Constructing banking networks under decreasing costs of link formation

The structure of networks plays a central role in the behavior of financial systems and their response to policy. Real-world networks, however, are rarely directly observable: banks’ assets and liabilities are typically known, but not who is lending how much and to whom. This paper adds to the existing literature in two ways. First, it shows how to simulate realistic networks that are based on balance-sheet information. To do so, we introduce a model where links cause fixed-costs, independent of contract size; but the costs per link decrease the more connected a bank is (scale economies). Second, to approach the optimization problem, we develop a new algorithm inspired by the transportation planning literature and research in stochastic search heuristics. Computational experiments find that the resulting networks are not only consistent with the balance sheets, but also resemble real-world financial networks in their density (which is sparse but not minimally dense) and in their core-periphery and disassortative structure.

Determinants of the performance of Moroccan banks

PurposeThe economic and financial literature dealing with the subject of bank profitability has often been based in the measurement of banking results on three main indicators: ROA, ROE and MIN. This article aims to determine and analyze the different determinants that influence bank profitability and to identify the impact of these determinants on the profitability of Moroccan banks.Design/methodology/approachFor this purpose, a fixed individual effect model was adopted for the case of six Moroccan banks during the period of study from 1997 to 2018. The authors carried out their estimates at three levels according to three categories of profitability factors: bank factors, factors of the banking system and macroeconomic factors.FindingsThe empirical findings show that Moroccan banks react on their size to boost their performance, which further explains the continued expansion of Moroccan banking networks. The authors confirm that Moroccan banks have not yet reached a level of size that will be detrimental to their performance. Therefore, the authors can conclude that the big Moroccan banks do not follow the concept of economy of scale. The effects of the variation in the level of economic growth as well as the evolution of the level of inflation on the performance of Moroccan banks are not significant.Originality/valueThe authors’ findings and results have some important originality and value. Primarily, these results would consist of better helping the State, bankers, and bank managers to better understand the various determinants of bank profitability. The results may also help to better examine the effect of each factor, whether internal or external, on banks' bottom line.

The Kabuliwalas: Afghan moneylending and the credit cosmopolis of British India, c. 1880–1947

Immortalised in Rabindranath Tagore’s short story ‘The Kabuliwala’, the Afghan moneylender has appeared in many studies about rural and urban India as an unwanted interloper. This article presents an alternative picture. From the late nineteenth century through the mid-twentieth century, Afghans regularly visited the financial frontiers of British India where they offered collateral-free loans with high interest rates to urban and rural communities on the fringes of respectable creditors, such as banks, cooperative societies and banking networks. More than simply predatory, Afghan moneylenders provided a micro-financial service when and where no one else would. As a result, Afghan moneylending operations, considered as a whole, provide insight into the cosmopolitan nature of credit relationships among the working poor in the colonial era and how social and cultural notions informed not only those relationships but also how the imperial government and its allies understood them. Beginning with the Great Depression, novel legal regimes emerged around the subcontinent aimed at eradicating Afghan moneylending and solving the social problems associated with it. In the process, the intrusion of the state into informal finance via regulation hampered deep historical patterns of interregional social connectivity and redefined the cosmopolitanism of credit relations in the informal sectors of the economy.

La participacion de filiales aseguradoras en la comercialización de prestamos hipotecarios: extensión de posición dominante al mercado de seguros español

Las entidades de crédito llevan décadas anudando contratos de préstamo hipotecario con contratos de seguro producidos por sus propias filiales aseguradoras. La distribución de estos seguros en el mercado de banca minorista ha sido masiva, contribuyendo al crecimiento exponencial del canal banca-seguros y al aprovechamiento de las redes bancarias. En este trabajo se examinan, desde nuestro sistema de libre competencia, las condiciones de competencia surgidas a través de la práctica de vinculación y sus repercusiones frente al resto de operadores del sector del seguro. For decades, loan institutions have been tying mortgage loan contracts with insurance contracts produced by their own insurance subsidiaries. The distribution of these insurances in the retail banking market has been massive, contributing to the exponential growth of the bancassurance channel and the use of banking networks. This paper examines, from our system of free competition, the conditions of competition arising through the tying practice and its repercussions in relation to the rest of the insurance sector operators.