Determinants of Bank Long-term Lending Behavior:Evidence from Russia

Abstract

We investigate the determinants of the banks' propensity to make long-term business loans in an emerging market context. Using a large sample of Russian banks, we find that the median bank allocates only 0.5% of its assets in long-term business loans and that there is wide cross-sectional variation in this ratio among banks. A bank's ability to extend long-term business loans depends on its size, capitalization, and the availability of long-term liabilities rather than its type of ownership. These results highlight the importance of bank-level (supply side) constraints in extending vital long-term credit to firms.

Factors Affecting the Bank Credit: An Empirical Study on the Jordanian Commercial Banks

“…7, No. 5;2015 Furthermore, the results indicated that the financial health and liquidity in banks play a vital role in determining the credit, and the good economic conditions induce banks to increase the volume of credit provided to the private sector. Sharma and Gounder (2012) examined the change in the bank credit provided to the private sector in six economies in the South Pacific during the period 1982-2009.…”

“…7, No. 5;2015 where BC/TA , represents the proportion of the credit facilities to the total assets provided from the bank i in the period t. DEP/TA , represents the ratio of deposits to the total assets of the bank i in the period t. NPLs , is the ratio of the non-performing loans to the total loans of the bank i in the period t. CAP , is the ratio of the capital to the total assets of the bank i in the period t. LIQ , represents the liquidity ratio to the total assets of the bank i in the period t. SIZE , is the natural logarithm of the size of the assets of the bank i in the period t. WR is the interest rate on the funds deposited in the window of deposit for the Central Bank of Jordan in the period t. LR is the average interest rate on the loans in period t. DR is the average interest rate on the deposits in period t. RR is the legal reserve ratio imposed by the Central Bank of Jordan on the banks in period t. INF is the inflation rate in Jordan during the period t. GRTH is the rate of growth in the GDP in the period t.…”

“…Asset size (SIZE): Several studies which investigated the determinants of bank lending used the size of the bank as an independent variable because of the importance of its impact on the volume of credit granted. Chernykh and Theodossiou (2011) indicated that the large banks are usually more diversified and they have large funds and more accessibility to borrowers from large companies with a high credit card balances, in addition they possess adequate resources for the development of advanced systems to manage and assess the credit risks. This makes the largest banks able to give a greater level of credit facilities.…”

“…7, No. 5;2015 offered for lending. Chodechai (2004) has pointed out that banks should be cautious when determining the interest rates on loans where the imposition of low interest rates will affect the returns achieved by the bank, which should be sufficient to cover the cost of deposits and general expenses and losses in the loan portfolio resulting from faltering some customers.…”

“…7, No. 5;2015 Cross-sections 10 10 10 10 10 10 10 10 10 10 10 10 Table 3 shows the results of the regression analysis model for the study, which connects the proportion of the credit facilities granted by the banks of Jordan with a number of independent variables. As it is evident in the table, the coefficient ratio of the deposits to the total assets (DEP/TA) was positive but not statistically significant, which means that the proportion of deposits does not affect the ratio of credit facilities granted by the commercial banks in Jordan.…”