Small Business Lending and Regulation for Small Banks

Since May 2015 several U.S. Bank Holding Companies (BHCs) have been newly classified as small banks by regulators, thus benefiting from a friendlier regulatory capital environment. Using a difference-in-differences setting, we show that less regulation on small BHCs boosts small business lending of the affiliated commercial banks. We employ various tests to demonstrate that these findings are attributable to a capital channel where increases in lending are driven by the preferential capital treatment granted to the small BHC. The regulatory capital relief also has some positive effects for the local economy. Overall, the effects of the regulatory capital relief for small BHCs are consistent with its desired policy objectives. This paper was accepted by Tomasz Piskorski, finance.

Apakah Terjadi Perpindahan Simpanan Nasabah Bank Kecil Ke Bank Besar (Flight to Quality) Pada Saat Krisis Pandemi Covid-19?

This paper aims to explain whether flight to quality or the transfer of deposit funds from small banks to large banks actually occurred during the Covid-19 pandemic crisis as suspected by banking analysts. This research is descriptive research with a quantitative approach. The secondary data source in this study was obtained from the website of the Indonesia Deposit Insurance Corporation which lists the value of Commercial Bank Deposits from July 2013 to d. July 2020. Analysis of the data using panel data regression analysis. The results of this study conclude that 1) the Covid-19 pandemic does not significantly affect the performance of small banks in collecting deposits, 2) the Covid-19 pandemic causes flight to quality small bank deposits, namely Book 1 banks, Islamic banks, and regional banks to category banks. others who have large assets and 3) Economic growth does not affect the performance of small banks in collecting deposits during the Covid-19 Pandemic.How to Cite:Ashari, H., & Nugrahanti, T. P. (2021). Apakah Terjadi Perpindahan Simpanan Nasabah Bank Kecil ke Bank Besar (Flight to Quality) Pada Saat Krisis Pandemi Covid-19? Akuntabilitas: Jurnal Ilmu Akuntansi, 14(2), 215-230.

Exploring the Main Effect of e-Banking on the Banking Industry Concentration Degree on Predicting the Future of the Banking Industry: A Case Study

Today, regarding the rapid growth of Information and Communications Technology (ICT), e-commerce, and the subsequent expansion of electronic banking, the banking market structure is also expected to dramatically be changed. This paper aims to explore the main effect of electronic banking on the structure of the Iranian banking industry by investigating the banking market concentration degree. To accomplish this aim, an intelligent hybrid model is developed based on multilayer perceptron neural network and fuzzy regression of the effects of banking on the relative electronic share of banks. In the developed method, the neural network parameters such as weights and errors have been considered as the fuzzy parameters to model it under uncertainty. Ultimately, the descriptive statistics are utilized to evaluate how the difference in relative size of banks concerning e-banking has changed, in addition to exploring the main effect of e-banking on the bank’s contribution described as a neural network-fuzzy regression model. Moreover, it shows how the concentration degree in the Iranian banking sector has been reduced. The implemented analysis of the reasons for this decrease reveals that the share of banks has decreased due to an increase in the share of the small banks. Furthermore, model estimation confirms that there exists a positive relationship between banks’ share and the use of electronic banking. Besides, the small banks have strongly been shown to utilize the e-banking so that it would lead to an increase in their share and a decrease in the concentration degree. As such, it can be concluded that e-banking has reduced the concentration degree in Iran. The descriptive statistics are employed to prove it.

Are small finance banks acting as catalysts for financial inclusion in India? A phenomenological study

Purpose This paper aims to investigate whether small finance banks (SFBs) in India are working towards financial inclusion through qualitative studies. Design/methodology/approach This paper uses a phenomenological approach in which semi-structured interviews were conducted with the employees of two SFBs in Mumbai with different specializations. Employee experience was captured to grasp, interpret and code data for the creation of different themes. Findings This research shows that the current literature on financial inclusion is inadequate to explain the behavior of the needy in India. Study found multiple themes of financial inclusion, namely, financial literacy, self-esteem, use of technology, prompt repayment, credit identity, cross-referencing and financial stability. Although overall results are positive, to generalize the results, SFBs need to spend some more time in business. The findings of this study can be of global benefit to micro-finance organizations of a similar scale to achieve financial inclusion and business improvement. Research limitations/implications This qualitative study was performed at a single location and with a limited sample size, which underlines the need for repeated exercises at multiple locations with a larger sample size to establish a broader logical generality. It also points out the need for a study of employee themes to enhance the business processes of SFBs. Originality/value To the best of the authors’ knowledge, this qualitative study is first attempt to figure out the extent of work done by SFBs in India in promoting financial inclusion. Themes related to financial inclusion can provide further thought process for policymakers for financial inclusion and business improvement. Findings refer not only to Indian organizations but also to small banks around the world to recognize the underpinnings of financial inclusion and what small banks and micro-finance institutions can do to make it meaningful.

The Bank Specific Determinants of Loan Growth and Stability: Evidence from Indonesia

Introduction/Main Objectives: This study aims to examine the specific determinants of loan growth and the consequences of excessive loan growth on bank stability. Background Problems: Bank loans play an important role in economic growth, but previous studies indicate that excessive loans lead to bank instability. Novelty: This study undertakes a comprehensive analysis, as it will discuss both the loan determinants and excessive loans simultaneously. Research Methods: This study covers more than 89% of the total loans of commercial banks (listed and non-listed banks) between 2002 and 2018 and it employs GMM in order to obtain robust estimations. Finding/Results: The growth of customers’ deposits and gross NPL are the most important factors in explaining loan growth in Indonesia. Banks with excessive loans tend to have high levels of credit risk. Conclusion: Banks’ liquidity and credit risk have important roles in explaining banks’ loans. However, excessive loans could lead to bank instability, particularly for small banks.

Fintech Innovations: The Impact of Mobile Banking Apps on Bank Performance in Vietnam

This paper is aimed at analyzing the impact of FinTech innovations on bank performance across mobile banking applications in Vietnam. Using the longitudinal panel data from 2010-2019 (with 220 observations) of 22 local commercial banks in Vietnam. Multivariate panel regression is chosen to experimentally test the research hypotheses. This research paper is one of the first quantitatively investigating the effects of fintech innovation (mobile banking apps) on bank performance in Vietnam. In addition, studies on financial indicators are shown quite comprehensively in the period 2010-2019. Our empirical study has shown the following results: (i) FinTech innovations’ positive impact on bank performance in Vietnam; (ii) Banks’ adoption of mobile banking technologies positively impacted banks’ fee-based income, consumer loans and money market deposits; (iii) The effect of mobile technologies on financial performance was much stronger for small banks than large banks; (iv) As for the balance sheet liabilities aspect, the money market fund of small banks is positively affected by the mobile banking application; (v) In terms of balance sheet assets, consumer loans by small banks are positively affected by the mobile banking application while large banks are not; (vi) GDP per capita has a positive effect on the ROE of both small and large banks; (vii) Mobile phone penetration rates positively affected bank ROA and ROE and its effect was larger on small banks. From the findings, key recommendations to Vietnamese commercial banks to improve bank performance in the context of an increasingly technological development are to: (1) Increase investment in mobile banking apps and the entire mobile banking technology; (2) Increase investment in financial technology, focus more on mobile banking users and the entire mobile banking services; (3) Take advantage of the technical support and consultancy of international organizations and bilateral cooperation with other countries' authorities in management of Fintech businesses; (4) Learn from commercial banks in other countries to draw experiences, thereby develop in own context. (5) Training human resources for the finance and banking industry to not only have professional knowledge and ability to analyze data, but also have to be proficient in operating digital technology. Keywords: Fintech Innovations, mobile banking apps, bank performance, Vietnam, theories of Technological Innovation.

Banking Governance Parameters Differentiated by size: Impact on Agency Cost

Large banks and small banks can impact agency costs differently. The current study considers a panel data of 30 Indian banks before the merger to reveal the relationship between agency cost and board composition using panel regression models. The agency cost is reflected in three measures: Asset turnover ratio, free cash flow and leverage ratio. Board composition is sub-divided into three groups: board structure, board independence and board diversity. The finding of the study for large banks shows that former CEO, number of employee representatives on board, independent chairperson, CEO duality, bank age and size impacts agency cost. On the other hand, for small banks, results prove that bank age, employee representative on board and CEO duality significantly affects agency cost. Therefore, in the current Indian context of banking merger and governmental directives to increase lending to micro, small and medium enterprises, the focus should be shifted more on increasing managerial productivity and increasing leverage. Hence, the emphasis should not be on increasing governmental representatives on the banking board but to enhance bank governance quality and its monitoring. To this end, the current article can potentially provide valuable insights for sustainable and real economic outcomes.

The impact of the banking system concentration level and the pandemic on the Georgian banking sector

Introduction. The importance of the banking sector is vital for the economic development of any country, since it is the main structural unit of monetary use, which plays the greatest role in the development of the state. As in all markets, we are faced with competition in the banking market, which is characterized by certain specifics, since the main product is money that cannot be replaced by other goods, and the main purpose of competition is to gain an advantage among agents operating in the same market, which is reflected in the final profit. The more the banking market develops and the more diversified the services offered to clients, the more the role of competition in the banking sector increases. The spread of the pandemic not only impeded the development of healthy competition, but also called into question the normal functioning and development of the banking sector. Aim and tasks. The aim of the study is to determine the level of competition in the Georgian banking sector by the method of identifying total assets and net loans, which aims to identify the causes of the market concentration level and find solutions, as well as to determine and assess the shock effects of the pandemic, because The pandemic period has become an even bigger challenge for the Georgian banking sector, where most of the market players occupy a small volume of the market, the National Bank of Georgia is actively trying to keep up with the challenges, and in order to mitigate the negative impact caused by the pandemic Results. The results of the study showed the monopoly functioning of the market, which is an obstacle to the development of a competitive market, resulting in unhealthy functioning of the market and the development of a flexible banking system, which ultimately negatively affects the stability of the country's economic development. As for the post-pandemic situation, it has been dealt with quite positively in Georgia, with the management of loan and deposit portfolios successfully managed through a temporary supervisory plan developed by the government, which has not been followed by outflow of funds from banks and loan portfolio mismanagement. Conclusions. In conclusion, it should be noted that in a highly concentrated market, small banks should be promoted with various legislative benefits, which will lead to competition, it is possible to impose a so-called "Capital tax", which implies high demands on capital, it will allow small banks to develop in a healthy competitive environment. Despite the fact that no bank was disrupted during the virus shock in Georgia, the financial result was so unfavorable, it was damaged, the main reason for which was the provision of possible losses on loans, which amounted to a total of 1.22 billion GEL, the National Bank of Georgia is actively trying to keep up with the challenges.