scholarly journals Banking: Interest Spread, Inelastic Deposit Supply, and Mergers

2006 ◽  
Vol 45 (4II) ◽  
pp. 1055-1070 ◽  
Author(s):  
M. Idrees Khawaja ◽  
Musleh-Ud Din
Keyword(s):  
Monetary Policy ◽  
Banking Sector ◽  
Developing Economies ◽  
Bank Lending ◽  
Bank Lending Channel ◽  
Treasury Bills ◽  
Lending Channel ◽  
Lending Rates ◽  
The Difference ◽  
Pass Through

Interest spread, the difference between what a bank earns on its assets and what it pays on its liabilities, has been on an upward trend during the last few years: during 2005 the average interest spread of the banking sector has increased by 2.14 percent. An increase in the interest spread implies that either the depositor or the borrower or both stand to loose. In the context of developing economies, the lack of alternate avenues of financial intermediation aggravates the adverse impact of increase in spread.1 Interest spread also has implications for the effectiveness of the bank lending channel. For example, with a commitment to market based monetary policy, the central bank influences the yield on treasury bills (T. bill hereafter) that in turn affects the deposit and lending rates.2 The change in these rates influences the cost of capital that in turn affects the level of consumption and investment in the economy. If the pass-through of the changes in yield on T. bill rate to the deposit and lending rates is asymmetric then this changes the spread, for better or worse, depending upon the nature of asymmetry. If the increase in spread is due to lower return to depositors then this discourages savings; alternatively if it is due to higher charge on loans, investment decisions are affected. In either case the increase in spread has an adverse bearing upon the effectiveness of bank lending channel of monetary policy and has therefore important implications for the economy......

Bank lending channel and banking sector efficiency: panel data of Egypt

2018 ◽  
Vol 13 (5) ◽  
pp. 1291-1310 ◽  
Author(s):  
Mohamed Aseel Shokr ◽  
Anwar Al-Gasaymeh
Keyword(s):  
Monetary Policy ◽  
Panel Data ◽  
Banking Sector ◽  
Generalized Method Of Moments ◽  
Bank Lending ◽  
Bank Loan ◽  
Bank Lending Channel ◽  
Bank Efficiency ◽  
Content Type ◽  
Lending Channel

Purpose The purpose of this paper is to examine the relevance of the bank lending channel (BLC) of monetary policy and the bank efficiency in Egypt. Design/methodology/approach This paper examines the effectiveness of bank lending channel using generalized method of moments GMM model during the period from 1996 to 2014. Also, it uses stochastic frontier approach (SFA) to examine the bank efficiency in Egypt. Findings This study supports the relevance of the BLC using panel data. Moreover, applying SFA, this paper computes cost efficiency taking account of both time and country effects directly. The finding suggests that banks with low inflation and high GDP tend to perform more efficiently. Research limitations/implications The limitation of the study is examining one country only. Practical implications The finding signals that the Central Bank of Egypt (CBE) should adjust interest rate in order to stabilize the bank loan supply. Social implications It is important for the CBE and Egyptian banks because it highlights the importance of BLC. Originality/value It examines one channel of monetary policy and bank efficiency in Egypt.

scholarly journals Size of Banks as a Factor Which Impacts the Efficiency of the Bank Lending Channel

e-Finanse ◽  
2020 ◽  
Vol 16 (1) ◽  
pp. 36-44 ◽  
Author(s):  
Filip Świtała ◽  
Iwona Kowalska ◽  
Karolina Malajkat
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Banking Sector ◽  
Bank Lending ◽  
Annual Data ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Lending Policy ◽  
Cooperative Banks ◽  
The Impact

AbstractIn most economies the banking sector plays the major role in the financial system. Therefore, it is of great importance to analyse and understand the mechanism of transmission of monetary policy and its impact on the banking sector. One of the possible repercussions of changing the level of official interest rates is the ability to influence the size of bank lending, by means of the bank lending channel. The key aspect our research is a thorough understanding of the functioning of the bank lending channel, with the main goal of this study being an examination of the efficiency of monetary policy transmission through the bank lending channel depending on the size of banks in the sector. This paper examines the abovementioned relation using annual data from 1995-2015 by 1709 commercial and cooperative banks from 27 EU countries and analyzing them in various econometric models. The results indicate that there is a positive impact of a bank’s size on loan growth (defined as the bank size increases, the impact of changes in interest rates in the bank’s lending policy is getting smaller), however, interaction between the variables of size and the interest rate, was proved to be insignificant (in the group of all analysed banks, as well as in commercial and cooperative banks separately).

scholarly journals Market structure, state ownership and monetary policy transmission through bank lending channel: Evidence from Vietnamese commercial banks

2021 ◽  
Vol 10 (3) ◽  
pp. 164-177
Author(s):  
Huu Huan Nguyen ◽  
Minh Vu Ngo ◽  
Thanh Phuc Nguyen
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Market Structure ◽  
Commercial Banks ◽  
Banking Sector ◽  
Bank Lending ◽  
State Ownership ◽  
Bank Loan ◽  
Bank Lending Channel ◽  
Lending Channel

This paper examines the impact of market structure and state ownership on bank lending as a transmission channel for monetary policies. For controlling the effects of bank heterogeneities and macroeconomic factors on bank lending, dynamic models using two-step difference GMM with panel data collected from 25 Vietnamese commercial banks and the Vietnamese banking sector from 1999 to 2017 are employed. Results indicate that a higher level of concentration in the banking market and state ownership dampen the expected impacts of interbank interest rate on the loan growth in commercial banks, which decreases the effectiveness of monetary policy via the bank lending channel. These results are robust regarding the use of alternative measures of market structure and the inclusion of event time variables in the dynamic model. Based on the findings, monetary policy could be implied using the significant moderating impacts of state-ownership as well as the market structure of the Vietnamese banking sector on the relationship between bank loan supply and interbank interest rate.

scholarly journals The Effect of Monetary Policy on Bank Wholesale Funding

2020 ◽  
Author(s):  
Dong Beom Choi ◽  
Hyun-Soo Choi
Keyword(s):  
Monetary Policy ◽  
Banking Sector ◽  
Financial Frictions ◽  
Bank Lending ◽  
Monetary Policy Transmission ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Policy Transmission ◽  
Effect Of Monetary Policy

We study how monetary policy affects the funding composition of the banking sector. When monetary tightening reduces the supply of retail deposits, banks attempt to substitute wholesale funding for deposit outflows to smooth their lending. Because of financial frictions, banks have varying degrees of access to wholesale funding. Therefore, large banks, or those with greater reliance on wholesale funding, increase their wholesale funding more. Consequently, monetary tightening increases both the reliance on and the concentration of wholesale funding within the banking sector. Our findings also suggest that liquidity requirements could bolster monetary policy transmission through the bank lending channel. This paper was accepted by Tyler Shumway, finance.

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