An examination of cross-border strategies in banking

The paper examines the process of bank internationalisation and explores how banks become international organisations and what this involves. It also makes an assessment of the significance of their international operations and determines whether banks are truly global organisations. The empirical data are based on the 60 largest banks in the world and content analysis is used to categorise the information into the eight international strategies of Atamer, Calori, Gustavsson, and Menguzzato-Boulard [Internationalisation strategies. In R. Calori, T. Atamer, & P. Nunes (Eds.), The dynamics of international competition – from practice to theory, strategy series (pp. 162–206). London: Sage (2000)] and Bryan, Fraser, Oppenheim, and Rall [Race for the World strategies to build a great global firm. Boston, MA: Harvard Business School Press (1999)]. The findings suggest that the majority of banks focus on countries or geographic regions in which they have some sort of cultural or economic affinity. Moreover, apart from a relatively small number of very large banks, they are international rather than truly global organisations.

Bank market concentration, relationship banking and small business liquidity

This paper examines two contrasting interpretations of how bank market concentration (Market Power Hypothesis) and banking relationships (Information Hypothesis) affect three sources of small firm liquidity (cash, lines of credit and trade credit). Supportive of a market power interpretation, we find that in a highly concentrated banking market, small firms hold less cash, have less access to lines of credit, and are more likely to be financially constrained, use greater amounts of more expensive trade credit and face higher penalties for trade credit late payment. We also find support for the information hypothesis: relationship banking improves small business liquidity, particularly in a concentrated banking market, thereby mitigating the adverse effects of bank market concentration derived from market power. Our results are robust to different cash, lines of credit and trade credit measures and to alternative empirical approaches.

A restatement of the welafare costs of inflation. The wast of scarce resources in the manufacturing , banking and household sectors

Lucas (2000) estimates that the US welfare costs of inflation are around 1% of GDP. This measurement is consistent with a speci…c distorting channel in terms of the Bailey triangle under the demand for monetary base schedule (outside money): the displacement of resources from the production of consumption goods to the household transaction time à la Baumol. Here, we consider also several new types of distortions in the manufacturing and banking industries. Our new evidences show that both banks and firms demand special occupational employments to avoid the inflation tax. We de…ne the concept of ”the foat labor”: The occupational employments that are aflected by the in‡ation rates. More administrative workers are hired relatively to the bluecollar workers for producing consumption goods. This new phenomenon makes the manufacturing industry more roundabout. To take into account this new stylized fact and others, we redo at same time both ”The model 5: A Banking Sector -2” formulated by Lucas (1993) and ”The Competitive Banking System” proposed by Yoshino (1993). This modelling allows us to characterize better the new types of misallocations. We …nd that the maximum value of the resources wasted by the US economy happened in the years 1980-81, after the 2nd oil shock. In these years, we estimate the excess resources that are allocated for every speci…c distorting channel: i) The US commercial banks spent additional resources of around 2% of GDP; ii) For the purpose of the firm foating time were used between 2.4% and 4.1% of GDP); and iii) For the household transaction time were allocated between 3.1% and 4.5 % of GDP. The Bailey triangle under the demand for the monetary base schedule represented around 1% of GDP, which is consistent with Lucas (2000). We estimate that the US total welfare costs of in‡ation were around 10% of GDP in terms of the consumption goods foregone. The big di¤erence between our results and Lucas (2000) are mainly due to the Harberger triangle in the market for loans (inside money) which makes part of the household transaction time, of the …rm ‡oat labor and of the distortion in the banking industry. This triangle arises due to the widening interest rates spread in the presence of a distorting inflation tax and under a fractionally reserve system. The Harberger triangle can represent 80% of the total welfare costs of inflation while the remaining percentage is split almost equally between the Bailey triangle and the resources used for the bank services. Finally, we formulate several theorems in terms of the optimal nonneutral monetary policy so as to compare with the classical monetary theory.

Ownership, Multiple Blockholders and Performance: A study of the Indonesian Banking Industry

The objective of this study is to provide empirical evidence on how ownership structure and owner’s identity affect performance, in the banking industry by using a panel of Indonesia banks over the period 2000–2009. Firstly, we analysed the impact of the presence of multiple blockholders on bank ownership structure and performance. Building on multiple agency and principal-principal theories, we investigated whether the presence and shares dispersion across blockholders with different identities (i.e. central and regional government; families; foreign banks and financial institutions) affected bank performance, in terms of profitability and efficiency. We found that the number of blockholders has a negative effect on banks’ performance, while blockholders’ concentration has a positive effect. Moreover, we observed that the dispersion of ownership across different types of blockholders has a negative effect on banks’ performance. We interpret such results as evidence that, when heterogeneous blockholders are present, the disadvantage from conflicts of interests between blockholders seems to outweigh the advantage of the increase in additional monitoring by additional blockholder. Secondly, we conducted a joint analysis of the static, selection, and dynamic effects of different types of ownership on banks’ performance. We found that regional banks and foreign banks have a higher profitability and efficiency as compared to domestic private banks. In the short-run, foreign acquisitions and domestic M&As reduce the level of overhead costs, while in the long-run they increase the Net Interest Margin (NIM). Further, we analysed NIM determinants, to asses the impact of ownership on bank business orientation. Our findings lend support to our prediction that the NIM determinants differs accordingly to the type of bank ownership. We also observed that banks that experienced changes in ownership, such as foreign-acquired banks, manifest different interest margin determinants with respect to domestic or foreign banks that did not experience ownership rearrangements.

Banking Regulation in Turkey and Russia: An Economic Analysis

The importance of the banks and financial markets relies on the fact that they promote economic efficiency by allocating savings efficiently to profitable investment opportunities.An efficient banking system is a key determinant for the financial stability.The theory of market failure forms the basis for understanding financial regulation.Following the detrimental economic and financial consequences in theaftermath of the crisis, academics and policymakers started to focus their attention on the construction of an appropriate regulatory and supervisory framework of the banking sector. This dissertation aims at understanding the impact of regulations and supervision on banks’ performance focusing on two emerging market economies, Turkey and Russia. It aims at examining the way in which regulations matter for financial stability and banking performance from a law & economics perspective. A review of the theory of banking regulation, particularly as applied to emerging economies, shows that the efficiency of certain solutions regarding banking regulation is open to debate. Therefore, in the context of emerging countries, whether a certain approach is efficient or not will be presented as an empirical question to which this dissertation will try to find an answer.

An 'Ideal' Decomposition of Industry Dynamics: An Application to the Nationwide and State Level U.S. Banking Industry

This paper considers the aggregate performance of the banking industry, applying a modified and extended dynamic decomposition of bank return on equity. The aggregate performance of any industry depends on the underlying microeconomic dynamics within that industry . adjustments within banks, reallocations between banks, entry of new banks, and exit of existing banks. Bailey, Hulten, and Campbell (1992) and Haltiwanger (1997) develop dynamic decompositions of industry performance. We extend those analyses to derive an ideal decomposition that includes their decomposition as one component. We also extend the decomposition, consider geography, and implement decomposition on a state-by-state basis, linking that geographic decomposition back to the national level. We then consider how deregulation of geographic restrictions on bank activity affects the components of the state-level dynamic decomposition, controlling for competition and the state of the economy within each state and employing fixed- and random-effects estimation for a panel database across the fifty states and the District of Columbia from 1976 to 2000.

An 'Ideal' Deconposition of Industry Dynamics: An Application to the Nationwide and State Level U.S. Banking Industry

This paper considers the aggregate performance of the banking industry, applying a modified and extended dynamic decomposition of bank return on equity. The aggregate performance of any industry depends on the underlying microeconomic dynamics within that industry --- adjustments within banks, reallocations between banks, entry of new banks, and exit of existing banks. Bailey, Hulten, and Campbell (1992) and Haltiwanger (1997) develop dynamic decompositions of industry performance. We extend those analyses to derive an ideal dynamic decomposition that includes their dynamic decomposition as one component. We also extend the decomposition, consider geography, and implement decomposition on a state-by-state basis, linking that geographic decomposition back to the national level. We then consider how deregulation of geographic restrictions on bank activity affects the components of the state-level dynamic decomposition, controlling for competition and the state of the economy within each state and employing fixed- and random-effects estimation for a panel database across the fifty states and the District of Columbia from 1976 to 2000.

Geographic Deregulation and Commercial Bank Performance in US State Banking Markets

This paper examines the effects of geographical deregulation on commercial bank performance across states. We reach some general conclusions. First, the process of deregulation on an intrastate and interstate basis generally improves bank profitability and performance. Second, the macroeconomic variables -- the unemployment rate and real personal income per capita -- and the average interest rate affect bank performance as much, or more, than the process of deregulation. Finally, while deregulation toward full interstate banking and branching may produce more efficient banks and a healthier banking system, we find mixed results on this issue.

Infrastructure Finance in Developing Countries by State and Multilateral Development Banks

Infrastructure concession is an alternative widely used by governments to increase investment. In the case of the road sector, the main characteristics of the concessions are: long-term projects, high investments in the early years of the contract and high risks. A viability analysis must be carried out for each concession and consider the characteristics of the project. When the infrastructure is located in a developing country, political and market growth uncertainties should be add in the concession project analysis, as well as economic instability, because they present greater risks. This paper is an analysis of state bank participation in road infrastructure finance in developing countries. For this purpose, we studied road infrastructure financing and its associated risks, and also the features of developing countries. Furthermore, we considered the issue of state banks and multilateral development banks that perform an important role by offering better credit lines than the private banks, in terms of cost, interest and grace period. Based on this study, we analyzed the Brazilian Development Bank - BNDES – and their credit supply to road infrastructure concessions. The results show that BNDES is the main financing agent for long-term investment in the sector, offering loans with low interest rates in Brazilian currency. From this research we argue that a single state bank should not alone support the increasing demand for finance in Brazil. Therefore, we conclude that there is a need to expand the supply of credit in Brazil, by strengthening private banks in the long-term lending market.

Banking Business Models Monitor 2014: Europe. CEPS Paperbacks, 14 October 2014

CEPS and the International Observatory on Financial Services Cooperatives (IOFSC) at HEC Montreal have initiated an annual monitoring exercise on banking business models in the EU. Based on their balance sheet structures, 147 European banks that account for more than 80% of the industry assets were categorised in four business models. The Monitor emphasises the ownership structures and assesses the financial and economic performance, resilience and robustness, before, during and after the financial and economic crises across retail diversified-, retail focused-, investment-, and wholesale oriented banks. Inter alia, this edition of the Monitor finds that banks that engage more in traditional retail banking activities with a mix of funding sources fared well as compared to other bank models during the different phases of the crisis.

The Relevance of International Spillovers and Asymmetric Effects in the Taylor Rule. CEPS Working Document No. 403, February 2015

Deviations of policy interest rates from the levels implied by the Taylor rule have been persistent before the financial crisis and increased especially after the turn of the century. Compared to the Taylor benchmark, policy rates were often too low. This paper provides evidence that both international spillovers, for instance international dependencies in the interest rate-setting of central banks, and nonlinear reaction patterns can offer a more realistic specification of the Taylor rule in the main industrial countries. The inclusion of international spillovers and, even more, nonlinear dynamics improves the explanatory power of standard Taylor reaction functions. Deviations from Taylor rates tend to be smaller and their negative trend can be eliminated.

Firmer foundations for a stronger European Banking Union. Bruegel Working Paper 2015/13, November 2015

The move to European Banking Union involving the supervision and resolution of banks at euro-area level was stimulated by the sovereign debt crisis in the euro area in 2012. However, the long-term objective of Banking Union is dealing with intensified cross-border banking.The share of the assets of national banking systems that come from other EU countries was rising before the financial and economic crisis of 2007, but went into decline thereafter in the context of a general retrenchment of international banking. Most recent data, however, suggests the decline has been halted. About 14 percent of the assets of banks in Banking Union come from other EU countries, while about a quarter of the assets of the top 25 banks in the Banking Union are held in other EU countries.While a crisis-prevention framework for the euro area has largely been completed, the crisis-management framework remains incomplete, potentially creating instability. There is no governance mechanism to resolve disputes between different levels of crisis-management agencies, and incentives to promote optimum oversight are lacking. Most importantly, risk-sharing mechanisms do not adequately address the sovereign-bank loop, with a lack of clarity about the divide between bail-in and bail-out.To complete Banking Union, the lender-of-last-resort and deposit insurance functions should move to the euro-area level, breaking the sovereign-bank loop. A fully-fledged single deposit insurance (and resolution) fund should be favoured over a reinsurance scheme for reasons of cost and simplicity.

Report of the Commissioner of Banking and Insurance relative to building and loan and savings and loan associations.

Report year irregular.

Commercial banking and credits,

Mode of access: Internet.

Conditional risk, return and contagion in the banking sector in Asia

This paper investigates risk and return in the banking sector in three Asian markets of Taiwan, China and Hong Kong. The study focuses on the risk-return relation in a conditional factor GARCH-M framework that controls for time-series effects. The factor approach is adopted to incorporate intra-industry contagion and an analysis of spillovers between large banks and small banks. Finally, the study provides evidence on these relations before and after the Asian financial crisis of 1997. The results are generally consistent across the markets and with expectations.