Credit Supply and Demand in Unconventional Times

Altavilla, Carlo; Boucinha, Miguel; Holton, Sarah; Ongena, Steven

doi:10.1111/jmcb.12792

Cited by 36 publications

(33 citation statements)

References 55 publications

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“…Financing supply plays an important role for the activity of banking intermediation. Banking with the conditions of good financial performances and supported with good quality lenders will determine the amount of bank lending to the customers (Imran & Nishat, 2013;Altavilla et al, 2018;Busmante, Cuba & Nivin, 2019).…”

Section: Background Theorymentioning

confidence: 99%

Financing Supply of Islamic Banking During COVID-19 Outbreak in Indonesia

Afandi

2021

JIEBR

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This study aims to analyze the factors that affect the financing supply of Islamic banking during pandemic COVID-19 outbreak in Indonesia. The variable of financial performances of Islamic banking such as Return on Assets (ROA), Capital Adequacy Ratio (CAR), Financing to Deposit Ratio (FDR) and Non-Performing Financing (NPF) are used as the independent variables. Meanwhile, the impact of COVID-19 pandemic is analyzed using dummy variable. Furthermore, each of the independent variables and the dummy variable are tested its influence to the dependent variable, namely the financing supply of Islamic banking by using a proxy of the total financing. Ordinary Least Square (OLS) with double log model used as a data analysis technique with the results of the study show that the variable of ROA has a positive but not significant effect to the financing supply. Variable CAR and FDR each shows a negative and not significant effect to the financing supply. Whereas, the variable of NPF shows a negative and significant effect to the financing supply. Meanwhile, COVID-19 pandemic contributes in giving a positive and significant difference effect to the financing supply than before the presence of COVID-19 in Indonesia. The results of this study prove that the phenomenon of credit crunch in Islamic banking relative can be addressed during pandemic COVID-19 outbreak in Indonesia.

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Section: Background Theorymentioning

confidence: 99%

Financing Supply of Islamic Banking During COVID-19 Outbreak in Indonesia

Afandi

2021

JIEBR

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“…As each bank has to put aside certain amount of own funds for each unit of credit, it becomes a conventional wisdom that weak banks tend to originate less credit. Indeed, Altavilla et al [5] show that lower credit growth among weaker banks may result both from a weak supply, as well as low demand for funds, which depends on financial intermediaries own characteristics, such as risk profile and funding. Gambacorta and Shin [32] pointed out that bank equity is an important determinant of both the bank's funding cost and its lending growth.…”

Section: The Effectiveness Of Bank Capital Regulationmentioning

confidence: 99%

“…Due to a significant role of FX loans in the lending activity of Polish banks, we decided to adjust the changes in bank lending volume for movements of FX rates of the 3 most important currencies (CHF, EUR, and USD). 5 It allows us to control for situations, when changes in lending volume (in PLN) are driven by FX movements. As the banks usually do not publish the currency structure of their lending portfolio on a quarterly basis (they mostly show it in annual reports), we use the end of year data and approximate the shares throughout the year assuming a linear pattern in their changes between the ends of consecutive years.…”

Section: Data Descriptionmentioning

confidence: 99%

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Measuring the restrictiveness of (macro)prudential policy: the case of bank capital regulation in Poland

Czaplicki

2021

J Bank Regul

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The heterogeneity of the banking sector is a vital problem both in case of the conduct of macroprudential policy, as well as the assessment of its effectiveness. To address this issue, we construct a new measure of macroprudential policy restrictiveness, the bank’s free lending capacity ratio (the quotient of a new lending a bank can extend given its capital surplus above capital requirement, and its current volume of loans). We describe its advantages over the measures used in the previous research. Finally, employing first difference GMM method on (dynamic) panel data series, we explain the drivers of changes in lending growth of stock-listed banks in Poland between 2010 and 2020. We show that the free lending capacity ratio displays the most convincing results among the examined variables, pointing at its usefulness both in explaining and evaluating the impact of prudential regulation on banking activity, as well as in understanding potential issues in the transmission of monetary policy via the banking sector, resulting from its heterogeneity. Finally, we draw practical and policy-related conclusions, as regards the measurement of macroprudential policy restrictiveness. Supplementary Information The online version contains supplementary material available at 10.1057/s41261-021-00164-2.

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“…An exception isAltavilla et al (2018) who also use EL as an explanatory variable in one of their robustness checks.…”

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confidence: 99%

Negative interest rates, excess liquidity and retail deposits: Banks’ reaction to unconventional monetary policy in the euro area

Demiralp

Eisenschmidt

Vlassopoulos

2021

European Economic Review

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Negative interest rate policy (NIRP) is associated with a particular friction. The remuneration of banks´ retail deposits tends to be floored at zero, which limits the transmission of policy rate cuts to bank funding costs. We investigate whether this friction affects banks' reactions under NIRP compared to a standard rate cut in the euro area. We argue that reliance on retail deposit funding and the level of excess liquidity holdings may increase banks' responsiveness to NIRP. We find evidence that banks highly exposed to NIRP tend to grant more loans, i.e. NIRP is indeed expansionary. This confirms studies pointing to higher risk taking by banks under NIRP and contrasts results that associate NIRP with a contraction in bank loans. Broader coverage of our loan data and the explicit consideration of banks' excess liquidity holdings are the reasons for this different result compared to some earlier literature. We are the first to document the importance of banks' excess liquidity holdings for the effectiveness of NIRP, pointing to a strong complementarity of NIRP with central bank liquidity injections, e.g. via asset purchases.

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Credit Supply and Demand in Unconventional Times

Cited by 36 publications

References 55 publications

Financing Supply of Islamic Banking During COVID-19 Outbreak in Indonesia

Financing Supply of Islamic Banking During COVID-19 Outbreak in Indonesia

Measuring the restrictiveness of (macro)prudential policy: the case of bank capital regulation in Poland

Negative interest rates, excess liquidity and retail deposits: Banks’ reaction to unconventional monetary policy in the euro area

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