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.

Regulatory capital requirements: can the banks mitigate the risk through lending rates?

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Vighneswara Swamy
Keyword(s):  
Commercial Banks ◽  
Bank Lending ◽  
Capital Requirements ◽  
Basel Iii ◽  
Content Type ◽  
Percentage Point Increase ◽  
Point Increase ◽  
Lending Rate ◽  
Lending Rates ◽  
The Impact

PurposeThe purpose of this study is to investigate the impact of the new capital requirements under the Basel III framework on bank lending rates.Design/methodology/approachBy constructing a stylized representative bank's financial statements, the authors show that the higher cost associated with a 1-percentage increase in the capital ratio can be recovered by increasing the bank lending rate.FindingsThe results indicate that in the case of scheduled commercial banks, a 1-percentage-point increase in the capital ratio can be recovered by a commensurate increase in the bank lending rate by 16 basis points and would go up to an extent of 94 basis points for a 6-percentage point increase assuming that the risk-weighted assets are unchanged.Practical implicationsThe results assume significance as the estimations for the scenarios of changes in risk-weighted assets change in return on equity and the cost of debt. Given the enormous significance of the impact of Basel III on banks, this research outcome benefits the practitioners in the industry and researchers.Originality/valueThis study contributes to the literature on bank regulation and risk management with a newer and topical approach for quantification of the impacts of new regulatory standards. Another contribution of this study is that it considers three different groupings of banks: (1) scheduled commercial banks; (2) public sector banks and (3) private banks in Indian banking. This is the first of its kind in the context of studying Indian banking.

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 The factors affecting accessibility to credit capital of small and medium enterprises in Vietnam

2019 ◽  
Vol 15 (6) ◽  
pp. 15-25
Author(s):  
Phung The Dong ◽  
Nguyen Thi Hong Nham
Keyword(s):  
Interest Rates ◽  
Small And Medium Enterprises ◽  
Probit Model ◽  
Bank Loans ◽  
Bank Loan ◽  
Factors Affecting ◽  
Business Loan ◽  
The Government ◽  
Medium Enterprises ◽  
The Impact

The difficulty in accessing loans is one of the major barriers to the development of small and medium enterprises (SMEs) in Vietnam. Low accessibility to capital forces SMEs to spend both official and unofficial costs in order to obtain loans, and/or to access the unofficial market at higher interest rates, thereby increasing cost of production of enterprises. Studies suggest that the determinants of bank loan processing through which small and medium enterprises can access official loans include: characteristics of enterprises; indicators, reflecting the performance of enterprises; characteristics of loans; characteristics of enterprises, enterprise owners; geographical position of enterprises; the creditworthiness of enterprises and the role of the network.Purpose of the study.The aim of this paper is the quantitative analysis of the factors, affecting accessibility to credit capital of small and medium enterprises in Vietnam.Materials and methods.This study was conducted on the basis of a survey in December 2017. The survey includes 301 enterprises in Hanoi city. Selected enterprises are also enterprises, surveyed in the annual enterprise survey by the General Statistics Office of Vietnam. This paper uses the Probit and Logit regression approach to estimate the impact of factors, affecting the disbursement probability of a loan of an enterprise. The number of SMEs accounts for 56.69% of the samples. The number of enterprises, applying for a bank loan accounts for 58.4% of the total samples, of which the percentage of disbursed loans for SMEs accounts for only 47.3%. For enterprises without a bank loan, eliminating the reasons for the lack of demand and unwish to be in debt, the main reasons not to access bank loans are high interest rates, complicated loan procedures and insufficient collateral.Results.The results obtained from the Logistic and Probit models show that the estimated coefficients are statistically significant, affecting the probability of taking a business loan, accepted by financial institutions. Although the coefficients, estimated from Logistics model are larger than those estimated from the Probit model, the estimated results show that the direction of impact of the variables in two estimation techniques gives quite similar results.Conclusion.Based on the results of this study, the Government of Vietnam should implement policies to support SMEs in the direction of improving their access to capital. The credit institutions should design products and services suitable to the characteristics of SMEs in Vietnam.

Impact of interest rates of bank loans on road construction: the case of Sri Lanka

2018 ◽  
Vol 16 (4) ◽  
pp. 518-532
Author(s):  
Manamgoda Gamage Nimantha Manamgoda ◽  
B.A.K.S. Perera ◽  
Colombapatabendige Savindi Ranthika Perera
Keyword(s):  
Interest Rate ◽  
Sri Lanka ◽  
Interest Rates ◽  
Road Construction ◽  
Debt Financing ◽  
Bank Loans ◽  
Bank Loan ◽  
Content Type ◽  
Road Projects ◽  
The Impact

Purpose Infrastructure systems play a dominant role in the economic growth of countries. Projects involved with the construction of roads, which is vital for the development of a country, are financed mainly using borrowed funds because of the reliability of debt financing. The cost of borrowing is the interest that has to be paid. In Sri Lanka, there is a high tendency for interest rates of bank loans to fluctuate, and this makes the road projects in the country that are funded with borrowed money to be highly risky. Thus, this paper aims to identify the impact of bank loan interest rates on road construction in Sri Lanka. Design/methodology/approach The study consisted of two questionnaire surveys conducted among financial specialists and road construction experts, followed by a documentary review. The collected data were analysed using Relative Importance Index. The relationship between the interest rates of bank loans and the prices of the resources used in road projects were determined using regression and correlation analyses. Findings The research revealed a strong, linear relationship between interest rate fluctuations and bitumen, aggregate base course, metal and earth price fluctuations. It also identified the pattern of interest rate fluctuations to help practitioners to predict the pattern of input price variations. Originality/value When developing the capital structure of road projects, it is necessary to consider the prices of materials used in the projects when determining the financial risks of debt financing.

scholarly journals “The Impact of Shadow Banks on the Commercial Bank Lending in India with Reference to the Housing Finance Sector.”

2020 ◽  
Vol 8 (6) ◽  
pp. 51-58
Keyword(s):  
Commercial Banks ◽  
Banking System ◽  
Secondary Data ◽  
Bank Lending ◽  
Bank Loans ◽  
Housing Finance ◽  
Shadow Banking ◽  
Housing Sector ◽  
Bank Profitability ◽  
The Impact

Significant variations of bank profitability in Indian commercial banks during the period 2009-2018 motivated the critical need to study the impact of shadow banking on the profitability of commercial banks in India. Shadow banking is defined as any institution that offer bank like activities but not regulated as banks. These institutions seem to be on the rise in India thus this research considered to investigate their implications to traditional banks’ profitability. The secondary data in this analysis covered a period of 10years from 2009 to 2018. The multiple linear panel regression model for the bank profitability measures; Return on Asset (ROA), was used as a dependent variable to analyze the data. Shadow banking ratios, variables were used as independent variables in the model. To measure if the loans given by banks to housing sector decreased as a result of housing finance companies, the net aggregate of loans disbursed by banks to housing sector and net aggregate of loans disbursed by housing finance companies were recorded for the past 5 years and significant analysis was made accordingly looking at the data .Shadow banking ratios were derived from monetary aggregates data that is M3, total bank loans and total bank deposits. Regression results indicated thatShadow banking only completes the banking system and has no significant impact on loans of the commercial banks in the Housing Finance sector.

Does auditor industry expertise affect bank loan costs?

2017 ◽  
Vol 32 (3) ◽  
pp. 295-324 ◽  
Author(s):  
Yinghong Zhang ◽  
Fang Sun ◽  
Chunwei Xian
Keyword(s):  
Interest Rates ◽  
Bank Loans ◽  
Bank Loan ◽  
Content Type ◽  
Loan Terms ◽  
Loan Spreads ◽  
The Impact ◽  
Auditor Industry Expertise ◽  
Industry Expertise ◽  
Industry Specialist

Purpose This paper aims to examine whether firms retaining industry-specialist auditors receive better price and non-price terms for bank loans. Design/methodology/approach Based on a sample of companies retaining big N auditors during the 2000-2010 period, this paper constructed six proxies for auditor industry expertise and tested three major loan terms: loan spreads, number of general and financial covenants and requirements for collateral. Findings It was found that companies retaining industry-specialist auditors receive lower interest rates and fewer covenants. Banks are also less likely to demand secured collateral. These findings are supported by several sensitivity tests. Research limitations/implications The findings suggest that auditor industry expertise provides incremental value to creditors and that bank loan cost is one economic benefit for companies hiring specialist auditors. Originality/value To the best of the authors’ knowledge, this study is the first to investigate the impact of auditor industry expertise on the cost of private debts.

scholarly journals The Bank Lending Channel of Monetary Policy? The Panel Evidence from Egypt

2014 ◽  
Vol 16 (3) ◽  
pp. 255 ◽  
Author(s):  
Mohamed Aseel Shokr ◽  
Zulkefly Abdul Karim ◽  
Mansor Jusoh ◽  
Mohd. Azlan Shah Shah Zaidi
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Empirical Studies ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Level Data ◽  
Effect Of Monetary Policy

This paper examines the relevance of the bank lending channel of monetary policy in Egypt using bank-level data. Previous empirical studies in Egypt that used macro-level data have not supported the relevance of the bank lending channel. However, using a sample of 32 commercial banks for the period from 1998 until 2011 and a dynamic panel GMM technique, the empirical findings revealed the relevance of the bank lending channel of monetary policy in Egypt. Moreover, there is a heterogeneity effect of monetary policy on bank loans according to bank size, in which the small banks are more affected during a monetary contraction than larger banks. This finding signals that the monetary authorities in Egypt should take cognizance of the stability of interest rates in order to stabilize the bank loan supply.       

Loan tenor in project finance

2019 ◽  
Vol 12 (3) ◽  
pp. 825-842 ◽  
Author(s):  
Wouter Thierie ◽  
Lieven De Moor
Keyword(s):  
Political Risk ◽  
Bank Lending ◽  
Bank Loans ◽  
Policy Implications ◽  
Project Finance ◽  
Basel Iii ◽  
Infrastructure Projects ◽  
Data Set ◽  
Content Type ◽  
The Impact

Purpose The purpose of this paper is to develop a better understanding of the debt structuring of project finance (PF) loans and the main drivers affecting the maturity of bank loans in infrastructure deals. When banks grant loans to a project, they have two decision variables: the interest margin or the spread and the maturity of the loan. Although several studies analyze the drivers of the spread, few studies in the literature look at the maturity of bank loans. As infrastructure projects are typically highly leveraged, the structuring of bank lending is an important parameter in the financial viability of the project. Design/methodology/approach The paper develops a regression analysis of the loan’s maturity on four categories: characteristics of the project, political risk of the country where the project is executed, the macro-economic setting and the regulatory framework. By using a new data set of InfraDeals containing data on bank loans of more than 1,800 infrastructure projects worldwide from 1997 to 2016, this paper reveals new insights on the debt structuring of banks for PF loans. Findings The results indicate that the maturity of bank loans granted to infrastructure deals is predominantly driven by political risk and regulation, rather than the structuring of the project. This implicates that the region where the deal is closed weighs more heavily than the specificities of the project itself. Originality/value The results have important policy implications. The paper allows to develop a better understanding on how political risk and new regulation, like Basel III, might affect the PF market. The paper is the first one finding empirical evidence of the impact of Basel III regulation on PF lending. By delving deeper into the political risk variable, the authors formulate several recommendations to mitigate political risk.

scholarly journals BANK LENDING IN UKRAINE AND SIMULATION OF CREDIT ACTIVITY BY METHODS OF SYSTEM DYNAMICS

2021 ◽  
Vol 2021 (2) ◽  
pp. 101-127
Author(s):  
Svitlana Hlushchenko ◽  
◽  
Sergiy Ivakhnenkov ◽  
Sofiia Demkiv ◽  
◽  
...  
Keyword(s):  
System Dynamics ◽  
Interest Rates ◽  
Commercial Banks ◽  
Banking Sector ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Short Term ◽  
Loan Portfolio ◽  
Stage Of Development

The article identifies trends in bank lending to companies and households in Ukraine and considers modeling and integrated mapping of demand and supply of bank loans using the methods of system dynamics. The article shows that by 2020 the main trends in the Ukrainian banking sector are: a) increased dynamics of return on capital (29.7%) and reduced dynamics of interest rates on deposits (6.6%) and loans (14.8%); b) growth of the dynamics of bank loans in general, including the following characteristics: the largest share of the bank loan portfolio is accounted for by loans to economic entities, while loans to households account for 21.9%; loans to households are growing faster compared to the growth rate of loans to businesses; in the sectoral context, the largest share in lending is accounted for by the trade sector; short-term consumer loans predominate in household lending (82%); half of the loan portfolio of commercial banks consists of short-term loans; the share of non-performing loans in the total volume of issued loans remains high (48.75%); c) the deposit portfolio is dominated by household deposits, but in the dynamics there is a tendency to decrease in their share. Based on the methods of system dynamics, the authors present a model that allows to trace the relationship between commercial banks and legal entities and individuals, as well as to forecast the amounts 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, characterization of trends in banking, modeling the interaction of major participants in bank lending and determining the volume of bank loans using methods of system dynamics will help identify the main factors influencing the supply and demand of bank credit resources at the current stage of development of Ukraine and predict future dynamics of lending.

Discretionary Accruals in Italian Private Firms and Non-Linear Bank Loan Granting

2017 ◽  
pp. 83-99
Author(s):  
Elisabetta Mafrolla ◽  
Viola Nobili
Keyword(s):  
Financial Reporting ◽  
Banking System ◽  
Regulatory System ◽  
Discretionary Accruals ◽  
Bank Loans ◽  
Bank Loan ◽  
Banking Union ◽  
Private Firms ◽  
European Banking Union

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers' financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms' discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

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