITY OF THE RUPIAH EXCHANGE RATE AGAINST THE DOLLARSAMERICA IN THE MIDDLE OF THE COVID-19

<em>Liberalization, regionalization, and globalization have made the inflow of goods, services, and capital easier to break through the regional boundaries of a country, and the barriers have continued to decrease for global trade or business. cross border. The consequences of liberalization, regionalization, and globalization demand the existence of a country's economic transparency which can cause concerns for every country, including Indonesia, especially regarding the stability of its currency exchange rate. During the Covid-19 Pandemic, at the end of March 2020, the Rupiah exchange rate against the US Dollar weakened by 18% compared to its position in December 2019 (before the Covid-19 Pandemic). The exchange rate of the Rupiah against the US Dollar is continuously fluctuating and tends to weaken. The volatility of the Rupiah exchange rate against the US Dollar and its large volatility over a long period can disrupt the economy as a whole. The purpose of this research is to analyze the factors that influence the volatility of the Rupiah exchange rate to the US Dollar. This research uses inferior information on duration (time series) from 2009 to 2020 (information per year). The results of the research can be concluded that the JCI, Trade Balance, Foreign Loans, Inflation, and Interest Rates have an important influence on the volatility of the Rupiah exchange rate to the US Dollar either simultaneously or partially</em>