Money in the Banking System - Analysis of the Balance Sheets of Central Banks

Problems in the financial sector were at the core of the current economic crisis. Therefore, economic recovery will only become sustainable after taking care of the major weaknesses in the financial sector. This conclusion is relevant both for the US and UK - the two countries where crisis has started, and for other economies which financial institutions turned out to be fragile in the face of the swings in the risk appetite. Russia is one of the countries where the crisis has revealed serious deficiency in the financial sector. Our study of 11 banking crises during the last 25-30 years shows that sustainable economic recovery and decrease in the dependence on commodity prices will be virtually impossible without cleaning of balance sheets and capitalization of the financial sector.

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Same Story, Different Place?

10.1093/oso/9780198815815.003.0007 ◽

2018 ◽

Cited By ~ 1

Author(s):

Viral V. Acharya ◽

Tim Eisert ◽

Christian Eufinger ◽

Christian Hirsch

Keyword(s):

Banking Sector ◽

Debt Crisis ◽

Banking System ◽

Policy Implications ◽

Balance Sheets ◽

System P ◽

Loan Supply ◽

European Banking ◽

European Debt Crisis

This chapter compares the recapitalizations of the Japanese banking sector in the 1990s with those in the ongoing European debt crisis. The analysis points to four main policy implications. First, recapitalizing banks by insuring or purchasing troubled assets alone is not likely to solve the problem of banks’ weak capitalization, as this measure is not able to adjust the extent of the recapitalization to the banks’ specific needs. Second, the amount of the recapitalization should be based on actual capital shortages and not risk-weighted assets to avoid banks decreasing their loan supply. Third, banks should face restrictions regarding the amount of dividends they are allowed to pay out. Finally, banks must be induced to clean up their balance sheets and reduce the amount of bad (non-performing) loans to rebuild confidence in the European banking system.

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Disintermediation of banks in a developing economy

Managerial Finance ◽

10.1108/mf-11-2017-0493 ◽

2019 ◽

Vol 45 (2) ◽

pp. 222-243 ◽

Cited By ~ 1

Author(s):

Tahseen Mohsan Khan ◽

Syed Kumail Abbas Rizvi ◽

Ramla Sadiq

Keyword(s):

Design Methodology ◽

Structural Changes ◽

Banking System ◽

Causality Test ◽

Correction Model ◽

Content Type ◽

Balance Sheets ◽

Panel Regressions ◽

The Impact ◽

Major Hypothesis

Purpose The purpose of this paper is to investigate how Pakistani banks manage their portfolios (lending vs investment) when the economic indicators are not supportive. This study investigates three aspects of the banking system in Pakistan – prevalence of disintermediation, post-crisis profitability orientation and depositor protection by financial system in unfavorable conditions. Design/methodology/approach This study is limited to identifying the key economic and financial drivers behind disintermediation and its subsequent impact on banks’ profitability and depositors’ protection. GLS panel regressions and Engle–Granger causality test as specified by the error correction model have been used to test the major hypothesis of this study. Findings This study shows that small banks have been shifting major part of their portfolios toward risk-free investments to be able to maintain their profitability more efficiently and effectively, like large banks. The study also observes that significant pairing causality exists between gross credit loans and investments confirming disintermediation hypothesis for all types of banks except Islamic or Sharia compliant banks, whereas for significant pairing causality, the results are mixed for remaining variables among gross credit loans as a proportion of assets and economic variables that include GDP growth, unemployment, KSE-100 and SBP policy rate. It is also confirmed by the results that disintermediation improves banks profitability and depositor protection, thus providing a good rationale and justification to banks for opting it. Originality/value The study focuses on the impact of structural changes in portfolios only of commercial banks’ revenue-generating assets not including other financial institutions as a part of banking system. Furthermore, data are extracted from balance sheets and is the sole property of corresponding author.

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TREASURY BILLS AND/OR CENTRAL BANK BILLS FOR ABSORBING SURPLUS LIQUIDITY: THE MAIN CONSIDERATIONS

Journal of International Commerce Economics and Policy ◽

10.1142/s1793993313500117 ◽

2013 ◽

Vol 04 (02) ◽

pp. 1350011

Author(s):

OBERT NYAWATA

Keyword(s):

Central Bank ◽

Banking System ◽

Central Banks ◽

Market Development ◽

Practical Reasons ◽

Treasury Bills ◽

Positive Externalities ◽

Excess Liquidity ◽

Challenging Question ◽

Transmission Of Monetary Policy

This paper discusses the challenging question of whether central banks should use Treasury bills or central bank bills for draining excess liquidity in the banking system. While recognizing that there are practical reasons for using central bank bills, the paper argues that Treasury bills are the first best option especially because of the positive externalities for the financial sector and the rest of the economy. However, the main considerations in the choice should be: (i) operational independence for the central bank; (ii) market development; and (iii) the strengthening of the transmission of monetary policy impulses.

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Securitization of (bad) loans to Italian SMES: The role of the public guarantee

Banks and Bank Systems ◽

10.21511/bbs.16(4).2021.16 ◽

2021 ◽

Vol 16 (4) ◽

pp. 193-208

Author(s):

Lucilla Bittucci ◽

Stefano Marzioni ◽

Pina Murè ◽

Marco Spallone

Keyword(s):

Financial Stability ◽

Positive Impact ◽

Central Banks ◽

General Purpose ◽

Recent Past ◽

Balance Sheets ◽

Access To Credit ◽

The Public ◽

Main Factors

This study investigates the main factors driving the evolution of the securitization of loans to Italian small and medium-sized enterprises (SMEs). The value of securitization increased in last two years, even though it has not been used as collateral for central banks. The disposal of non-performing loans (NPLs) may have been rather triggered by increasing attention of the international institutions to such an issue, within the general purpose of financial stability. The purpose of this paper is to interpret such a phenomenon focusing on Italian banks and restricting the analysis to the case of securitizations backed with loans to small and medium-sized enterprises (SMEs). The interesting result that emerges, supported by econometrically tested empirical evidence, is that given the orientation of international financial institutions, such as the ECB and the EBA, and reacting to incentives coming from the fiscal policy authorities for the public guarantee of loans, banks have been using securitization to reduce the burden on their bad balance sheets due to (NPLs). It was found that the public guarantee had a positive impact on SME securitization, whereas securitization in other sectors has not been affected significantly. Such evidence suggests that, in the absence of a public guarantee, the financial stability target would have been at risk, and the effectiveness of collateral-based policies in the recent past must be improved to enhance access to credit for SMEs.

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Transformation of banking in the new paradigm strategy of Ukraine’s development

Herald of Ternopil National Economic University ◽

10.35774/visnyk2018.01.020 ◽

2018 ◽

pp. 20-33

Author(s):

Bohdan Lutsiv

Keyword(s):

Dynamic Model ◽

Industrial Policy ◽

Banking Sector ◽

System Analysis ◽

Banking System ◽

Modern World ◽

Capital Investments ◽

New Paradigm ◽

Systematic Analysis ◽

Integration Strategies

Transformation of banking in the new paradigm strategy of Ukraine’s development Bohdan Lutsiv Abstract The article considers the issues of transformation of banking into the new strategy of Ukraine’s development in conformity with the accelerating comprehensive transformations of the modern world. It is found that the crisis of globalization is deepening, resulting in the end of the industrial matrix of globalization and the beginning of post-industrial paradigm. It is pointed out that due to the networking transformation of the world a strategic perspective is rather an apolar world than a multipolar one, or a world of equivalent entities. This signals the end of Euro-centrism. In the paper, it is shown that Ukraine’s course to European integration should correlate with current Euro-integration strategies. The systematic analysis of the modern state of the economic backwardness of Ukraine was carried out and the dynamic model of development with the new industrial policy in the reform of the economy was used. A system analysis of the current economic underdevelopment in Ukraine is carried out and a dynamic model of development with a new industrial policy is proposed. Taking into account the deterioration of investment climate, Ukraine’s position in the global investment flows is determined. The structure of capital investments is analyzed by funding sources. In order to mitigate investment risks, a scheme of interaction between tools and instruments used for attracting investments to Ukraine’s economy is proposed. It is stressed that a sustainable stabilization of Ukraine’s banking system is a key driver for the recovery of the real sector. Since the banking sector has been and continues to be a leader and a driving force for reforms in the country, the current state of Ukraine’s banking system after a “big banking cleansing” is assessed. It is concluded that restoration of lending is an essential result received from the transformation of banking. The roots of non-performing loans in bank portfolios are defined and ways for restructuring non-performing loans are outlined. It is noted that addressing the problem of insider lending plays an important role in improving loan portfolios.

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Bank Consolidation, Efficiency, and Profitability in Italy

IMF Working Papers ◽

10.5089/9781484309261.001 ◽

2017 ◽

Vol 17 (175) ◽

Cited By ~ 1

Author(s):

Anke Weber

Keyword(s):

Banking Sector ◽

Banking System ◽

Operational Efficiency ◽

Policy Options ◽

Efficiency Gains ◽

Consolidation Process ◽

Comprehensive Strategy ◽

Balance Sheets ◽

Cross Country ◽

Bank Balance Sheets

This paper examines the case for efficiency-driven banking sector consolidation in Italy, evaluates its potential effects on profitability, and discusses policy options to facilitate a consolidation process that is as effective as possible. A bottom-up analysis of 386 Italian banks suggests that while profitability is expected to improve as the economy gradually recovers, operational efficiency gains are nonetheless needed to restore large parts of the banking system to healthy profitability. Banking system consolidation can play a role in facilitating such efficiency gains, but its effectiveness is likely to be most as part of a comprehensive strategy that includes complementary reforms to clean up bank balance sheets. Cross-country experience indicates that efficiency gains are more likely to follow consolidations where careful viability analyses are conducted of the synergies and operational improvements that can be achieved.

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CENTRAL BANK DIGITAL CURRENCY: ECONOMIC AND LEGAL CHARACTERISTICS

Legal horizons ◽

10.21272/legalhorizons.2019.i19.p94 ◽

2019 ◽

pp. 94-100

Author(s):

T.S. Hudima ◽

V.A. Ustymenko

Keyword(s):

Monetary Policy ◽

Central Bank ◽

Financial Stability ◽

Banking System ◽

Legal Framework ◽

Central Banks ◽

Digital Currency ◽

Business Entities ◽

The Right ◽

Article 5

The article is devoted to identifying the peculiarities of the central bank digital currency (CBDC), explaining their impact on the monetary policy of the state, and identifying the prospects for the transformation of domestic banking legislation in connection with the implementation of the CBDC. It is noted that the scope of competence of the Central Bank and the legal basis for the issuance of the CBDC will depend on the economic and legal features of the digital currency, the degree of its impact on the monetary policy, the financial stability of the country’s economy and so on. In the process of forming the appropriate legal field and defining the conceptual apparatus in the sphere of emission and circulation of the CBDC, the peculiarities of the use of the latter in economic transactions and the specific functions not inherent in ordinary means of payment should be taken. СBDC initiatives will help: 1) progressively narrow the banking system at the level of the Central Banks (such as the Chicago Plan) by allowing individuals and businesses to deposit directly into the accounts of the Central Banks; 2) increasing confidence of economic entities and individuals in the financial system; 3) strengthening the financial stability of the economy (both domestically and globally). Granting business entities or individuals the right to store digital money directly with the Central Bank can give rise to two main directions of influence on monetary policy: first, to strengthen its transmission mechanism; secondly, lead to banks being disrupted. This may lead to some legal issues regarding (1) the NBU’s area of competence; (2) the constitutional foundations of the legal economic order (Article 5 of the ECU). In particular, it cannot be ruled out that centralization of the production, servicing, and management of the СBDC turnover may violate the principles of competition in business activities, prevent abuse of monopoly position in the market, etc. Keywords: monetary policy, central bank digital currency, financial stability, competence, legal framework, economic operations, issue.

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Financial and Monetary Stability Aspects of Global Stablecoins

Credit and Capital Markets – Kredit und Kapital ◽

10.3790/ccm.53.2.159 ◽

2020 ◽

Vol 53 (2) ◽

pp. 159-185

Author(s):

Stefan Schäfer ◽

Oliver Read

Keyword(s):

Exchange Rates ◽

Banking System ◽

Central Banks ◽

Jel Classification ◽

Monetary Stability ◽

Digital Currency ◽

National Currencies ◽

Starting Point ◽

The World ◽

The One

Abstract Global stablecoins (GSCs) like Facebook’s Libra could prove much more instable than they might appear at first sight. Not only can their exchange rates against individual fiat currencies fluctuate substantially; theoretically, they also have the potential to replace national currencies, constitute “digital currency areas” and become the basis of a two-tier banking system with one and more GSC issuers, on the one hand, and, on the other hand, commercial banks that can create GSC deposit money. Against that background, all steps taken so far by supervisors and central banks can only be the starting point of what is necessary to effectively regulate the new normal of the world of money that is emerging. JEL Classification: E42, F65, G28, K24

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Ranking of EU national banking systems using multi-criteria analysis in the light of Brexit

Acta Oeconomica ◽

10.1556/032.2017.67.4.1 ◽

2017 ◽

Vol 67 (4) ◽

pp. 473-509 ◽

Cited By ~ 3

Author(s):

Magdalena Radulescu ◽

Aleksandra Fedajev ◽

Djordje Nikolic

Keyword(s):

System Analysis ◽

Banking System ◽

Entropy Method ◽

Banking Union ◽

Policy Makers ◽

Promethee Ii ◽

Banking Systems ◽

Eu Member States ◽

European Banking ◽

Multi Criteria Analysis

In order to define and implement the most effective measures to overcome the difficulties of the post-crisis period, the policy-makers of ECB must identify not just main weaknesses of each banking system, but their strong points also. This requires the application of multi-criteria analysis, considering that policy-makers need to take into account a number of different aspects that, on the whole, indicate the quality of the banking system. Our aim is a comparative analysis of European banking systems right after the Brexit moment and within the framework of the tight new Basel III regulations. In this paper, we have ranked the banking systems of the 28 EU member states using multi-criteria analysis, specifically the PROMETHEE II method. The use of the PROMETHEE II method in combination with the entropy method offers a comprehensive insight into the banking system of each member state, given that the observed countries are ranked according to 9 conflicting criteria that are mostly used in banking system analysis. Our analysis shows that the banking systems in Central and Eastern Europe are the best performers, while the EMU’s developed banking systems such as the German, Italian, British, and French one are positioned among the last ranked. The Portuguese and Greek banking systems are, as expected, ranked in the last positions in our list. The obtained results also pointed out that the ECB should change its approach to the management and further development of a European Banking Union.

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