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We analyze the effect of subsidies on firm R&D, conditional on firms' access to external financing during the financial crisis when access to external financing was particularly difficult. Specifically, we determine whether subsidies can mitigate or completely offset the effect of external financing constraints of firms or banks. Financial constraints are considered through (i) firms' credit ratings, and (ii) the capital reserves of their banks. Subsidies were found to help maintain R&D investments during the crisis, especially when financial constraints were present. After the crisis, the subsidized firms reached the level of R&D spending they had prior to the crisis. [ABSTRACT FROM AUTHOR]

Basel I introduced capital requirements for undrawn commitments, but only for revolvers with an original maturity greater than one year. We use this regulatory discontinuity to estimate the impact of capital regulation on the cost and composition of credit. Following Basel I, short-term commitment fees declined relative to long-term commitments and issuance of short-term facilities increased. Our results highlight the sensitivity of credit provision to capital regulation, particularly for banks with less capital. We are able to infer that low-capital banks are willing to forego twice as much income from fees to reduce required regulatory capital by a dollar. [ABSTRACT FROM AUTHOR]

We study how banks use "regulatory adjustments" to inflate their regulatory capital ratios and whether this depends on forbearance on the part of national authorities. Using the 2011 EBA capital exercise as a quasi-natural experiment, we find that banks substantially inflated their levels of regulatory capital via a reduction in regulatory adjustments (without a commensurate increase in book equity and without a reduction in bank risk). We document substantial heterogeneity in regulatory capital inflation across countries, suggesting that national authorities forbear their domestic banks to meet supranational requirements, with a focus on short-term economic considerations. [ABSTRACT FROM AUTHOR]

Using regulatory data, we study German bank lending in countries targeted by financial sanctions. We find that domestic banks in Germany reduce lending in sanctioned countries, whereas their foreign bank affiliates outside Germany increase lending. In some cases, this is because the bank affiliates' host countries have not imposed sanctions themselves. However, even German bank affiliates in host countries that enact sanctions like Germany increase lending if these host countries lack strong institutions and anticrime policies. These findings suggest that even universally adopted sanctions distort bank capital flows and competition if the level of their enforcement varies across bank locations. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online [ABSTRACT FROM AUTHOR]

The belief that bank capital helps improve stability takes for granted the idea that increases in capital are an incentive to reduce risk-taking because bank owners would have more to lose (skin-in-the-game) if their banks fail. Nevertheless, given the higher cost of capital as compared to debt, it is also possible that increases in capital would lead to higher risk-taking due to the need for banks to boost their returns. In light of these contradictory possibilities, we exploit exogenous variations of capital to empirically investigate the actual effects of capital on risk-taking. Our analyses based on a sample of nearly 1900 US Banking Holding Companies in the 1990–2020 period indicate that increasing capital actually leads to higher risk-taking, which contradicts the skin-in-the-game hypothesis. We show evidence that this relationship could be explained by the consequent increase in funding costs that creates pressure for better returns, which is normally achieved by means of taking higher risk. Our main findings are robust to a number of alternative model and sample specifications. [ABSTRACT FROM AUTHOR]

We analyse the effect of credit supply constraints on R&D conditional on the financial strength of firms and heterogeneity in the restrictions in the supply of external financing. The financial strength of firms and access to external financing are identified by an exogenously calculated rating index. Restrictions in the supply of external financing are determined by the specific time period (crisis vs. non-crisis) and the balance sheet strength of the firm's main bank in terms of bank capital. Our results support the theoretical prediction that financing constraints negatively affect R&D. We find that firms with a lower financial strength reduce R&D to a stronger extent in times of stress on financial markets and when the firm faces restrictions in external financing. Additionally, the effect does not persist over time. [ABSTRACT FROM AUTHOR]

To help small firms secure bank financing, large sellers often orchestrate joint finance programs, linking their small dealers with major banks that lend to all participating dealers based on the information the seller provides. We examine supply chain decisions (pricing and inventory) and lending terms under such seller-orchestrated financing programs. In loan pricing, we highlight a form of financial friction that is of particular importance under such schemes—bank capital regulation. Banks are globally mandated to maintain regulatory capital to mitigate unforeseen loan losses, using either the standardized approach (where regulatory capital is a fixed percentage of the loan amount) or the internal rating-based (IRB) approach (where it depends on the loan's value-at-risk). We consider a game-theoretic model consisting of a large seller and multiple capital-constrained newsvendor-type dealers, who obtain financing from banks that are subject to capital regulation. The seller decides the wholesale price and whether to orchestrate a joint finance program for its dealers by collaborating with a bank, and the dealers choose their inventory level and the financing channel. We find that a seller should only orchestrate the joint financing program when the bank adopts the IRB approach and the dealers are of low risk. Such a program is more profitable to the seller when the demand correlation among dealers is low, and there is a large number of dealers. Although always benefiting the seller, these programs may hurt dealers with intermediate risk. Facing dealers with varying financial situations, the terms under the joint finance program should be designed as if the financially strong dealers subsidize the weak ones. Finally, allowing the seller to share part of the loan loss could further enhance the performance of joint financing, but only when the seller's opportunity cost of capital is low. Our findings provide guidance to large sellers on how to orchestrate joint finance schemes, and to small dealers on making their corresponding operational decisions. [ABSTRACT FROM AUTHOR]

This paper investigates the effects of the new post‐financial crisis regulatory regime – risk‐based capital ratios (RBC) and stress tests – on banks' off‐balance sheet activities (OBS). We use a panel of US bank holding companies over the period 2001–2018 to examine the relationship between banks' capital levels and OBS activities. Our major finding is that banks significantly reduced their OBS exposure following the introduction of the new capital regulatory framework requirements. In particular, we show that tighter regulatory RBC resulted in a reduction of OBS activities in well‐capitalised banks. Conversely, we find that under‐capitalised banks increased their OBS activities, which suggests the possibility of regulatory arbitrage. [ABSTRACT FROM AUTHOR]

Political influence on bank credit allocation is often viewed as being necessary to address social problems like income inequality. We hypothesize that such influence elicits bank capital responses. Our hypothesis yields three testable predictions for which we find supporting evidence. First, when banks observe election outcomes that suggest greater impending political credit-allocation influence, they reduce capital to increase fragility and deter political influence. Second, banks subject to greater political influence nonetheless increase lending that politicians favor, and household consumption consequently increases. Third, these banks exhibit poorer post-lending performance. Our study has implications for the interaction between politics, household consumption, and bank risk through a specific channel—the interplay between credit-allocation regulation and bank capital structure. This paper was accepted by Victoria Ivashina, finance. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.04056. [ABSTRACT FROM AUTHOR]

This paper studies the introduction of new temporary taxation on banks and its effects on banks' lending decisions. Focusing on a unique policy experiment in Slovenia in 2011, where the government imposed a 0.1% tax on banks' total assets, I find that the introduction of the tax resulted in a lower credit supply of loans to corporates. In particular, for each percentage point increase in the share of tax in the capital, banks charge, on average, 8 basis points higher lending rates and decrease their lending amount by 0.5%. The findings of this research carry strong policy implications for countries contemplating or having already implemented windfall or other temporary taxes on banks. The introduction of the tax might lead to a reduction in lending beyond what would be warranted from the standpoint of monetary or other policies. [ABSTRACT FROM AUTHOR]

In the framework of sustainable ecology, financial sustainability takes on greater significance. As a result, this study examines the impact of financial development (bank adequacy) on both renewable energy and carbon emissions for Gulf Cooperation Council (GCC) countries from 2005 to 2020, using institutional quality (government stability and corruption control) as a moderating factor while controlling for FDI, population growth, and urbanization. However, for the investigation, the quantile-on-quantile regression technique was used, while the fixed effect OLS and Driscoll Kraay OLS techniques were used as robustness checks. The first model outcome reveals that all the variables have a positively significant connection with renewable energy. This implies that higher bank capital adequacy-augmented liquid assets, heightened asset returns, and enhanced investment viability. prospects may encourage physical asset outlays of companies operating in greening. But for the second model, financial development, FDI, and government stability have a positive relationship with carbon emissions, which confirms the presence of the pollutant haven hypothesis for the understudied countries while controlling corruption, population, and urbanization to decrease ecological degradation. This outcome implies that excess-investment clean energy enterprises intermediary effect of liquidity of banks for the understudy countries. Moreover, this study adds to the current literature by comparing the financial development (capital adequacy of banks) in GCC countries that are leaders in climate finance and by highlighting the role that bank capital adequacy plays in strengthening environmental laws to promote investment in renewable energy. [ABSTRACT FROM AUTHOR]

This study seeks to answer the question of whether we could use a bank's past financial data to predict the bank failure in 2009 and proposes three new empirical proxies for loan quality (LQ), interest margins (IntMag), and earnings efficiency (OIOE) to forecast bank failure. Using the bank failure list from the Federal Deposit Insurance Corporation (FDIC) database, I match the banks that failed in 2009 with a control sample based on geography, size, the ratio of total loans to total assets, and the age of banks. The model suggested by this paper could predict correctly up to 94.44% (97.15%) for the failure (and non-failure) of banks, with an overall 96.43% prediction accuracy, (p = 0.5). Specifically, the stepwise logistic regression suggests some proxies for capital adequacy, assets/loan risk, profit efficiency, earnings, and liquidity risk to be the predictors of bank failure. These results partially agree with previous studies regarding the importance of certain variables, while offering new findings that the three proposed proxies for LQ, IntMag, and OIOE statistically and economically significantly impact the probability of bank failure. [ABSTRACT FROM AUTHOR]

By utilizing China's 2016 Implementation Plan for the Specific Rectification of Internet Financial Risks as an exogenous shock, we employ a difference-in-differences identification strategy to investigate the impact of FinTech regulation on banks' risk-taking. Our findings indicate that FinTech regulation strengthens banks' deposit franchises and funding liquidity. As reliable and interest-rate-insensitive funding sources, higher deposit franchises weaken banks' incentives for risk-taking. Further analysis, conducted to control for the potential interference of other policies, confirms the stable incremental effect of FinTech regulation. Moreover, we find that FinTech regulation tends to benefit banks with higher capital buffers and smaller sizes from a triple difference (difference-in-difference-in-difference) analysis. By focusing on the external effects of FinTech regulation, we aim to shed light on how regulatory gaps impact the formal financial system and highlight the importance of effectively regulating emerging financial entities. [ABSTRACT FROM AUTHOR]

This article deeply integrates the characteristics of the China financial market under the background of the spread of the global new coronavirus pneumonia epidemic and integrates the multi-sector DSGE model including heterogeneous residents, manufacturers, banks, and macro-prudential supervision, and then numerically simulates the impact of technology and financial shocks on major economic indicators. Macroprudential capital regulation can help stabilize large economic waves, increase labour supply in the economic system, and restrain excessive transmission of systemic risks in the financial system. Meanwhile, the leverage ratio of banks will also change correspondingly with the price fluctuations of the real estate market. The relevant decision-making departments of the central government and the financial supervision departments coordinated in many ways to find the optimal internal balance point and increase the combined effect of effectively deflating systemic risks. [ABSTRACT FROM AUTHOR]

Bank capital stands at the heart of banking regulation aimed at curbing bank risk-taking. This paper examines the impact of the Chinese version of Basel III capital regulation on bank risk-taking in China, by applying panel regressions to a large sample of Chinese commercial banks. Our findings indicate that more Tier 2 contingent convertible (CoCo) bonds as capital instruments in the capital composition may paradoxically increase, rather than decrease, bank risk-taking. This effect is robust to instrumental variable estimation. A channel analysis reveals that this unintended effect primarily arises from a leverage effect. This is due to the strong debt attributes of Chinese Tier 2 CoCo bonds, leading to lower core capital levels. Conversely, no evidence is found for the franchise value effect as a significant driver. Lastly, we confirm that capital constraints influence banks' capital adjustments and asset risk allocation aligning with regulatory aims. Our paper has significant policy implications for financial regulation, shedding light on the efficacy of Basel III capital regulation while highlighting the limitations of Tier 2 CoCo bonds as capital instruments in China. [ABSTRACT FROM AUTHOR]

Small Finance Banks (SFBs) are specialised banking institutions incorporated to serve the unbanked, small and underserved customers. Their primary motive is to improve financial access by providing access to essential financial services. This article examines the performance of ten SFBs in India over four years. The CAMELS model has been applied for performance analysis, which provides performance and ranking of various SFBs using the model’s six parameters: Capital adequacy, Asset quality, Management, Earning quality, Liquidity and Sensitivity. This study will help identify SFBs in financial distress, which will be helpful in timely action for their revival. Financial analysts and credit rating agencies can also use the comparative performance of these banks to frame their opinion or ratings. The common public, including customers and investors, can frame their short-term and long-term investment decisions based on the performance and ranking of these institutions. Furthermore, a proper assessment of these banks is needed as their good performance can ensure that formal credit availability reaches the grassroots level. [ABSTRACT FROM AUTHOR]

This study aims to evaluate the impact of human capital investment, encompassing training, education, knowledge, and skills, on the efficiency of banks in Bangladesh. Utilizing a simple random sampling method, data is gathered from 309 respondents through a seven-point Likert scale. The analysis employs measurement modeling and structural equation modeling with the PLS-SEM approach. The findings reveal a positive association between human capital investment and bank efficiency. The study suggests that by investing in training, education, knowledge, and skills, banks can enhance their investment efficiency, recognizing the varying performance levels of employees. This implies a need for aligning human capital through strategic investments. Institutional investors utilize investment management frameworks to operationalize investment policies, where efficiency integrates risk, return, and total cost. The implications of this study provide actionable insights for managers, owners, decision-makers, and academicians, serving as a basis for policy dialogue. The research contributes to existing knowledge by shedding light on the relationship between human capital investment and investment efficiency, drawing from social exchange theory and resource-based view theory. [ABSTRACT FROM AUTHOR]

This article studies the effects of higher bank capital requirements. Using new firm-lender matched credit data from South Korea, we document that Basel III coincided with a 25% decline in credit from regulated banks, and an increase of similar magnitude from non-bank (shadow) lenders. We use our data to estimate the effect of capital requirements on bank credit, and the spillover effect of the reform on non-bank lending. We then build a general equilibrium model with heterogeneous banks and firms that replicates these micro estimates. We find that Basel III can account for most of the observed decrease in regulated bank lending and about three quarters of the increase in shadow lending. The latter is driven exclusively by general equilibrium effects of the reform. [ABSTRACT FROM AUTHOR]

Copyright of Journal of Economic Administrative & Legal Sciences is the property of Arab Journal of Sciences & Research Publishing (AJSRP) and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Arab Gulf Journal of Scientific Research is the property of Arabian Gulf University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Zeitschrift für Bankrecht und Bankwirtschaft is the property of De Gruyter and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Additional Tier 1 bonds (AT1 bonds) are hybrid financial instruments issued by banks under Basel III. In case of a threat to the financial stability of an institution, these bonds can be converted into equity or written down to help the bank meet capital requirements. AT1 bonds are designed to insure a bank against a potential capital shortfall and minimize the need for a regulatory bail-out. AT1 bonds gained new attention after the collapse of Credit Suisse (CS), when all outstanding AT1 bonds issued by the bank were written down to zero. This paper provides an overview of AT1 capital, compares the main types of AT1 bonds and describes their most common features. In addition, it quantifies the risk premium in AT1 bond yields and identifies the main factors underlying this premium. The analysis is supported by real data on AT1 issuance in Europe. It is shown that in the primary market investors demand a significant premium from banks for the additional risk embedded in AT1 bonds. The size of the premium depends mostly on issuer-specific factors such as issuer’s credit risk, capital ratio, stock volatility and asset size. On the contrary, security design turns out to be a less important pricing factor. The author compares the results before and after the CS crash and concludes that the CS AT1 write-down did not directly affect the pricing principles in the market. The results of the research may be useful both for investors looking for yield pickup in financial sector and for banks working on the optimal design for their AT1 bonds.

Credit is an important component in developing micro, small, and medium enterprises (MSMEs), as it can boost a country’s economy, help boost the production capacity of MSMEs, create jobs, and reduce poverty. This study aims to examine the characteristics of banks in Indonesia that influence lending to micro, small, and medium enterprises by adopting agency theory that explains the relationship between lenders (banks) and borrowers (MSMEs) as agents and principals. Data were taken from quarterly financial reports of banks in Indonesia. There are 42 sample banks from 2010 to 2022, so the data used are 2,182 observations. Data analysis uses a fixed effect model with robust standard errors. The results show that operating costs do not influence credit access for MSMEs or medium-sized enterprises. Bank stability has an impact on increasing MSME credit access. High bank capital also increases MSME credit access. Robustness tests were also conducted using the general method of moments. The results were consistent with the main model. The implication is that cost management theory and credit decision-making need to consider differences in business scale. The results also further strengthen the argument that bank stability is an important factor that can improve access to credit for small and medium enterprises. AcknowledgmentsAppreciation is given to the Doctoral program Universitas Sebelas Maret Surakarta Indonesia and the Institute of Research and Community Services (LPPM) Unisnu Jepara Indonesia, which has supported this research.

Since the seminal work of MM irrelevance theory, there has been a long history of controversy among academicians both in developed and developing nations regarding the determinants of capital structure. To this end, the main aim of this study was to investigate firm-specific and country-level determinants of the capital structure of Ethiopian commercial banks. The study adopted an explanatory research design with a quantitative research approach. A panel dataset was obtained from 14 commercial banks, which range from 2010 to 2022. A random effect panel regression result revealed that tangibility, non-debt tax shields, growth, and interest rate had a positive and significant effect, while the gross domestic product had a negative and significant effect on leverage which is used as a measure of capital structure. Among the independent variables tested, ROA, liquidity, effective tax rate, risk, and inflation have an insignificant effect on the capital structure of the selected commercial banks. The study will have implications for managers of commercial banks, legislators, regulators, and other interested parties that can use the study's conclusions to help them make well-informed capital decisions and implement the necessary measures to enhance the financial performance of Ethiopian banks with an optimal ratio of debt to equity. [ABSTRACT FROM AUTHOR]

This study examines the determinants of profitability of deposit banks in Turkiye taking into account differences in the ownership structures of public, private domestic and foreign-owned banks. The aim of the study is to analyse whether the factors determining profitability change depending on the managerial differences that the ownership structure may entail. A seemingly unrelated regression method with monthly data from 2010 to 2022 is used for this purpose. Our findings suggest that the real effective exchange rate, inflation, and non-interest income variables have common effects on profitability regardless of bank ownership. However, the bank capital ratio, bank size, loan to deposit ratio, and economic activity affect profitability differently across bank ownership types. [ABSTRACT FROM AUTHOR]

This paper reviews the historical evolution of the quantitative models, model usage and model risk management (MRM) in large US banks since the 1980s. It comments on the most significant model-related events through this period. Some of these events were associated with contexts of great stress to the financial system. The paper identifies the main features of modelling in finance and economics that distinguish it from its application in the natural sciences. Then it presents the different types of models used in the large banks' stress testing programmes, the specific characteristics and risks of each type of model and the best practices for the implementation of sound model risk management, and it suggests a proper way to interpret the results of stress testing and capital assessment in the presence of model risks. The paper discusses the future evolution of MRM towards the implementation of a fully fledged risk management framework along the lines of other risk management disciplines, including risk identification, measurement, monitoring, reporting, limiting and capitalisation. It acknowledges the enhancements and opportunities offered by advances in the use of artificial intelligence and machine learning as well as increases in computational power. The paper concludes by noting that the model risk management framework that has been enforced by the Federal Reserve's stress testing and capital planning programmes has substantially strengthened the capital position, profitability and resilience of the large banks in the US. [ABSTRACT FROM AUTHOR]

Using supervisory data on small and midsized nonfinancial enterprises (SMEs), we find that those SMEs with higher leverage faced tighter constraints in accessing bank credit after the COVID‐19 outbreak in spring 2020. Specifically, SMEs with higher pre‐COVID leverage obtained a smaller volume of new loans and had to pay a higher spread on them during the pandemic period. Consistent with an inward shift in loan supply, these effects were concentrated in loans originated by banks with below‐median capital buffers. Highly levered SMEs that relied on low‐capital large banks for funding before the pandemic were not able to substitute to other sources of debt financing and thus experienced more of a reduction in total debt as well as a decline in investment and employment. On the other hand, the unprecedented public support, especially the Paycheck Protection Program (PPP), mitigated the adverse real effect stemming from bank credit constraints. [ABSTRACT FROM AUTHOR]

The study examines the Green Preferential Capital Requirement Programmes of the Magyar Nemzeti Bank, with a special focus on their extension, and presents the information on which the decision is based, the theoretical background of the programmes, the international regulatory environment, the mechanism of the preferential capital requirement and the results of the programmes. The results and feedback from market participants suggest that the preferential capital requirement programmes have a market and institutional development impact across the financial institutions system. From a prudential perspective, the green preferential capital requirement programmes did not have a material negative impact: they reduced banks' capital requirements by up to 0.31 per cent only. In view of the positive results, having been extended for a uniform period, these programmes are expected to continue to encourage green lending. [ABSTRACT FROM AUTHOR]

Purpose: Financial inclusion aims to provide affordable financial services, including banking, loans, equity, and insurance products, to underserved populations. This study aims to examine the moderating effect of a bank's capital adequacy ratio (CAR) on the nexus between financial inclusion (FI) and a bank's financial performance (FP) in the Egyptian setting. Design/methodology/approach: The study uses two empirical linear mixed models (LMM) to test the moderation effect of a bank's CAR on the association between FI and FP. The study sample comprises 360 bank quarter-observations of 10 listed banks in the Egyptian Stock Exchange (EGX) from 2013 to 2021. Findings: The findings show that the bank's CAR strengthens the association between FI dimensions, namely, deposit growth, loan growth, and the number of employees, and the bank's FP with contradicted directions. Research limitations/implications: This study provides policymakers insights into the crucial role of complying with banking regulation, namely, the capital adequacy ratio (CAR) and expanding financial inclusion practices to enhance and improve the bank's FP. Thus, encouraging more strategies and facilities toward financial inclusion. Originality/value: Due to the scarcity of financial inclusion literature in emerging economies, this paper extends FI literature by highlighting the moderation impact of a bank's CAR on the relationship between FI dimensions and FP in the Egyptian banking sector. Consequently, this study clarifies this beneficial relationship, which may have significant implications for restoring the challenges faced by the Egyptian economy following the critical events it went through, which, in turn, impacted the country's poor and vulnerable. [ABSTRACT FROM AUTHOR]

Copyright of Financial & Business Studies Journal / Maǧallaẗ Al-Dirāsāt Al-Māliyyaẗ wa Al-Tiǧāriyyaẗ is the property of Beni Suef University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We analyse the effects of changes in regulatory capital requirements under Basel III on the dynamic evolution of bank shareholder equity over time. Evidence from managerial and regulatory reports shows that bank shareholder equity stands between micro-prudential regulatory capital requirements and managerial pursuit of equity economising strategies. Shareholder value strategies see shareholders as the equity investment remuneration recipients. Micro-prudential regulators, in turn, address them as equity investment providers. With opposing cash streams, one orientation puts the other to a test. The article visualises this conflict by analysing the actual shareholder contribution to the bank equity position in nine case studies of European financial institutions between 2001 and 2017; our evidence-based financial analysis applies an innovative method to data directly extracted from financial statements, in order to measure this equity position evolution and assess bank equity dynamics in light of revised regulatory capital requirements and persistent assurance of shareholder value thriving in managerial reports. The choice of in-depth analysis of a sample of relevant case studies overcomes the absence of detailed data on changes in bank equity in existing databases. [ABSTRACT FROM AUTHOR]

Based on a panel of banks in Hong Kong, we found that banks with a relatively thin capital buffer and liquidity before the pandemic may constrain their post‐pandemic loan growth. We further found strong evidence that the release of countercyclical capital buffer (CCyB) requirements amid the pandemic mitigated the capital constraint to support continued provision of bank credit to the real economy, but mainly to non‐hard hit economic sectors. Nevertheless, the credit flow to hard‐hit economic sectors is found to be well supported by the SME Financing Guarantee Scheme. [ABSTRACT FROM AUTHOR]

We collected over 1600 estimates on the relationship between bank capital and lending and construct 40 variables to capture the context in which these estimates are obtained. Accounting for potential publication bias, we find that a 1 percentage point (pp) increase in capital (regulatory) ratio results in around 0.3 pp increase in annual credit growth, while changes to capital requirements cause a decrease of around 0.7 pp. Using Bayesian and frequentist model averaging, we show that the relationship between bank capital and lending changes over time, reflecting the post‐crisis period of increasingly demanding bank capital regulation and subdued profitability. We also find that the reported estimates of semi‐elasticities are significantly influenced by the empirical approach chosen by researchers. Our findings suggest that the literature fails to provide policymakers with reliable estimates of the effects of capital regulation on bank lending, and our study offers insights that could help guide future research. [ABSTRACT FROM AUTHOR]

Lexicographic orders produce a total order over a set of fuzzy numbers by comparing several real-valued functions of each fuzzy number under consideration following a strictly hierarchical method. Lexicographic orders present advantages such as simplicity, consistency with human intuition, and power of discrimination. In this paper, we move one step forward in the search for simplicity by proposing a simplified version of lexicographic orders that focuses on the defining parameters of fuzzy numbers instead of using more complex functions as is common in the existing methodologies. More precisely, we show that two lexicographic methods described in the literature for trapezoidal and triangular fuzzy numbers are equivalent to the lexicographic order of a reorganization of the vector of defining parameters, reducing the complexity of the methods. We illustrate our approach through numerical examples and a case study about capital adequacy in the banking sector. [ABSTRACT FROM AUTHOR]

We present a tractable dynamic general equilibrium model of self-fulfilling bank runs, where banks trade capital in competitive and liquid markets but remain vulnerable to runs due to a loss of creditor confidence. We characterize how the vulnerability of an individual bank depends on its leverage position and the economy-wide asset prices. We study the effect of credit easing policies, in the form of asset purchases. When a banking crisis is generated by runs, credit easing can reduce the number of defaulting banks and enhance welfare. When the crisis is driven by fundamentals, credit easing may have adverse consequences. (JEL E32, E44, E58, G01, G21, G28, G33) [ABSTRACT FROM AUTHOR]

Purpose: This paper focuses on the different Shari'ah resolutions on preference shares. This study aims to provide a systematic review to cover all authentic, peer-reviewed literature on this issue between the years 2001 and 2020. Design/methodology/approach: This library research combines, compares and contrasts the discussions and the results of all these papers besides the opinions and discussions of some renowned scholars in the field. Findings: The aim of this paper was met as every research during that period was included and scrutinized which resulted in a comprehensive knowledge about the presence shares. Research limitations/implications: One of the limitations was the limited research on the Shari'ah issues in preference shares as a regulatory capital that meets Basel III accords. Originality/value: This paper will be the reference for any researcher who wants to add value on this issue and to start from where researchers ended. [ABSTRACT FROM AUTHOR]

Central bank independence (CBI) has been widely advocated as a means to address the time‐inconsistency problem of controlling inflation. Consequently, many countries have embraced central bank reforms since the 1990s. While extant research in political science has sought to unveil the consequences of CBI, there remains an unexplained variation in the response of countries with regard to capital account openness. Notably, a positive association exists between CBI and capital account openness due to the constraints CBI places on leaders' discretionary monetary and fiscal policies, thereby fostering reliance on financial policy to boost their economies. However, this relationship is contingent on the domestic political contexts of countries. CBI leads to capital account liberalization only when the rule of law is guaranteed, given that CBI is often stipulated by laws. Therefore, in countries where political leaders can easily override formal rules, CBI shows no discernible impact on capital account openness. Employing two‐way fixed‐effects and error‐correction models, the study reveals that CBI increases capital account openness only in democracies, in the presence of multiple veto players, and a high level of transparency. The findings underscore the pivotal role of the domestic political environment in analyzing how CBI constrains political leaders. [ABSTRACT FROM AUTHOR]

This study investigates whether some regulatory and contextual features influenced Euro Area listed banks decisions to manage earnings and regulatory capital through discretionary provisions in the period 2013–2018. The new regulation factors are the pressure to increase high-quality regulatory capital (Basel III) and more timely recognition of loan losses (IFRS 9). The contextual features are the intensified banking competition at a national level, and the significant money market pressure. Results demonstrate that the pressure to increase high-quality regulatory capital for banks with lower Common Equity Tier 1 capital (CET1) in year t − 1 is negatively associated with upward earnings and capital management in year t. The more timely recognition of loan losses in year t compared to year t + 1 is negatively associated with upward earnings and capital management in year t. The strengthening of banking competition is positively associated with upward earnings management, but not associated with upward capital management. The increasing money market pressure is negatively associated with upward earnings management, but not associated with upward capital management. This study should be helpful to standard-setters, regulators, investors and academics interested in incentives and constraints to earnings and capital management by providing evidence regarding how listed banks reacted to the regulatory, accounting, and contextual factors, observed holistically during a unique historical period (i.e., 2013–2018) and regulatory setting (i.e., European banking sector). [ABSTRACT FROM AUTHOR]

This paper aimed to investigate the effects of government borrowing banks' capital structure using a sample of banks registered in South Africa from 2012 to 2021. Despite the extensive literature on this association, few prominent researchers have studied this phenomenon in the banking sector. Applying the generalised method of moments (GMM) model, the study established a positive but significant effect on the South African banks' capital structure from total government borrowing, local government borrowing and foreign government borrowing, and capital structure. Contrary to the crowding-out effects detected, the results revealed a positive and significant relationship between government borrowing and banks' capital structure. The crowding-in effect better explains these results, where government borrowing stimulates the local market for goods and services, motivating banks to borrow more in order to meet the demand for loans. Future research should test the cointegrating and causality relationship between government borrowing and bank capital structure. Also, given that the banking sector is constrained by Basel III's capital adequacy requirement, controlling for this factor is critical in future research. [ABSTRACT FROM AUTHOR]

The Federal Reserve is currently in the process of reducing the size of its balance sheet. Major questions, especially in light of the surprising impact of its 2019 reductions, are what its ultimate size will be. Many factors will play into that, including the interaction of bank capital and liquidity requirements with the size of reserves and the impact on the ability of the private market to absorb Treasury debt issuance, the willingness of banks to regularly use the discount window and other market participants to borrow at the standing repo facility, as well as the ongoing risk that a large Fed balance sheet can generate large losses to the System. [ABSTRACT FROM AUTHOR]

Since 2016, the Basel Committee on Banking Supervision has regulated banks to switch from a Value-at-Risk (VaR) to an Expected Shortfall (ES) approach to measuring the market risk and calculating the capital requirement. In the transition from VaR to ES, the major challenge faced by financial institutions is the lack of simple but powerful tools for evaluating ES forecasts (i.e., backtesting ES). This article first shows that the unconditional backtest is inconsistent in evaluating the most popular Historical Simulation (HS) and Filtered Historical Simulation (FHS) E S models, with power even less than the nominal level in large samples. To overcome this problem, we propose a new class of conditional backtests for E S that are powerful against a large class of alternatives. We establish the asymptotic properties of the tests, and investigate their finite sample performance through some Monte Carlo simulations. An empirical application to stock indices data highlights the merits of our method. [ABSTRACT FROM AUTHOR]

Purpose: The study seeks to evaluate the effect of capital adequacy and competition on the liquidity creation of Kenyan commercial banks. Design/methodology/approach: Unbalanced panel data from 36 Kenyan commercial banks with licenses from 2001 to 2020 is used in the study. The generalized method of moments (GMM), a two-step system, is employed in the investigation. To increase the robustness and prevent erroneous findings, serial correlation tests and instrumental validity analyses are used. The methodology developed by Berger and Bouwman (2009) is used to estimate the commercial banks' levels of liquidity creation. Findings: The study supports the financial fragility-crowding out hypothesis by finding a significant negative effect of capital adequacy on the liquidity creation of commercial banks. The research also identifies a significant inverse relationship between competition and liquidity creation, depicting competition's value-destroying effect. Practical implications: A trade-off exists between capital adequacy and liquidity creation, which must be carefully evaluated as changes in capital requirements are considered. The value-destroying effect of competition on liquidity creation presents a case for policy geared toward consolidating banks' operations through possible mergers and acquisitions. Originality/value: To the best of the authors' knowledge, this is the first study to empirically offer evidence concurrently on the effect of competition and capital adequacy on the liquidity creation of commercial banks in a developing economy such as Kenya. Additionally, the authors employ a novel measure of competition at the firm level. [ABSTRACT FROM AUTHOR]

Beyond the 2007–2008 financial crisis, the collapse of the Silicon Valley Bank and the acquisition of Credit Suisse by the Swiss investment bank UBS Group AG in 2023 have brought fresh attention to the need for new regulatory capital, liquidity risk management, and leverage requirements. To meet tightened capital requirements, banks have to increase their capital ratios either by increasing equity or by decreasing risk-weighted assets. Both options lead to banks' performance deterioration. One remedy for banks to recover is raising their lending spread. A critical question is how much the lending spread should be increased to offset the drop in the bank's financial performance level. In this study, we focus on the asymmetries and efficiency consequences of performance indices such as economic value added (EVA) and the more commonly used return on equity (ROE) in determining the loan spread. Using data on the largest U.S. banks over the period 2018–2022, our results show that the ROE rule significantly overestimates the magnitude of the lending spreads required to offset the negative financial consequences of increases in capital ratios. The EVA approach, on the other hand, prescribes on average a significantly lower lending spread of 0.4505 basis points against a lending spread of 21.0441 basis points associated with the use of the ROE approach. The efficiency and the level of lending spreads should enable banks to maintain their competitive advantages in the loan markets impacting overall economic productivity and growth. [ABSTRACT FROM AUTHOR]