Pro-cyclicality of the Basel Capital Requirement Ratio and Its Impact on Banks

2011 ◽  
Vol 10 (2) ◽  
pp. 22-36 ◽  
Author(s):  
Naoyuki Yoshino ◽  
Tomohiro Hirano
Keyword(s):  
Interest Rates ◽  
Stock Prices ◽  
Bank Lending ◽  
Bank Loans ◽  
Capital Requirement ◽  
Land Prices ◽  
Minimum Capital ◽  
Cross Border ◽  
Minimum Capital Requirement ◽  
Boom Period

This paper proposes replacing the present Basel capital requirement with a new counter-cyclical measure. Optimally, (i) the Basel capital requirement ratio should depend on various economic factors such as the cyclical stage of GDP, credit growth, stock prices, interest rates, and land prices—hence, avoiding the expansion of bank loans during a boom period and a credit crunch during a sluggish period; (ii) the Basel minimum capital requirement rule should be different from country to country since the economic structures and the behavior of banks are different; and (iii) cross-border bank operation should follow the minimum capital requirement ratio where bank lending activities occur rather than the origin of the source of funds.

scholarly journals The Effects of Bank-Level and Macroeconomic Variables on Commercial Bank Lending Based on Type of Use

2021 ◽  
Vol 24 (1) ◽  
pp. 105
Author(s):  
Arintoko Arintoko
Keyword(s):  
Interest Rates ◽  
Bank Lending ◽  
Bank Loans ◽  
Capital Adequacy ◽  
Working Capital ◽  
Macroeconomic Variables ◽  
Distributed Lag ◽  
Real Gdp ◽  
Long Run ◽  
Lending Behavior

ABSTRACTThe purpose of this study was to analyze the effect of interest rates, bank-level and macroeconomic variables on bank lending based on the type of use. The analysis method uses an autoregressive distributed lag (ARDL) model with quarterly data for the period of 2011Q1 - 2020Q1. The results show that investment lending behavior can be explained well by all bank-level and macroeconomic variables for the long run. The bank-level variable also reflects the performance and soundness of the bank, namely the capital adequacy ratio and loan to deposit ratio. Meanwhile, macroeconomic variables include inflation and real GDP. Consumer lending behavior is better explained by macroeconomic variables than bank-level variables. Meanwhile, GDP is the only variable that has a significant effect on working capital loans, which means that the behavior of working capital loans is more influenced by the business cycle as indicated by changes in real GDP. GDP is the only variable that consistently has a significant positive effect on bank loans for the three types of loans. Banks need to continue to emphasize the principle of prudence in providing credit by taking into account the term and credit risk, as well as internal and external factors.

scholarly journals The development of bank lending to corporate clients in Ukraine in times of economic cycles

2017 ◽  
pp. 72-87 ◽  
Author(s):  
Yaroslav Chaikovskyi
Keyword(s):  
Interest Rates ◽  
Economic Activity ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Economic Activities ◽  
Economic Cycles ◽  
Loan Portfolios ◽  
Major Factors ◽  
Corporate Clients

The article considers bank lending to corporate clients in Ukraine overcoming the issues related to economic cycles. The dynamics of gross domestic product, total assets, and credit portfolios of Ukraine’s banks over the period between 2012 and 2016 is analyzed. The changes in the composition of bank loans to non-financial corporations are analyzed in terms of scheduled payments, forms of currencies, target allocation and economic activities. Additionally, the dynamics and composition of residents’ deposits mobilized by deposit-taking corporations are considered in terms of scheduled payments over the above period. The major factors that hinder the recovery of bank lending to corporate clients are identified. It is highlighted that the main obstacles to the development of banking lending to corporate clients in Ukraine in times of economic cycles are as follows: high interest rates; a significant percentage of unprofitable enterprises and loan arrears in bank loan portfolios; an increase of non-performing loans (NPL); the fact that banks, having sufficient liquidity for lending to economy-boosting projects, prefer to purchase government securities; corrupt practices of granting loans to affiliated companies (insider loans). The percentage of unprofitable enterprises in Ukraine in 2016 is determined and analyzed by type of economic activity. Based on the analysis performed, some assumptions are made about the trends of the development of bank lending to corporate clients in Ukraine and proposals on further harmonization of bank lending to corporate clients in times of economic cycles are set out.

scholarly journals Bank lending in Ukraine and simulation of credit activity by methods of system dynamics

2021 ◽  
Vol 2021 (2) ◽  
pp. 89-109
Author(s):  
Hlushchenko Svitlana ◽  
◽  
Ivakhnenkov Sergiy ◽  
Demkiv Sofiia ◽  
◽  
...  
Keyword(s):  
System Dynamics ◽  
Interest Rates ◽  
Growth Rates ◽  
Commercial Banks ◽  
Banking Sector ◽  
Supply And Demand ◽  
Bank Lending ◽  
Bank Loans ◽  
Short Term ◽  
Loan Portfolio

The trends of bank crediting of businesses and households in Ukraine are determined and credit interrelations between subjects of economy by means of methods of system dynamics simulated. The article shows that by end 2020 the main trends in the Ukrainian banking sector are: 1) increasing the dynamics of return on capital, consistently high interest rates on loans until 2019 and their declining dynamics in 2020; 2) declining trends in the dynamics of the share of loans in the assets of commercial banks and the indicator of the financial depth of lending to the Ukrainian economy; 3) predominance of the share of loans to businesses in comparison with the share of loans to households in the loan banking portfolio; 4) faster growth rates of bank loans to households compared to the growth rates of lending to businesses; 5) in the sectoral context, the largest share in lending to business units is accounted for by trade and in lending to households – by consumer lending; 6) half of the loan portfolio of commercial banks are short-term loans for up to one year; 7) the share of non-performing loans in the loan portfolio remains high; 8) gradual reduction of non-deposit sources among the liabilities of commercial banks and their transition to almost full financing at the expense of customer deposits; 9) increase in the share of short-term and decrease in the share of long-term deposit financing of commercial banks. Based on the methods of system dynamics, the authors created a model that allows to trace the relationship between commercial banks-businesses-households, as well as to calculate the forecast volumes of bank loans in accordance with the demand for loans from businesses and households (weighted by the maximum value credit load) and supply of credit resources by commercial banks. From a practical point of view, determining the characteristic trends of bank lending, modeling the interaction of its main participants and determining the volume of bank loans using system dynamics helps to identify key factors influencing the supply and demand of bank credit resources at the present stage of Ukraine’s development and predict future lending dynamics.

scholarly journals Local and international dimensions of credit provision by commercial banks in Kenya

2017 ◽  
Vol 12 (3) ◽  
pp. 87-99
Author(s):  
Roseline Misati ◽  
Anne Kamau
Keyword(s):  
Interest Rates ◽  
Commercial Bank ◽  
Home Ownership ◽  
Bank Lending ◽  
Bank Loans ◽  
Foreign Banks ◽  
Interest Rate Spread ◽  
Bank Ownership ◽  
Main Determinants

Although considerable research has focused on the determinants of credit to the private sector, the issue still remains controversial, particularly with respect to the role of foreign banks in emerging markets. This study sought to understand the factors that affect lending of commercial bank loans both in form of foreign and local loans. It used panel data methods on quarterly bank-specific data covering the period from 2000 to 2013. In general, the results reveal that the ownership structure, housing variable and the size of the bank are the main determinants of aggregate commercial bank lending. This conclusion is maintained even when the determinants of foreign loans and local loans are specifically examined separately. However, the role of the liquidity measure is in not consistent in the different specifications while the role of interest rates is largely in line with expectation in most of the specifications. Implicitly, the results seem to suggest a need for mergers of small banks, policy focus on incentives for more local bank ownership and continued efforts on minimization of interest rate spread, which not only promote mortgage financing and home ownership, but also overall credit growth.

scholarly journals MODERN PROBLEMS OF BANK LENDING OF ENTERPRISES OF THE AGRICULTURAL COMPLEX OF UKRAINE

2021 ◽  
Vol 4 (39) ◽  
pp. 50-57
Author(s):  
S. Arzhevitin ◽  
B. Stetsenko ◽  
I. Okhrymenko ◽  
A. Bilochenko ◽  
V. Biloshapka
Keyword(s):  
Interest Rates ◽  
Agricultural Sector ◽  
Positive Impact ◽  
Bank Lending ◽  
Jel Classification ◽  
Bank Loans ◽  
Industrial Complex ◽  
Agricultural Producers ◽  
Analysis And Synthesis ◽  
Credit Programs

Abstract. The purpose of the article is to identify the main factors that constrain lending to enterprises of the agro-industrial complex of Ukraine, to suggest ways to improve their lending system. A systematic approach was chosen as the methodological basis of the study, which provides for a comprehensive study of the bank lending system of the agro-industrial complex. Historical and structural-functional approaches were also used in its analysis. Methods of comparative analysis were used to consider some problems of bank lending to the agro-industrial complex. Of the general scientific methods in this study, methods of analysis and synthesis, induction and deduction were used. The article examines the dynamics and structure of loans to the agro-industrial complex in Ukraine for 2015-2020; the dynamics of interest rates on loans to the agro-industrial complex and the dynamics of agricultural production by UAH 1. credit provision of the agro-industrial complex in Ukraine for 2015-2020. During the analyzed period, these indicators increase or decrease proportionally, as evidenced by the importance of the efficiency of credit support of the agar sector. In 2020, the efficiency of credit provision of the agricultural sector amounted to UAH 11.64, which is UAH 0.4 more than in 2015. The analysis revealed that the agro-industrial complex today has a high need for financial resources. The characteristic of the main problems of the mechanism of crediting of an agro-industrial complex is given. The need to ensure the availability of bank loans has been identified. Stimulating investment lending to agricultural enterprises will have a positive impact on the development of the industry, as well as improve the existing economic situation of rural residents. High demand for credit resources from agricultural producers, the current state and dynamics of lending to the agro-industrial complex in Ukraine allow us to conclude that it is necessary to improve the mechanism of bank loans, develop effective credit products for the agro-industrial complex and strengthen state support for agricultural lending. Keywords: credit, banks, enterprises of the agro-industrial complex, credit programs for the agro-industrial complex. JEL classification G21, Q14 Formulas: 0; fig.:3; tabl.: 1; bibl.: 15.

scholarly journals The Impact Of Basel III On Italian Banks Loan Rates: An Accounting-Based Approach

2012 ◽  
Vol 11 (11) ◽  
pp. 1269
Author(s):  
Pasquale Di Biase
Keyword(s):  
Interest Rates ◽  
Banking System ◽  
Bank Lending ◽  
Capital Requirements ◽  
Bank Loans ◽  
Bank Loan ◽  
Basel Iii ◽  
Baseline Scenario ◽  
Percentage Point Increase ◽  
The Impact

This paper empirically investigates the impact of the new capital requirements imposed under Basel III on bank lending rates.A general accounting equilibrium model is developed in order to map the change in the average interest rate on bank loans which is required to preserve the economic performance and the market value of financial institutions under the new regulatory framework.The study refers to the Italian banking system. According to our estimates, the long-term impact of heightened capital requirements on bank loan rates is likely to be modest.In our baseline scenario, we find evidence that each percentage point increase in the capital ratio can be recovered by increasing interest rates with which borrowers are charged by only 5.75 basis points. We conclude that the Italian banking system should be able to adjust to the higher capital requirements imposed by Basel III through a set of operative and commercial levers with no significant effects on the cost of credit for companies and consumers.

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