Role Of Bank Capital Research Articles

THE ROLE OF CAPITAL IN STRENGTHENING THE RESOURCE BASE OF PRIVATE BANKS

In the article, the resource base of private banks, their size and dynamics, the role and structure of capital in the composition of the resource base are analyzed and given corresponding conclusions. In addition, the article examines the researches of foreign and domestic scientists in showing the role of capital in strengthening the resource base of private banks, and the advantages of strengthening the resource base are researched. In particular, as a result of studying the scientific opinions of researchers, a number of shortcomings and problems in strengthening the resource base were identified. Also, the role of bank capital in strengthening their resource base was studied. Conclusions and practical recommendations were formed based on the conducted research.

The Role of Bank Capital in the Propagation of Shocks in Iran: A Dynamic Stochastic General Equilibrium Approach

The Role of Bank Capital in the Propagation of Shocks in Iran: A Dynamic Stochastic General Equilibrium Approach

Bank interconnectedness and financial stability: The role of bank capital

This paper builds a network model to study the relation between financial stability and interconnectedness among banks. In the model, banks adopt a Value-at-Risk rule to determine capital ratios. It is shown that interconnectedness may hurt financial stability by amplifying the banks’ mistakes of underestimating risk, and that interconnectedness increases systemic risk. The results in the paper suggest that financial integration may hurt financial stability, and that bank interconnectedness is more harmful when the economy turns abruptly from boom to recession. In addition, banks should be given incentives to reduce interconnectedness if systemic risk is a serious concern for regulators.

Flooded Through the Back Door: The Role of Bank Capital in Local Shock Spillovers

AbstractThis article demonstrates that low bank capital carries a negative externality because it amplifies local shock spillovers. We exploit a natural disaster that is transmitted to firms in nondisaster areas via their banks. Firms connected to a strongly disaster-exposed bank with lowest-quartile capitalization significantly reduce their total borrowing by 6.6% and tangible assets by 6.9% compared to similar firms connected to a well-capitalized bank. These findings translate to negative regional effects on GDP and unemployment. Additionally, following a disaster event, banks reduce their exposure to currently unaffected but generally disaster-prone areas.

The role of bank capital on the bank lending channel of monetary policy transmission: An application of marginal analysis approach

The role of bank capital on the bank lending channel of monetary policy transmission: An application of marginal analysis approach

Flooded through the Back Door: The Role of Bank Capital in Local Shock Spillovers

This paper demonstrates that low bank capital carries a negative externality because it amplifies local shock spillovers. We exploit a natural disaster that is transmitted to firms in non-disaster areas via their banks. Firms connected to a strongly disaster-exposed bank with lowest-quartile capitalization significantly reduce their total borrowing by 6.6% and tangible assets by 6.9% compared to similar firms connected to a well-capitalized bank. These findings translate to negative regional effects on GDP and unemployment. Additionally, following a disaster event, banks reduce their exposure to currently unaffected but generally disaster-prone areas.

The transmission mechanism of credit support policies in the euro area

We use an original monthly dataset of 131 banks to examine the effectiveness and transmission mechanism of the Eurosystem’s credit support policies in the wake of the banking and sovereign debt crisis. First, we show that these policies were indeed succesful in stimulating the credit flow of banks to the private sector. Second, we find support for the “bank lending view” of monetary transmission. Specifically, the policies had a greater impact on loan supply of banks that were more constrained to obtain unsecured external funding, i.e. small banks (size effect), banks with less liquid balance sheets (liquidity effect), banks that depended more on wholesale funding (retail effect) and low-capitalized banks (capital effect). The role of bank capital was, however, ambiguous. Besides the above favorable direct effect on loan supply, lower levels of bank capitalization at the same time mitigated the size, retail and liquidity effects of the policies. The drag on the other channels was even dominant, i.e. better capitalized banks responded on average more to the credit support policies of the Eurosystem as a result of more favourable size, retail and liquidity effects.

Impact of Bank Capital on Non-Performing Loans: New Evidence of Concave Capital from Dynamic Panel-Data and Time Series Analysis in Malaysia

Amid the steep expansion in Malaysia household debt, we investigate the role of bank capital in disciplining non-performing loans (NPLs) after controlling for the macroeconomic environment. Utilizing generalized method of moments (GMM) on a dynamic panel-data of 19 commercial banks and stress testing of NPLs using vector autoregression (VAR) on aggregated-monthly time series of the banking system, we provide new evidence that the capital (in the past and in the future) is a concave function of NPLs implying that increasing the capital will initially increase the NPLs until NPLs reach a maximum threshold (under the moral hazard effect), after which more capital buildups will succeed in decreasing NPLs (under the disciplinary or regulatory effect). We also find that higher levels in GDP growth and lending interest rate and are associated with more NPLs, while higher inflation is associated with less NPLs. Monetary expansion, i.e. higher money supply growth raises NPLs in banks, while competition between banks and higher liquidity of the stock market are NPLs reducing.

The Transmission Mechanism of Credit Support Policies in the Euro Area

We use an original monthly dataset of 131 individual euro area banks to examine the effectiveness and transmission mechanism of the Eurosystem?s credit support policies since the start of the crisis. First, we show that these policies have indeed been succesful in stimulating the credit ?ow of banks to the private sector. Second, we ?nd support for the lending view of monetary transmission. Speci?cally, the policies have had a greater impact on loan supply of banks that are more constrained to obtain unsecured external funding, i.e. small banks (size effect), banks with less liquid balance sheets (liquidity effect), banks that depend more on wholesale funding (retail effect) and low-capitalized banks (capital effect). The role of bank capital is, however, ambiguous. Besides the above favorable direct e¤ect on loan supply, lower levels of bank capitalization at the same time mitigate the size, retail and liquidity effects of the policies. The drag on the other channels has even been dominant during tthe sample period, i.e. better capitalized banks have on average responded more to the credit support policies of the Eurosystem as a result of more favourable size, retail and liquidity effects.

The Role of Bank Capital in Bank Holding Companies’ Decisions

The Role of Bank Capital in Bank Holding Companies’ Decisions

A Note on the Role of Bank Capital

This note explores how a bank’s balance sheet responds to a capital shock in a simple model of the banking firm where both loan demand and deposits are sensitive to a bank’s capital position relative to its competitors. An unconstrained bank shrinks its deposit base in the wake of a capital loss if loan demand is very sensitive to the bank’s relative capital position. The deposits of an unconstrained bank expand only if both deposit and loan demands are fairly immune to a bank’s relative capital position. In a simple model with reserves we show that in the wake of a capital loss the adjustment of loans and reserves under a binding constraint depends on the parameters of the model while the adjustment of total assets and liabilities does not. Loans decrease by the size of the capital loss plus the increase in reserves. If the constraint is not binding then loans generally decrease by more than the increase in reserves. Keywords: deposits, loans, reserves, capital-asset ratio, balance sheet JEL Code: E51, G2

Quality of Bank Capital and Credit Growth in the Global Financial Crisis

Using a worldwide bank sample from 2000 to 2010, this article analyzes the determinants of bank lending behavior during the global financial crisis highlighting the role of bank capital. It reveals that the high quality of the bank funding strategy (tier 1 bank capital and retail deposits) and prevalent government backing were crucial to continuous bank lending during the crisis period. This effect was especially pronounced in non-OECD and BRIC countries. We also point out that, although higher use of tier 2 capital and interbank deposits could be important for increased lending during a normal period, this did not support lending activities during the financial crisis. The article concludes by suggesting that in crisis periods high-quality bank capital is a bank’s competitive strength.

The role of bank capital in the propagation of shocks

The recent financial turmoil has underlined the importance of analyzing the link between banks’ balance sheets and economic activity. We develop a dynamic stochastic general equilibrium model in which bank capital mitigates an agency problem between banks and their creditors. As a result, the capital position of banks affects their ability to attract loanable funds and therefore influences the business cycle through a bank capital channel of transmission. We find that the bank capital channel greatly amplifies and propagates the effects of technology shocks on output, investment and inflation. Moreover, bank capital shocks create sizeable declines in output and investment.

EXISTENCE OF BANK CAPITAL CHANNEL: AN ANALYSIS FOR THE TURKISH BANKING SECTOR

Traditional monetary theory has largely ignored the role of bank capital. The \'bank lending channel\' thesis maintains that monetary policy actions can also alter the supply of bank loans by changing bank reserves. However, financial regulations on bank capital along with other interventions should be considered to fill the gap between traditional monetary theory and bank lending channel.Therefore, the paper analyzes the different responses of the capital-asset ratio and growth rate of loan of banks, classified in three categories, in the commercial banking group to selected macroeconomic variables such as exchange, interest, and public sector domestic debt stock. Based on the some empirical evidences and the results of the impulse response function, for 1992.04-2005.03, the paper has several implications. First, bank capital channel that explains a link between capital and loans structure is that monetary policy actions can affect the supply of bank loans through their impact on bank capital. Second, the strength of this channel depends on the capital adequacy ratio of banks in each category. In particular, lending by banks with different level of capital adequacy ratios will have different reactions to shocks to the variables.