scholarly journals Why Are Banks Exposed to Monetary Policy?

2021 ◽  
Vol 13 (4) ◽  
pp. 295-340
Author(s):  
Sebastian Di Tella ◽  
Pablo Kurlat
Keyword(s):  
Interest Rates ◽  
Balance Sheet ◽  
Monetary Shocks ◽  
Hedging Strategy ◽  
Cross Sectional ◽  
Time Pattern ◽  
Bank Deposits ◽  
Maturity Mismatch ◽  
Optimal Dynamic ◽  
The Cost

We propose a model of banks’ exposure to movements in interest rates and their role in the transmission of monetary shocks. Since bank deposits provide liquidity, higher interest rates allow banks to earn larger spreads on deposits. Therefore, if risk aversion is higher than one, banks’ optimal dynamic hedging strategy is to take losses when interest rates rise. This risk exposure can be achieved by a traditional maturity-mismatched balance sheet and amplifies the effects of monetary shocks on the cost of liquidity. The model can match the level, time pattern, and cross-sectional pattern of banks’ maturity mismatch. (JEL E43, E44, E51, E52, G21, G32)

Interaction between wealth management products and bank deposits: evidence from China's shadow banking

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Syed Mehmood Raza Shah ◽  
Yan Lu ◽  
Qiang Fu ◽  
Muhammad Ishfaq ◽  
Ghulam Abbas
Keyword(s):  
Interest Rates ◽  
Banking Sector ◽  
Balance Sheet ◽  
Shadow Banking ◽  
Cross Sectional ◽  
Content Type ◽  
Wealth Management ◽  
Panel Ardl ◽  
Bank Deposits ◽  
Long Run

PurposeShadow banking has been evolving rapidly in China, with banks actively using wealth management products (WMPs) to evade regulatory restrictions. These products are the largest constituent of China's shadow banking sector. A large number of these products are off-balance-sheet and considered a substitute for bank deposits. China's banking sector, especially the small and medium-sized banks (SMBs), uses these products to avoid regulatory restrictions and sustainability risk in the deposit market.Design/methodology/approachThis study empirically examined how banks in China, specifically SMBs, utilize these products on a short and long-run basis to manage and control their deposit levels. This study utilized a quarterly panel dataset from 2010 to 2019 for the top 30 Chinese banks, by first implementing a Panel ARDL-PMG model. For cross-sectional dependence, this study further executed a cross-sectional augmented autoregressive distributive lag model (CS-ARDL).FindingsUnder regulations avoidance theory, the findings revealed that WMPs and deposits have a stable long-run substitute relationship. Furthermore, the WMP–Deposit substitute relationship was only significant and consistent for SMBs, but not for large four banks. The findings further revealed that the WMP–Deposit substitute relationship existed, even after the removal of the deposit rate limit imposed by the People's Bank of China (PBOC) to control the deposit rates.Research limitations/implicationsThe individual bank-issued WMPs' amount data is not available in any database. Therefore, this study utilized the number of WMPs as a proxy for China's banking sector's exposure to the wealth management business.Practical implicationsThis research helps policymakers to understand the Deposit–WMP relationship from the off-balance-sheet perspective. During the various stages of interest rate liberalization, banks were given more control to establish their deposit and loan interest rates. However, the deposit rates are still way below the WMP returns, making WMPs more competitive. This research suggests that policymakers should formulate a more balanced strategy regarding deposit rates and WMPs returns.Originality/valueThis study contributes to the existing literature on China's shadow banking by concentrating on the WMPs. This research represents one of the few studies that analyze regulatory arbitrage in terms of the WMP–Deposit relationship. Moreover, the implementation of CS-ARDL panel data models and multiple data sources makes this study's findings more reliable and significant.

scholarly journals Who Bears Interest Rate Risk?

2018 ◽  
Vol 32 (8) ◽  
pp. 2921-2954 ◽  
Author(s):  
Peter Hoffmann ◽  
Sam Langfield ◽  
Federico Pierobon ◽  
Guillaume Vuillemey
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Banking Sector ◽  
Balance Sheet ◽  
Interest Rate Risk ◽  
Cross Sectional ◽  
Net Worth ◽  
Loan Rate ◽  
Rate Risk ◽  
European Banking

Abstract We study the allocation of interest rate risk within the European banking sector using novel data. Banks’ exposure to interest rate risk is small on aggregate, but heterogeneous in the cross-section. Contrary to conventional wisdom, net worth is increasing in interest rates for approximately half of the institutions in our sample. Cross-sectional variation in banks’ exposures is driven by cross-country differences in loan-rate fixation conventions for mortgages. Banks use derivatives to partially hedge on-balance-sheet exposures. Residual exposures imply that changes in interest rates have redistributive effects within the banking sector. Received October 31, 2017; editorial decision August 30, 2018 by Editor Philip Strahan. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.

scholarly journals Evaluation of Banks' Interest Rate Risk: An Alternative Approach

2018 ◽  
Vol 5 (6) ◽  
pp. 111
Author(s):  
Jakob Lichtner ◽  
Marcus Riekeberg ◽  
Friedrich Thiessen ◽  
Thomas Maurer
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Yield Curve ◽  
Balance Sheet ◽  
Interest Rate Risk ◽  
Bank Loans ◽  
Bank Deposits ◽  
Rate Risk ◽  
Alternative Approach ◽  
Realistic View

Interest rate risk is often assessed through parallel yield curve shifts of 100, 200 or 400 basis points. In order to provide a more realistic view, we did simulations based on periods of growing interest rates that actually occurred in the past. These simulations show that non-bank deposits and non-bank loans react more strongly to rising interest rates than certain interbank and security positions. Existing research usually overestimates related risks slightly as it does not take the interest-elastic reactions of non-banks into account. We found three types of effects. Firstly, the direct earnings effect stems from changed market interest rates applied to constant balance sheet positions. This effect is typically measured by straightforward models. Secondly, to increase accuracy, we identified an indirect earnings effect. Customers react to interest rate changes, and therefore balance sheet positions increase or decrease. The size of this effect depends on how strongly they react, i. e. their interest elasticity. Thirdly, the induced earnings effect results from a bank’s reactions in an attempt to compensate for the changed business volume.

scholarly journals A housing supply absorption rate equation

2020 ◽  
Author(s):  
Cameron Murray
Keyword(s):  
Interest Rates ◽  
Rate Equation ◽  
Absorption Rate ◽  
Asset Price ◽  
Balance Sheet ◽  
Optimal Rate ◽  
Asset Markets ◽  
Housing Supply ◽  
Demand Growth ◽  
The Cost

What is the optimal rate of new housing supply? We answer this question with a simple model of new housing supply where the choice variable is the rate of new housing lot sales. This model is informed by the cost-side assumptions of the static equilibrium model but allows for demand for home-buying to vary over time. It differs from static models of housing production equilibrium by assuming that landowners hold land assets that are sold in asset markets to create new supply. Landowners maximise the present value of their balance sheet by choosing a rate of new housing lot sales, accounting for the effect on asset price growth from their sales in a housing market of finite depth. The resulting absorption rate equation has radically different parameter effects compared to the popular static housing density model. Constraints on density, for example, increase the optimal rate of supply by reducing the return to delaying development. Interest rates, land value tax rates, and demand growth, positively relate to the optimal rate of supply. The policy lessons are (1) the relationship between demand growth and the optimal supply rate limits the ability for market supply to reduce prices, and (2) increasing the cost to delaying housing development is the primary way to increase the market rate of housing supply.

scholarly journals Determinants of homeownership in the condominium housing sites of Ambo, Ethiopia

2019 ◽  
Vol 3 (2) ◽  
pp. 1-18
Author(s):  
Abenezer Kitila
Keyword(s):  
Interest Rates ◽  
Total Sample ◽  
Test Results ◽  
Housing Provision ◽  
Cross Sectional ◽  
Mean Values ◽  
Descriptive Research ◽  
Chi Squared ◽  
The Government ◽  
The Cost

This study investigated the determinants of homeownership among the residents of the condominium housing sites of Ambo town, West Shewa Zone, Oromia Regional State, Ethiopia. It employed a descriptive research design, mainly using cross-sectional and correlational studies. A total sample of 230 respondents were selected through a random sampling method. The logistic regression model output showed that homeownership was determined by respondents’ gender, age, monthly income, saving practice, loan and credit services, marital status, and household size, while education level, occupation type, and land produced insignificant results. The chi-squared test and independent samples t test results also revealed significant associations and differences among and between different variables. The absence of land, lack of capital, bureaucratic system of land provision, limited loan and credit services, and high interest rates were also mentioned as determinant factors of homeownership. Moreover, mean values were computed to determine the adequacy and accessibility of basic amenities between the two sites. Therefore, the study recommends that the government should reformulate a profound housing policy that would improve the efficiency of the housing provision system and reduce the cost of homeownership.

ANALISA PERBANDINGAN LAPORAN KEUANGAN DAN RASIO KEUANGAN SEBAGAI ALAT UKUR KINERJA KEUANGAN PADA KOPERASI KARYAWAN SUCOFINDO (KOPERASI SUCOFINDO JAYA) TAHUN 2009 – 2011

2019 ◽  
Vol 9 (2) ◽  
pp. 35
Author(s):  
Sri Marti Pramudena
Keyword(s):  
Financial Performance ◽  
Balance Sheet ◽  
Fiscal Year ◽  
Percentage Increase ◽  
Net Worth ◽  
Average Value ◽  
Financial Position ◽  
Profitability Analysis ◽  
Equity Ratio ◽  
The Cost

This study aims to determine the financial position and financial performance Cooperative Sucofindo Jaya (KOPSUCOFINDO JAYA) from fiscal year 2009-2011 through a comparative analysis / comparisons and ratio analysis. From the research, the authors obtained a picture that results of the financial position and financial performance of KOPSUCOFINDO JAYA as follows: (1) To Horizontal Analysis of the Balance Sheet shows the overall unfavorable developments as the rise of short-term debt experienced a greater percentage increase than the increase in current assets (2) For Horizontal Analysis of the SHU, SHU in 2010 an increase of 125.38% compared to 2009 and in 2011 increased by 282.47% compared to 2009, but this increase was not followed by a reduction in the burden of cost of goods, especially business and this increase was obtained from the contribution percentage increase in other income. (3) For Vertical Analysis of the Balance Sheet shows that in terms of assets, current assets are assets that make up the largest component but also cause considerable investment value embedded in current assets and also showed asset turnover, receivables turnover and working capital is very low under 1 times. (4) For the SHU Vertical analysis shows that income JAYA KOPSUCOFINDO more than 85% absorbed in the Cost of Goods. (5) For liquidity analysis showed that highly liquid KOPSUCOFINDO JAYA obtain an average value above 400%. (6) For solvency analysis shows that the performance is not good / not solvable because the results of the analysis LITA average of above 95%, Total Debt to Equity Ratio in the top 2.000%, and Net Worth Debt Ratio to average below 4%. (7) For activity ratios indicate that the performance is not good for Turnover of Assets value of 1 times. (8) For the rentability analysis KOPSUCOFINDO JAYA show results for ROA of 0.86% (2009), 1.31% (2010), 1.18% (2011), ROE in 2009 is 14.81%, 26.43% in 2010 and 2011 amounted to 31.11%, for the ROI of 0.56% in 2009, in 2010 was 0.96% and by 0.93% in 2011. (9) For the analysis of profitability, for the analysis of GPM in 2009 amounted to 1.49%, in 2010 of 2.31% and 3.92% in 2011. As for the analysis of NPM in 2009 amounted to 0.97%, in 2010 by 1.70% and by 3.10% in 2011. Keywords:  Cooperative Financial Performance, horizontal analysis, vertical analysis, Analysis of Liquidity, Solvency Analysis, Activity Analysis, Profitability Analysis, profitability analysis

Strategi Pengelolaan Risiko dan Peningkatan Kualitas Pengelolaan Kas Negara

2017 ◽  
Vol 2 (2) ◽  
pp. 43-54
Author(s):  
Agung Mulyono
Keyword(s):  
Interest Rates ◽  
Financial Risk ◽  
Vector Autoregression ◽  
Secondary Market ◽  
Key Factors ◽  
Bond Price ◽  
Hedging Strategy ◽  
Foreign Loan ◽  
Term Operation ◽  
Loan Interest Rates

Cash management is  one of treasury’s main functions in which has a potential financial risk. A potential financial risk emerges when State Treasurer manages cash surplus and or/ shortages in order to maintain optimum liquidity. By applying Vector Autoregression (VAR) system on empirical data provided by Bank Indonesia and the Ministry of Finance of Indonesia, we found that currency value  flunctuation is a significant factor for repayment value of foreign loan. Interest rates and amount of government’s bond held by foreign investors are also variables impacted on government’s bond price movement in secondary market. Currency value  flunctuation and price of government’s bond in secondary market are the key factors that have to be considered by State Treasurer (BUN) in managing state’s money. Hedging strategy by using derivatif product is possible to be utilized by State Treasurer (BUN) due to it’s flexibility for short-term operation.   Abstrak Pengelolaan kas negara merupakan salah satu fungsi pokok perbendaharaan yang dalam proses pelaksanaannya menyimpan potensi berbagai risiko keuangan. Risiko keuangan, khususnya dalam investasi berpotensi muncul ketika Bendahara Umum Negara (BUN) melakukan kegiatan pengelolaan kelebihan dan/ kekurangan kas dalam rangka menjamin ketersediaan dan optimalisasi kas. Dengan menggunakan analisis Vector Autoregression (VAR) atas data empiris yang diperoleh dari Bank Indonesia dan Kementerian Keuangan Indonesia, penulis menemukan bahwa fluktuasi nilai tukar mata uang merupakan faktor yang signifikan terhadap besaran pembayaran utang luar negeri pemerintah. Tingkat suku bunga acuan dan pergerakan besaran kepemilikan SUN oleh investor asing juga merupakan variabel yang berpengaruh terhadap pergerakan harga SUN di pasar sekunder. Fluktuasi nilai tukar mata uang dan pergerakan harga SUN di pasar sekunder menjadi faktor penting dalam pelaksanaan investasi yang dilakukan BUN dalam rangka pengelolaan kelebihan dan/ kekurangan kas. Berdasarkan hasil tersebut, strategi pengelolaan risiko atau hedging dengan menggunakan produk-produk derivatif dalam pengelolaan kelebihan dan/ kekurangan kas jangka pendek – menengah sangat dimungkinkan karena sifat instrumen derivatif yang fleksibel.

Evaluating the Outcomes of a Hospital-to-Community Model of Integrated Care for Dementia

2020 ◽  
pp. 1-6
Author(s):  
Ngoc Huong Lien Ha ◽  
Philip Yap Lin Kiat ◽  
Sean Olivia Nicholas ◽  
Ivana Chan ◽  
Shiou Liang Wee
Keyword(s):  
Cost Effectiveness ◽  
Integrated Care ◽  
Dementia Care ◽  
Behavioural Problems ◽  
Gdp Per Capita ◽  
Post Intervention ◽  
Cross Sectional ◽  
Life Years ◽  
Per Capita ◽  
The Cost

<b><i>Introduction:</i></b> Living with dementia is challenging for persons with dementia (PWDs) and their families. Although multi-component intervention, underscored by the ethos of person-centred care, has been shown to maintain quality of life (QOL) in PWDs and caregivers, a lack of service integration can hinder effectiveness. <b><i>Methods:</i></b> CARITAS, an integrated care initiative provided through a hospital-community care partnership, endeavours to provide person-centred dementia care through ambulatory clinic consults, case management, patient and caregiver engagement, and support. We evaluated CARITAS’ clinical outcomes and cost-effectiveness with a naturalistic cross-sectional within-subject design. We assessed patients’ function, QOL, and behavioural problems post-intervention. We estimated CARITAS’ cost-effectiveness from a patient’s perspective, benchmarking it against other dementia treatments and Singapore’s Gross Domestic Product (GDP) per capita. <b><i>Results:</i></b> CARITAS care significantly improved health utility (<i>p</i> &#x3c; 0.001), reduced caregiver burden (<i>p</i> &#x3c; 0.001), and improved PWDs’ behavioural problems (<i>p</i> &#x3c; 0.001) related to “memory” (<i>p</i> &#x3c; 0.001), “disruption” (<i>p</i> = 0.017), and “depression” (<i>p</i> &#x3c; 0.001). CARITAS’ benefits (<i>d</i><sub>RMBPC</sub> = 0.357, <i>d</i><sub>EQ5D index</sub> = 0.328, <i>d</i><sub>ZBI</sub> = 0.361) were comparable to those of other pharmacological and non-pharmacological interventions for dementia. CARITAS costs SG$133,056.69 per quality-adjusted life years gain, yielding an incremental cost-effectiveness ratio of 1.31 and 1.49 against the cost of donepezil in patients with mild Alz­heimer’s disease and Singapore’s GDP per capita in 2019, respectively, falling within the cost-effectiveness threshold of 1.0–3.0. <b><i>Discussion:</i></b> CARITAS integrated dementia care is a cost-effective intervention that showed promising outcomes for PWDs and their caregivers.

scholarly journals Cost-Effectiveness of Colorectal Cancer Genetic Testing

2021 ◽  
Vol 18 (16) ◽  
pp. 8330
Author(s):  
Abdul Rahman Ramdzan ◽  
Mohd Rizal Abdul Manaf ◽  
Azimatun Noor Aizuddin ◽  
Zarina A. Latiff ◽  
Keng Wee Teik ◽  
...  
Keyword(s):  
Colorectal Cancer ◽  
Genetic Testing ◽  
Cost Effectiveness ◽  
Cancer Survival ◽  
Screening Method ◽  
Targeted Prevention ◽  
Activity Based Costing ◽  
Cross Sectional ◽  
Increased Risk ◽  
The Cost

Colorectal cancer (CRC) remains the second leading cause of cancer-related deaths worldwide. Approximately 3–5% of CRCs are associated with hereditary cancer syndromes. Individuals who harbor germline mutations are at an increased risk of developing early onset CRC, as well as extracolonic tumors. Genetic testing can identify genes that cause these syndromes. Early detection could facilitate the initiation of targeted prevention strategies and surveillance for CRC patients and their families. The aim of this study was to determine the cost-effectiveness of CRC genetic testing. We utilized a cross-sectional design to determine the cost-effectiveness of CRC genetic testing as compared to the usual screening method (iFOBT) from the provider’s perspective. Data on costs and health-related quality of life (HRQoL) of 200 CRC patients from three specialist general hospitals were collected. A mixed-methods approach of activity-based costing, top-down costing, and extracted information from a clinical pathway was used to estimate provider costs. Patients and family members’ HRQoL were measured using the EQ-5D-5L questionnaire. Data from the Malaysian Study on Cancer Survival (MySCan) were used to calculate patient survival. Cost-effectiveness was measured as cost per life-year (LY) and cost per quality-adjusted life-year (QALY). The provider cost for CRC genetic testing was high as compared to that for the current screening method. The current practice for screening is cost-saving as compared to genetic testing. Using a 10-year survival analysis, the estimated number of LYs gained for CRC patients through genetic testing was 0.92 years, and the number of QALYs gained was 1.53 years. The cost per LY gained and cost per QALY gained were calculated. The incremental cost-effectiveness ratio (ICER) showed that genetic testing dominates iFOBT testing. CRC genetic testing is cost-effective and could be considered as routine CRC screening for clinical practice.

Sign in / Sign up

Export Citation Format

Share Document