Stories of banks and bankers

by Frederick Martin

The Optimal Capital Structure of Banks: Balancing Deposit Insurance, Capital Requirements and Tax-Advantaged Debt

The capital structure and regulation of financial intermediaries is an important topic for practitioners, regulators and academic researchers. In general, theory predicts that firms choose their capital structures by balancing the benefits of debt (e.g., tax and agency benefits) against its costs (e.g., bankruptcy costs). However, when traditional corporate finance models have been applied to insured financial institutions, the results have generally predicted corner solutions (all equity or all debt) to the capital structure problem. This paper studies the impact and interaction of deposit insurance, capital requirements and tax benefits on a bankÇs choice of optimal capital structure. Using a contingent claims model to value the firm and its associated claims, we find that there exists an interior optimal capital ratio in the presence of deposit insurance, taxes and a minimum fixed capital standard. Banks voluntarily choose to maintain capital in excess of the minimum required in order to balance the risks of insolvency (especially the loss of future tax benefits) against the benefits of additional debt. Because we derive a closed- form solution, our model provides useful insights on several current policy debates including revisions to the regulatory framework for GSEs, tax policy in general and the tax exemption for credit unions.

Productivity Growth and Efficiency in Indian Banking: A Comparison of Public, Private, and Foreign Banks

India's public sector banks (PSBs) are compared unfavorably with their private sector counterparts, domestic and foreign. This comparison rests, for the most part, on financial measures of performance, and such a comparison provides much of the rationale for privatization of PSBs.In this paper, we attempt a comparison between PSBs and their private sector counterparts based on measures of productivity that use quantities of outputs and inputs. We employ two measures of productivity: Tornqvist and Malmquist total factor productivity growth. We attempt these comparisons over the period 1992-2000, comparing PSBs with both domestic private and foreign banks. Out of a total of four comparisons we have made, there are no differences in three cases, PSBs do better in two, and foreign banks in one. To put it differently, PSBs are seen to be at a disadvantage in only one out of six comparisons. It is difficult, therefore, to sustain the proposition that efficiency and productivity have been lower in public sector banks relative to their peers in the private sector.

The Performance of Domestic and Foreign Banks: The Case of Korea and the Asian Financial Crisis

This paper considers the performance of banks, domestic and foreign, in Korea prior to, during, and immediately after the Asian financial crisis, examining how the profitability of those banks differed and identifying factors that explain why those differences existed. The performance of Korean banks deteriorated dramatically in 1998 with most banks recovering somewhat in 1999. Foreign banks did not experience the same negative effect on their returns on assets and equity as a rule. Several standard findings emerge. For example, equity to assets correlates positively with domestic, but not foreign, bank performance, as measured by the returns on assets and equity, even when the government recapitalized institutions that were performing quite badly. Also, foreign-currency deposits significantly and negatively correlate with domestic Korean bank performance, although only in the post-crisis period for regional banks. In sum, the domestic Korean banks suffered more severely from the Asian financial crisis than foreign banks.

The Effect of the Asian Financial Crisis on the Performance of Korean Nationwide Banks

The Asian financial crisis spread its effect quickly across a number of countries. Korea faced serious problems in her financial and corporate sectors. This paper considers the performance of Korean nationwide banks before, during, and immediately after the Asian financial crisis. The performance of Korean nationwide banks took a big hit in 1998. Most banks recovered somewhat in 1999 with the notable exception of the further deterioration of Seoul. Several factors possess strong correlations with bank performance. Among other standard findings, equity to assets correlates positively with bank performance, even when the government recapitalized a number of institutions that performed poorly. The Asian crisis did not affect the normal rules of good bank management. The government, however, directly intervened in the banking sector on a large scale to limit the scope of the crisis in the Korean economy.

Labor-Use Efficiency in Indian Banking: A Branch Level Analysis

This paper uses Data Envelopment Analysis to measure labor use efficiency of individual branches of a large public sector bank with several thousand branches across India. We find considerable variation in the average levels of efficiency across the four metropolitan regions considered in this study. In this context, we introduce the concept of area or spatial efficiency for each region relative to the nation as a whole. Our findings suggest that the policies, procedures, and incentives handed down from the corporate level cannot fully neutralize the influence of the local work culture in the different regions. Most of the potential reduction in labor cost appears to be coming from possible downsizing the clerical and subordinate staff. Our analysis identifies branches that operate at very low levels of efficiency and may be gainfully merged with other branches wherever possible.

Banks' Langschwanzkakadu

Von Dr. Chr. Lindemann

Die Banks-Rose

Prof. Dr. Wilh. Seelig

Mesozooplankton size data from the fjord branch Kapisigdlit located in the Godthaabsfjord system, West Greenland, 2010

Sampling was conducted from March 24 to August 5 2010, in the fjord branch Kapisigdlit located in the inner part of the Godthåbsfjord system, West Greenland. The vessel "Lille Masik" was used during all cruises except on June 17-18 where sampling was done from RV Dana (National Institute for Aquatic Resources, Denmark). A total of 15 cruises (of 1-2 days duration) 7-10 days apart was carried out along a transect composed of 6 stations (St.), spanning the length of the 26 km long fjord branch. St. 1 was located at the mouth of the fjord branch and St. 6 was located at the end of the fjord branch, in the middle of a shallower inner creek . St. 1-4 was covering deeper parts of the fjord, and St. 5 was located on the slope leading up to the shallow inner creek. Mesozooplankton was sampled by vertical net tows using a Hydrobios Multinet (type Mini) equipped with a flow meter and 50 µm mesh nets or a WP-2 net 50 µm mesh size equipped with a non-filtering cod-end. Sampling was conducted at various times of day at the different stations. The nets were hauled with a speed of 0.2-0.3 m s**-1 from 100, 75 and 50 m depth to the surface at St. 2 + 4, 5 and 6, respectively. The content was immediately preserved in buffered formalin (4% final concentration). All samples were analyzed in the Plankton sorting and identification center in Szczecin (www.nmfri.gdynia.pl). Samples containing high numbers of zooplankton were split into subsamples. All copepods and other zooplankton were identified down to lowest possible taxonomic level (approx. 400 per sample), length measured and counted. Copepods were sorted into development stages (nauplii stage 1 - copepodite stage 6) using morphological features and sizes, and up to 10 individuals of each stage was length measured.

Mesozooplankton abundance data from the fjord branch Kapisigdlit located in the Godthaabsfjord system, West Greenland, 2010

Sampling was conducted from March 24 to August 5 2010, in the fjord branch Kapisigdlit located in the inner part of the Godthåbsfjord system, West Greenland. The vessel "Lille Masik" was used during all cruises except on June 17-18 where sampling was done from RV Dana (National Institute for Aquatic Resources, Denmark). A total of 15 cruises (of 1-2 days duration) 7-10 days apart was carried out along a transect composed of 6 stations (St.), spanning the length of the 26 km long fjord branch. St. 1 was located at the mouth of the fjord branch and St. 6 was located at the end of the fjord branch, in the middle of a shallower inner creek . St. 1-4 was covering deeper parts of the fjord, and St. 5 was located on the slope leading up to the shallow inner creek. Mesozooplankton was sampled by vertical net tows using a Hydrobios Multinet (type Mini) equipped with a flow meter and 50 µm mesh nets or a WP-2 net 50 µm mesh size equipped with a non-filtering cod-end. Sampling was conducted at various times of day at the different stations. The nets were hauled with a speed of 0.2-0.3 m s**-1 from 100, 75 and 50 m depth to the surface at St. 2 + 4, 5 and 6, respectively. The content was immediately preserved in buffered formalin (4% final concentration). All samples were analyzed in the Plankton sorting and identification center in Szczecin (www.nmfri.gdynia.pl). Samples containing high numbers of zooplankton were split into subsamples. All copepods and other zooplankton were identified down to lowest possible taxonomic level (approx. 400 per sample), length measured and counted. Copepods were sorted into development stages (nauplii stage 1 - copepodite stage 6) using morphological features and sizes, and up to 10 individuals of each stage was length measured.