scholarly journals Bank Balance Sheets and External Shocks in Asia

2021 ◽  
Vol 21 (10) ◽  
Author(s):  
Zefeng Chen ◽  
Sanaa Nadeem ◽  
Shanaka Peiris
Keyword(s):  
Exchange Rate ◽  
Banking Sector ◽  
Foreign Currency ◽  
Balance Sheets ◽  
Foreign Exchange Intervention ◽  
Net Worth ◽  
Asian Economies ◽  
The Exchange Rate ◽  
Bank Balance Sheets ◽  
Panel Vector Autoregression

In emerging Asia, banks constitute the dominant source of financing consumption and investment, and bank balance sheets comprise large gross FX assets and liabilities. This paper extends the DSGE model of Gertler and Karadi (2011) to incorporate these key features and estimates a panel vector autoregression on ten Asian economies to understand the role of the banking sector in transmitting spillovers from the global financial cycle to small open economies. It also evaluates the effectiveness of foreign exchange intervention (FXI) and other macroeconomic policies in responding to external financing shocks. External financial shocks affect net external liabilities of banks and the exchange rate, leading to changes in credit supply by banks and investment. For example, a capital outflow shock leads to a deprecation that reduces the net worth and intermediation capacity of banks exposed to foreign currency liabilities. In such cases, the exchange rate acts as shock amplifier and sterilized FXI, often deployed by Asian economies, can help cushion the economy. By contrast, with real shocks, the exchange rate serves as a shock absorber, and any FXI that weakens that function can be costly. We also explore the effectiveness of the monetary policy interest rate, macroprudential policies (MPMs) and capital flow management measures (CFMs).

scholarly journals International Monetary Frameworks

2021 ◽  
pp. 101-121
Author(s):  
Ulrich Bindseil ◽  
Alessio Fotia
Keyword(s):  
Exchange Rate ◽  
Central Bank ◽  
Foreign Currency ◽  
Balance Sheet ◽  
Lender Of Last Resort ◽  
Balance Sheets ◽  
Fixed Exchange Rate ◽  
International Monetary Arrangements ◽  
Recent Developments ◽  
Bank Balance Sheets

AbstractIn this chapter we turn to representing flows of funds in alternative international monetary frameworks, and what global liquidity these different frameworks provide. We first recall some arguments in favour of and against fixed exchange rate systems. We then introduce two international monetary arrangements of the past which imply fixed exchange rates, namely the gold standard and the Bretton Woods system, and recall why both eventually failed. We then turn to three international monetary frameworks in the context of the current paper standard, i.e. fixed exchange rate systems, flexible exchange rate systems, and the European monetary union. We explain the role of an international lender of last resort and related solutions, and how these allow for more leeway in running fixed exchange rate systems. We also show how banks and central bank balance sheets are affected by international flows of funds and the balance of payments. Finally, we briefly review recent developments of foreign currency reserves, being the key central bank balance sheet position in this context.

scholarly journals Exchange Rate Fluctuations and Firm Leverage

2020 ◽  
Vol 20 (283) ◽  
Author(s):  
Ilhyock Shim ◽  
Sebnem Kalemli-Ozcan ◽  
Xiaoxi Liu
Keyword(s):  
Exchange Rate ◽  
Foreign Currency ◽  
Emerging Market ◽  
Firm Level ◽  
Balance Sheets ◽  
Net Worth ◽  
Exchange Rate Fluctuations ◽  
Level Data ◽  
Firm Leverage ◽  
Foreign Currency Debt

We quantify the effect of exchange rate fluctuations on firm leverage. When home currency appreciates, firms who hold foreign currency debt and local currency assets observe higher net worth as appreciation lowers the value of their foreign currency debt. These firms can borrow more as a result and increase their leverage. When home currency depreciates, the reverse happens as firms have to de-lever with a negative shock to their balance sheets. Using firm-level data for leverage from 10 emerging market economies during the period from 2002 to 2015, we show that firms operating in countries whose non-financial sectors hold more of the debt in foreign currency, increase (decrease) their leverage relatively more after home currency appreciations (depreciations). Combining the leverage data with firm-level FX debt data for 4 emerging market countries, we further show that our results hold at the most granular level. Our quantitative results are asymmetric: the effects of depre-ciations, that are generally associated with sudden stops, are quantitatively larger than those of appreciations, which take place at a slower pace over time during capital inflow episodes. As our exercise compares depreciations and appreciations of similar size, these results are suggestive of financial frictions being more binding during depreciations than a possible relaxation of such frictions during appreciations.

scholarly journals Kontrowersje w postrzeganiu kredytów w walutach obcych w Polsce i ich weryfikacja w ujęciu ekonomiczno-finansowym

Ekonomia ◽  
2018 ◽  
Vol 24 (1) ◽  
pp. 101-115
Author(s):  
Marek Radzikowski
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Banking Sector ◽  
Foreign Currency ◽  
Financial Knowledge ◽  
Foreign Currencies ◽  
The Exchange Rate

Controversies in the perception of foreign currency loans in Poland as well as their verification from the economic and financial perspectiveThis article is devoted to the verification of the following seven popular opinions on the foreign currency loans in Poland: I banks create money out of nothing; II the banks that were granting foreign currency loans did not actually possess the foreign currencies; III the banks possessed foreign currencies, but only for the loans denominated in foreign currencies, and not for the ones indexed in them; IV the banks that were granting foreign currency loans made a profit on the appreciation of these currencies; V a conversion of foreign currency loans at the exchange rate from the day of granting the loan would not entail high costs for the banking sector; VI it was unjustified to use the foreign exchange spreads by the banks that were granting the foreign currency loans; VII the foreign exchange spreads used by the banks were excessive, which means that the banks obtained an undue profit on them. The author critically evaluates these opinions and on the basis of current economic and financial knowledge, concludes that they are wrong.

Features of payments in foreign currency in budgetary institutions

2020 ◽  
pp. 19-28
Author(s):  
Larisa Gerasimova
Keyword(s):  
Exchange Rate ◽  
Foreign Currency ◽  
Fair Value ◽  
Budgetary Institutions ◽  
The Exchange Rate ◽  
Monetary Assets ◽  
Made In

The article discusses the procedure for accounting for objects in a foreign currency. It is shown that foreign currency assets, liabilities, and other items are recorded simultaneously in foreign currency and in rubles. Analyzed the accounting treatment of exchange rate differences, it is shown that their records depend on the period. Examples of currency monetary and non-monetary accounting items and the specifics of their reflection in accounting transactions are given. Monetary assets and liabilities are recorded at the exchange rate at the date of recognition. The option of recognition at the reporting date is possible. Non-monetary assets and liabilities are recognized at the date of recognition and are no longer restated. An example of accounting for non-monetary assets accepted by an institution at fair value as an exception to their rules is given. The article reflects that the revaluation of such assets at the new exchange rate is made in cases when the fair value of the object changes. It shows the mechanisms for accounting for the return of advances in foreign currency and options when such debt is recalculated or not recalculated after being accepted for accounting.

scholarly journals Bank Consolidation, Efficiency, and Profitability in Italy

2017 ◽  
Vol 17 (175) ◽  
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.

scholarly journals How Does Financial Sector Reacts After Special Events? An Event Study Analysis of Tunisia after the Revolution of 2011.

2014 ◽  
Vol 4 (2) ◽  
pp. 584-599
Author(s):  
Amira KADDOUR ◽  
Mourad ZMAMI
Keyword(s):  
Exchange Rate ◽  
Stock Market ◽  
Event Study ◽  
Banking Sector ◽  
Financial Sector ◽  
Study Analysis ◽  
Special Events ◽  
Egarch Model ◽  
The Exchange Rate ◽  
The Impact

Using an event study analysis, we aim to investigate the impact of political, economic, social and terrorism events, on the Tunisian financial sector, over the period of the Tunisian Revolution; from (12)2010 to (04)2014. Based on a daily data analysis using three selected variables ; Sectoral index of performance of Tunisian banks ,Index of Tunisian stock market and the exchange rate Euro/ Dinar,  the EGARCH model results have highlighted that general events decrease the return of our variables, and increase their volatility. More, results have shown that stock market is very sensitive to political and terrorism events, bad economic events increase the volatility of the exchange rate, and decrease the performance of banking sector. Political events remain the more important component, they affect negatively all the endogenous variables; coefficients in the mean equation show an important decline in term of the return of banking sector ,the stock market and the exchange rate.

Corporate Debt Vulnerability and Non-performing Assets in India

2020 ◽  
pp. 097215092093575
Author(s):  
K. Dhananjaya
Keyword(s):  
Banking Sector ◽  
Global Financial Crisis ◽  
Corporate Debt ◽  
Sales Growth ◽  
Bank Profitability ◽  
Balance Sheets ◽  
Public Sector Banks ◽  
Bank Balance Sheets ◽  
Asset Quality

This article examines the increasing corporate debt vulnerability and its impact on the asset quality of the Indian public sector banks (PSBs) in the post-global financial crisis (post-GFC) of 2008. The study shows that the stress in both corporate and bank balance sheets has increased in the post-GFC. As a result, there has been a steep increase the proportion of firms with negative profitability. The article finds that the declining profitability has severely affected the debt serviceability of the firms. Consequently, the debt at risk has risen significantly, which in turn has contributed to increase in non-performing assets (NPAs) of the banking sector, particularly, the PSBs. Using the panel regression technique, the study finds that the corporate debt vulnerability is an important determinant of the growth of NPAs along with other factors such as debt concentration, corporate sales growth, lending to sensitive sectors, bank profitability, bank size and the efficiency of banks.

scholarly journals Efeitos das Intervenções Cambiais à vista na Taxa de Câmbio R$/US$ de 1999 a 2008: Um Estudo de Evento

2010 ◽  
Vol 8 (2) ◽  
pp. 229
Author(s):  
Roberto Meurer ◽  
Felipe Wolk Teixeira ◽  
Eduardo Cardeal Tomazzia
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Exchange Market ◽  
Foreign Exchange Intervention ◽  
Study Approach ◽  
Rate Acceleration ◽  
Rate Behavior ◽  
The Exchange Rate ◽  
Short Time ◽  
New Criterion

This study analyses interventions in the Brazilian spot foreign exchange market from 1999 to 2008 and their effects on the R$/US$ exchange rate, using an event study approach. It aims to verify if the foreign exchange interventions have any significant impact on the exchange rate behavior. The period was divided according to a MS-VAR model and analyzed with different criterions. The results indicate that prolonged foreign exchange intervention have a greater effect on the exchange rate behavior, in comparison to short time intervention episodes. The results also point to the existence of quickly dissipating effects on the rate behavior. The creation of a new criterion, based on the analysis of exchange-rate acceleration, shows that the exchange rate is mainly prone to accelerate on leaning with the wind purchase intervention episodes.

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