scholarly journals The fat years: the structure and profitability of the US banking sector in the pre-crisis period

2009 ◽  
Vol 33 (4) ◽  
pp. 609-632 ◽  
Author(s):  
Fiona Tregenna

Abstract Bank profitability in the USA was extremely high in the pre-crisis period, yet this did not prevent the current crisis. It has become clear that these profits were on shaky grounds and also that bank profits were not used to buttress banks’ capital bases. This paper analyses the effects of structure on profitability from 1994 to 2005. Bank-level panel data are used to test the effects of concentration, market power, bank size and operational efficiency on profitability. Efficiency is not found to be a strong determinant of profitability, suggesting that banks’ high profits during this period were not ‘earned’ through efficient performance. Robust evidence is found that concentration increases bank profitability. This holds even when the largest banks are excluded from the sample, suggesting that the relationship between concentration and profitability acts in a generalised structural way and that the higher profits arising from concentration are at the expense of the rest of the economy. The analysis points to various policy implications relevant to the current crisis, in particular in terms of the legitimacy of expectations of the restoration of pre-crisis profit rates and the need for much stronger regulation of the banking sector, especially in terms of the structure of the sector, pricing behaviour and use of profits.

2019 ◽  
Vol 45 (12) ◽  
pp. 1563-1579
Author(s):  
Md. Saifur Rahman ◽  
Shahari Farihana

Purpose The purpose of this paper is to examine the nexus between Asian and the US short-term financing rates and compare them between pre- and post-Asian financial crisis. Design/methodology/approach The short-term financing rate is used in the estimation by employing two-stage cointegration test. Findings The result of the empirical study shows several outcomes; the short-term financing rates among the selected Asian countries are not highly correlated during pre-crisis period, but the rates become strongly associated during the post-crisis period. The US financing rate has significant influence on the Asian rate during both periods. Asian financing rates are not integrated by the influence of the USA, rather regional cooperation and financial initiatives lead the regional financing rate to be integrated. Originality/value The empirical finding of the study offers significant policy implications for strengthening regional economic bonding and developing the financial systems.


2021 ◽  
Vol 14 (4) ◽  
pp. 142
Author(s):  
Faisal Abbas ◽  
Imran Yousaf ◽  
Shoaib Ali ◽  
Wing-Keung Wong

This research intends to explore the relationship between capital buffer, nominator effect, denominator effect, and economic growth for large insured commercial banks of the USA. The study applied a two-step system Generalized Method of Moment (GMM) framework by taking the unique and comprehensive dataset over the period extending from 2002 to 2018. The research found a countercyclical relationship between a capital buffer and economic growth. In the case of well-capitalized banks, this relationship is more critical than adequately capitalized banks. In the case of low-liquid banks, counter-cyclicality is more significant than high-liquid banks. The results also suggest the pro-cyclical relationship between nominator, denominator, and economic growth. The results remain consistent and robust with the use of the tier-one capital buffer ratio. The findings have implications for regulators to incorporate the counter-cyclicality between the capital buffer and economic growth, while formulating the policies for capital requirements in the future.


2017 ◽  
Vol 24 (2) ◽  
pp. 383-405 ◽  
Author(s):  
Laurynas NARUŠEVIČIUS

The purpose of this paper is to investigate the relationship between profitability of the Lithuanian banking sector and its internal and external determinants. We use the panel error correc­tion model to assess long-term and short-term determinants of items from bank income statements (net interest income, net fee and commission income and operating expenses). The results of the pooled mean group estimator show that bank size and real GDP are the main determinants in the long-term. Meanwhile, empirical examination suggests various variables as short-term determinants of income statement items. The pooled mean group estimation technique and the analysis of sepa­rate income statement items enable us to have a better insight into the Lithuanian banking sector and determinants of its revenue and expenses.


2019 ◽  
Vol 14 (7) ◽  
pp. 36
Author(s):  
Simone Rossi ◽  
Mariarosa Borroni ◽  
Mariacristina Piva ◽  
Andrea Lippi

During healthy economic/financial times, credit growth often happens without proper provisioning. This is due to a managerial myopia that underestimates the risks underlying an expansive lending policy, leading to lower profitability in following years. However, given the countercyclicality of credit standards, this effect shouldn’t occur during harsh times. In this paper, we analyse the relationship between abnormal credit growth and bank profitability during a crisis period. In particular, we test the hypothesis that during a crisis, abnormal credit growth improves bank profitability, given the need for higher, or at least stable, credit standards. We find support for this assumption using a sample of 101 large European banks observed during the recent crisis period. Results are robust to different robustness checks.


Author(s):  
Hasan Dinçer ◽  
Ümit Hacıoğlu ◽  
Türker Tuğsal

The purpose of this chapter is to emphasize the effect of bank employee turnover on profitability. Researchers so far have commonly studied employee turnover, job satisfaction, and commitment. The current research intends to fill the gap by focusing on the relationship between employee turnover and profitability. In this chapter, firstly, employee turnover, its terminology, and the nature of turnover are defined. This relationship in the banking sector is analyzed and three private banks in Turkey are scrutinized. The main argument of the research is that there is an adverse relationship between employee turnover and bank profitability. Conversely, the results of the study do not thoroughly support the assumption. As a result, findings show that banks minimize the effects of economic crisis by dismissal and not recruiting new employees to replace a quitting worker or recruiting for a new position.


2004 ◽  
Vol 34 (1) ◽  
pp. 21-38 ◽  
Author(s):  
KATHLEEN S. SHORT

Individuals and families may encounter difficulty making ends meet on many dimensions and there are a large number of measures designed to identify this group. In general, there is agreement that all of the approaches capture different pieces of the puzzle, while no single indicator can yield a complete picture. In an attempt to understand this multidimensional aspect of poverty, several measures are examined in this article: the official US poverty measure, a relative poverty measure, an experimental measure following recommendations of the US National Academy of Sciences, an index of material hardship, a measure of household debt, and responses to a question about inability to meet expenses. This study uses the 1996 panel of the Survey of Income and Program Participation (SIPP). The SIPP is a longitudinal survey that allows us to examine all of these various indicators for the same people over the period from 1996 to 1998. The study uses regression analysis to assess the relationship between and among the various indicators of economic hardship.


Author(s):  
Song Qin ◽  
Zhenlei Wang ◽  
◽  
◽  

What is the level of non-performing loans in China’s banking sector and in different countries? Has the relationship between economic growth and the non-performing loan ratio changed? Is there a difference in the effect of the economic growth of different economies on the rate of non-performing loans in the banking sector? This study analyzes the relationship between economic growth and the non-performing loan ratios and characteristics of 13 countries from 2005-2014 based on quantile regression models with panel data. The results showed that the relationship between economic growth and the non-performing loan ratio was positive before the financial crisis in 2008 but was negative after 2008. The non-performing loan ratio in Canada, Mexico, and the US was low before 2008 and high after 2008. The impact of economic growth on the non-performing loan ratio was more significant for countries with a high non-performing loan ratio than for countries with a low non-performing loan ratio.


2015 ◽  
Vol 24 (1) ◽  
pp. 18-27 ◽  
Author(s):  
José I. Rojas-Méndez ◽  
Nicolas Papadopoulos ◽  
Mohammed Alwan

Purpose – The overall aim of the present study is to advance research by drawing from this body of work and applying the brand personality construct, which has so far been considered mostly in connection with commercial product brands, in the context of nation branding. More specifically, and also more importantly, the study aims to contribute to research both in nation branding, as well as, indirectly, in the broader domain of brand personality in general, by being one of the first to examine the relationship between individual personality (IP) and nation brand personality (NBP) traits. Design/methodology/approach – The study was conducted via a Web-based questionnaire in Arabic language to Saudi citizens living in Saudi Arabia. The study object was defined as the brand personality of the USA. To make possible the comparison between respondents’ personality and the US brand personality, the Big Five factors typology was used as a proxy (openness to experience, conscientiousness, extraversion, agreeableness and neuroticism). Findings – Results revealed a significant negative impact of the gaps between Saudi’s IP and the US brand personality (i.e. independent variables) upon their attitudes and intentions to behave toward the USA (dependent variables). Results also show that there are no moderating effects of previous visits paid to the USA and having relatives living there. Research limitations/implications – First, data were collected in only one country about perceptions of NBP traits of one other country. Thus, the results should not be generalized to other contexts until further research is done for a mix of both sample and target countries. This must include not only culturally dissimilar countries (as, in this case, Saudi views of the USA), but also countries that are classified as very close in their cultural distance index (i.e. view of the USA by Canadians or of Kuwaitis by Saudis). A second limitation is the proxy used to measure NBP. Future research may alternatively use an NBP scale developed explicitly for countries. Finally, the somewhat higher proportion of female respondents may be an issue to consider in future studies. In this study, the concern, if any, is largely ameliorated by the results, which showed virtually no significant differences between male and female average responses in relation to the Big Five (the only exception was observed with regards to conscientiousness, where males scored slightly lower than females). As was noted above, one may speculate as to potential reasons for the gender distribution in this study – but differences between samples and populations, not only in gender but in any sample characteristics, are quite common in research; therefore, any effort to achieve more balanced sample distributions will be well placed and received. Practical implications – These results should encourage nation brand marketers to closely consider the predominant personality of their target markets, as well as the perceived personality of their own countries (image) when developing international marketing strategies. Such strategic focus should start by deciding what messages to send to the target audience to create in their minds the intended country’s identity by using the appropriate personality traits in communication applications. As this paper has demonstrated, international audiences holding similar personality types, especially in agreeableness, extraversion and conscientiousness, would feel attracted to perform positively towards the country’s offerings (i.e. tourism, investment, job opportunities, immigration, etc.). Originality/value – In this first ever study to explore the relationship between an IP and NBP, a key finding is the confirmation of self-congruity theory.


2017 ◽  
Vol 59 (5) ◽  
pp. 729-739 ◽  
Author(s):  
Patrick John O’Sullivan

Purpose The aim of the paper is to examine what type of relationship existed between the Office of the Comptroller of the Currency (OCC) and Riggs Bank in respect of anti-money laundering (AML) compliance. Different commentators have established certain trends in the interaction between a regulator and a regulated entity, and this paper seeks to apply these findings to the relationship between the OCC and Riggs Bank and ascertain where this example lies in the wider domain of regulatory relationships. The paper then examines whether the relationship between the OCC and HSBC United States was similar to the one between the OCC and Riggs Bank or did the regulator adopt a more aggressive supervisory stance. Throughout this work, there is also a focus on the underlying incentives which may adversely affect how a financial institution interacts with a financial regulator and possible solutions to this problem proposed. Design/methodology/approach Research undertaken by commentators was assessed and their findings as the different regulatory relationships that may develop between a regulator and a regulated entity were applied to the interactions between the OCC and two different financial institutions, namely, Riggs Bank and HSBC United States. Examples from the Senate Subcommittee Reports into the AML failings into these financial institutions were examined through the prism of pre-existing regulatory relationship categories. Findings The paper ultimately concludes that the OCC was far too passive in its interactions with both Riggs Bank and HSBC United States and that the primary underlying motivations for both institutions were profit- rather than compliance-led. Research limitations/implications One of the main limitations to this research was the absence of direct input from either personnel from the banking sector in the USA or of regulators from the same jurisdiction. Practical implications This paper proposes a number of practical solutions to recast the relationship between financial regulators and regulated institutions away from the former deferring to the latter to one where the former dictates to the latter. Originality/value This paper seeks to examine an actual regulatory relationship between a financial regulator and two different institutions that is reported in the public domain by applying pre-existing academic research on question of regulatory relationships and see how the practice differs or corresponds with the theory.


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