Bank procyclicality and output: Issues and policies

Athanasoglou, Panayiotis P.; Daniilidis, Ioannis; Delis, Manthos D.

doi:10.1016/j.jeconbus.2013.10.003

Cited by 78 publications

(51 citation statements)

References 87 publications

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“…There is an expectation of a positive relationship between bank profitability and the growth in GDP (Athanasoglou et al, 2014;Albertazzi & Gambacorta, 2009;Bikker & Hu, 2002). This expectation is plausible during a period of relative economic stability and growth.…”

Section: Growth In Gross Domestic Product (Gdp)mentioning

confidence: 99%

Determinants of bank profitability before, during, and after the financial crisis

Adelopo

Lloydking²,

Tauringana

2018

IJMF

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Purpose The purpose of this paper is to report the results of an investigation into the relationship between bank-specific, macroeconomic factors and bank profitability before (1999-2006), during (2007-2009), and after (2010-2013) the financial crisis. Design/methodology/approach Using the Economic Community of West African States’ bank panel data from 1999 to 2013, the paper used fixed effect models. The panel model includes bank-specific determinants (size, cost management, and liquidity), industry level, and macroeconomic variables. Findings Panel data analyses results show that there is a significant relationship between bank-specific determinants (size, cost management, and liquidity) and bank profitability (ROA) before, during, and after the financial crisis. However, the relationships between other bank-specific (capital strength, credit risk, and market power), macroeconomic (gross domestic product and inflation) determinants are sensitive to both periods of analysis (before, during, and after financial crisis) and bank profitability measure used (ROA or NIM). Originality/value Overall, these results suggest that the financial crisis did not affect the relationships between some bank-specific determinants and bank profitability.

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Section: Growth In Gross Domestic Product (Gdp)mentioning

confidence: 99%

Determinants of bank profitability before, during, and after the financial crisis

Adelopo

Lloydking²,

Tauringana

2018

IJMF

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“…See Agénor andPereira da Silva (2012, 2013) for a discussion of this issue in the context of middle-income countries. 10 See Andritzky et al (2009) and Athanasoglou, Daniilidis and Delis (2014) for an overview of the literature on the causes and consequences of procyclicality in banking.…”

Section: Procyclicality Financial Frictions and Macroprudential Regmentioning

confidence: 99%

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

Silva¹,

Agénor²

2016

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work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2016 Abstract * This paper discusses, from an analytical and operational perspective, the use of reserve requirements and loan loss provisions as countercyclical macroprudential instruments. In recent years both of these instruments have been used extensively in Latin America and elsewhere in the world. The first part of the paper sets the stage with a discussion of the rationale, in the presence of financial frictions, for using macroprudential regulation to mitigate financial system procyclicality. The second part reviews the general arguments, as well as the recent empirical evidence for Latin America, associated with the use of reserve requirements and loan loss provisions. The third part provides a normative analysis of the ways through which countercyclical reserve requirements and cyclically adjusted (or, more commonly called, dynamic) provisioning rules should be formulated, independently and jointly, to address concerns arising from procyclicality and financial volatility. Optimal countercyclical rules are discussed from the perspective of how these rules can either minimize a composite measure of economic volatility (combining measures of both macroeconomic and financial volatility) or maximize social welfare. The last part brings together the lessons for policymakers that can be drawn from the analysis. JEL classifications: E51, E58, G28

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“…VanHoose (2008) and Athanasoglou et al (2014) review this literature and suggest that the theoretical and empirical findings are mixed. For example, Blum and Hellwig (1995) theoretically show that bank capital regulation may reinforce macroeconomic fluctuations.…”

Section: Introductionmentioning

confidence: 99%

Real effects of bank capital regulations: Global evidence

Deli

Hasan

2017

Journal of Banking & Finance

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We examine the effect of the full set of bank capital regulations (capital stringency) on loan growth, using bank-level data for a maximum of 125 countries over the period 1998-2011. Contrary to standard theoretical considerations, we find that overall capital stringency only has a weak negative effect on loan growth. In fact, this effect is completely offset if banks hold moderately high levels of capital. Interestingly, the components of capital stringency that have the strongest negative effect on loan growth are those related to the prevention of banks to use as capital borrowed funds and assets other than cash or government securities. In contrast, compliance with Basel guidelines in using Basel-and credit-risk weights has a much less potent effect on loan growth.

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Bank procyclicality and output: Issues and policies

Cited by 78 publications

References 87 publications

Determinants of bank profitability before, during, and after the financial crisis

Determinants of bank profitability before, during, and after the financial crisis

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

Real effects of bank capital regulations: Global evidence

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