scholarly journals Bank business models, negative policy rates, and prudential regulation

2021 ◽  
Author(s):  
Roberto Savona
Keyword(s):  
Interest Rate ◽  
Business Models ◽  
Banking System ◽  
Prudential Regulation ◽  
Interest Rate Policy ◽  
Bank Business Models ◽  
Rate Policy ◽  
Using Data ◽  
Retail Banks ◽  
Compensatory Effect

AbstractUsing data from Italian banks over the period 2011–2017, we study how negative interest rate policy and prudential regulation impact on bank business models. We report four key findings. First, banks shifted into retail- and market-oriented business models. Second, high- and low-deposit banks reduced loans and increased security/liquid assets; only market-oriented banks expanded lending. Third, interest rate income compression induced by negative rates has been substantial for the Italian banking system as a whole, although retail banks seem to have suffered less. Fourth, non-interest incomes played a compensatory effect. The portfolio reshuffling, as we observed for wholesale and retail banks (less lending and more securities/liquid assets), is related to the goal of reducing risk exposures and, in turn, the connected capital absorption required by prudential regulation.

Depleting net worth of Russian banks: Changes in banks’ risk-taking and the interest rate policy of the Bank of Russia

2019 ◽  
pp. 30-55
Author(s):  
Mikhail E. Mamonov
Keyword(s):  
Interest Rate ◽  
Risk Taking ◽  
Banking Sector ◽  
Banking System ◽  
Bank Failures ◽  
Total Size ◽  
Interest Rate Policy ◽  
Net Worth ◽  
Rate Policy ◽  
The Interest Rate

Despite achieving success in the tight prudential regulation of the banking sector, the Bank of Russia (CB RF) continues to reveal new cases of negative net worth in banks. This paper investigates the influence of banks’ risk-taking and the interest rate policy of the CB RF on the depletion of net worth in Russian credit institutions during 2007—2017. The quartile regression approach is employed to examine the differences in net worth depletion of already failed banks; additionally, the Heckman selection approach is applied to analyze potential negative net worth that has not been revealed by the CB RF yet. The estimation results suggest that banks’ risk-taking matters: its increases are positively associated with the rises of the probability of bank failures and the size of negative net worth, conditional on failure. Ignoring of banks’ risktaking leads to a substantial upward bias in the estimates of the total size of negative net worth in the banking system — from 3.6 to 5.3 trillion rubles, or by 2% of the system’s total assets. Further, the interest rate policy of the CB RF has a risk-shifting effect: an increase of the key rate together with a rise of its volatility are associated with a further depletion of banks’ net worth. Finally, the paper shows that a joint increase in banks’ risk-taking and the key rate has a further negative effect on banks’ net worth.

Price interactions in the Russian credit market: Who is fighting whom and when do banks facilitate collusion?

2017 ◽  
pp. 79-99 ◽  
Author(s):  
M. Mamonov
Keyword(s):  
Interest Rate ◽  
Business Cycle ◽  
Price Competition ◽  
Banking System ◽  
Credit Market ◽  
Interest Rate Policy ◽  
Price Wars ◽  
Rate Policy ◽  
The Interest Rate

This paper analyzes how banks react on the interest rate policy of their rivals when the industry-wide price competition is strengthening over different phases of business cycle in both retail and corporate segments of credit market in Russia. Our estimations, based on the models proposed in the literature on New Industrial Empirical Organization (NIEO), show that price wars are taking place from time to time in the retail as well as in the corporate segments of Russian credit market; more often - in periods of macroeconomic crisis, and are started by the banks from the top-30 group (in terms of assets, excluding Sberbank), the most warlike group within the Russian banking system. During the non-crisis periods banks are turning to facilitate collusions. The retail segment of credit market appears to be significantly more competitive as compared to the corporate one.

Consequences of a High Interest Rate Policy in the Process of Disinflation. The Case of Poland

1998 ◽  
Vol 9 (1) ◽  
pp. 15-31 ◽  
Author(s):  
Alojzy Z. Nowak ◽  
Kazimierz Ryć ◽  
Jerzy Żyżński
Keyword(s):  
Interest Rate ◽  
Banking Sector ◽  
Banking System ◽  
Research Programme ◽  
Open Market ◽  
High Interest Rate ◽  
Interest Rate Policy ◽  
The Real ◽  
High Interest ◽  
Rate Policy

The aim of the article is to analyse the consequences of a high interest rate policy pursued in Poland since 1990 in the process of disinflation. The interest rate was the main instrument of monetary policy in a situation when the economy lacked a money market on which the money supply could be influenced directly by open market operations. The application of a high interest rate had many unfavourable consequences both in the real sphere and in the financial sphere. The most important of these consequences in the real sphere was that it forced self-financing on the part of enterprises, the ineffective allocation of resources, delays in carrying out investments, the cyclicity of demand; the effects in the financial sphere mainly concern the banking sector, where the assets of the banking system become distorted, while for enterprises the most important consequences result from the high cost of credit, which increases costs and reduced the competitiveness of enterprises dependent on credit. The authors analyse these consequences and formulate hypotheses and a research programme for testing them.

Analysis of the Bank of Russia information policy

2017 ◽  
pp. 88-110 ◽  
Author(s):  
S. Drobyshevsky ◽  
P. Trunin ◽  
A. Bozhechkova ◽  
E. Gorunov ◽  
D. Petrova
Keyword(s):  
Interest Rate ◽  
Nonparametric Tests ◽  
Information Policy ◽  
Var Models ◽  
New Approach ◽  
Interest Rate Policy ◽  
News Reports ◽  
Internet Users ◽  
Rate Policy ◽  
Exchange Markets

The article investigates the Bank of Russia information policy using a new approach to measuring information effects on Russian data, including the analysis of the tonality of news reports, as well as internet users’ queries on Google. The efficiency of regulator’s information signals is studied using EGARCH-, VAR- models, as well as nonparametric tests. The authors conclude that the regulator communicates effectively in terms of the predictability of interest rate policy, the degree to which information signals affect the money and foreign exchange markets.

The New Consensus and Post-Keynesian Interest Rate Policy

2007 ◽  
Vol 19 (3) ◽  
pp. 369-386 ◽  
Author(s):  
Claude Gnos ◽  
Louis-Philippe Rochon
Keyword(s):  
Interest Rate ◽  
Interest Rate Policy ◽  
Rate Policy
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