Competition in banking and the lending channel: Evidence from bank-level data in Asia and Latin America

Financial development and the bank lending channel in developing countries

“…The impact of the bank lending channel might also be affected by the characteristics of the banking systems. In this regard, Olivero et al (2011) found that loan supply is less sensitive to monetary shocks in more concentrated banking markets in Latin American countries.…”

“…The dependent variable, ∆ln(Loans) i,t , measures the growth rate in loan supply from bank i in year t relative to year t-1. This variable has been widely used in the bank lending channel literature (Jimborean, 2009;Gambacorta and Marques-Ibanez, 2011;Olivero et al, 2011). As many previous studies, we introduce this variable lagged 1 year as an independent variable to capture the persistence effects of the dependent variable.…”

“…However, most of the analyses are concentrated in developed countries, especially the United States and Europe, and reveal that the relevance of this channel is limited and depends on the country and the period under estimation 1 . Fewer studies deal with the bank lending channel in developing countries, but, different from industrial economies, they are more conclusive about the existence of the bank lending channel (Archer, 2006;Olivero et al, 2011;Amidu and Wolfe, 2013). However, the intensity of this channel also varies across countries.…”

Money, Lending and Banking Crises

“…Size, liquidity, capitalisation, credit risk, securitisation and bank market power are the main bank‐specific characteristics used in the literature. Thus, small banks are more influenced by a tight monetary policy than big banks (Kashyap & Stein, ,, ; Kishan & Opiela, , ; Altunbas et al ., , ); poorly capitalised banks respond more to monetary policy than well‐capitalised banks (Kashyap & Stein, , ; Peek & Rosengren, ; Kishan & Opiela, , ; Altunbas et al ., , ; Van den Heuvel, ; Gambacorta & Mistrulli, ; Gambacorta, ); less liquid banks feel more acutely the impact of monetary changes than more liquid banks (De Bondt, ; Kashyap & Stein, ; Ehrmann et al ., , ; Gambacorta & Mistrulli, ; Gambacorta, ; Altunbas et al ., ; Matousek & Sarantis, ); banks with higher credit risk are more affected by monetary contractions than banks with lower credit risk (Altunbas et al ., ; Bogoev, ; Adelino & Ferreira, ; Cantero‐Saiz et al ., ); less securitisation improves monetary policy (Altunbas et al ., ; Loutskina & Strahan, ; Gambacorta & Marques‐Ibanez, ); and, the higher the level of bank competition (less market power) the higher the influence of monetary policy (Adams & Amel, , ; Gunji et al ., ; Turk‐Ariss, ; Olivero et al ., ,; Brissimis et al ., ; Fungáčová & Weill, ; Fungáčová et al ., ; Leroy, ). Ehrmann et al .…”

Bank Competition in India: Some New Evidence Using Risk-Adjusted Lerner Index Approach

“…He concluded that banking markets in industrialized countries are characterized by monopolistic competition; there is higher competition in larger banks as compared to smaller banks; few large banks have the power to restrict competition while smaller banks are unable to do so. Olivero et al (2010) studied competition in banking and its consequences on monetary policy of a country and found that monetary tightening by the government would have no significant impact on large banks rendering it ineffective; however, it would have the impact of a larger magnitude on small banks. The customers of smaller banks would be affected in the presence of information asymmetries and transaction cost of moving from one bank to another.…”