Does competition influence the bank lending channel in the euro area?

Fungáčová, Zuzana; Solanko, Laura; Weill, Laurent

doi:10.1016/j.jbankfin.2014.06.018

Cited by 103 publications

(56 citation statements)

References 34 publications

(45 reference statements)

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“…Traditionally, the core function of any commercial bank is the extension of loans and the larger proportion of banks' assets is formed by loans (Fungacova et al 2014). This function is well executed only when banks operate in a more efficient manner.…”

Section: Introductionmentioning

confidence: 99%

“…The financial crisis of 2007/2008 was a wake-up call for banks globally, and particularly in Africa. The lesson learned from the recent financial crisis remind banks that bank performance and efficiency is a pre-requisite for some aspect of global economic development and financial stability such as credit supply (Fungacova et al 2014). According to Fungacova et al (2014), to promote a sound financial system, regulators require banks to hold sufficient amount of capital to absorb losses and limit moral hazard behavior.…”

Section: Introductionmentioning

confidence: 99%

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The Empirical Analysis of the Impact of Bank Capital Regulations on Operating Efficiency

Lotto

2018

IJFS

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This paper principally aims at examining the impact of capital requirements regulation on bank operating efficiency in Tanzania. The study employs bank level data for the period between 2009 and 2015. The findings show a positive and significant relationship between capital ratio and bank operating efficiency. This shows that commercial banks in Tanzania with more stringent capital regulations are more operationally efficient. This relationship proposes that capital adequacy does not only strengthen financial stability by providing a larger capital cushion but also improves bank operating efficiency by preventing a moral hazard problem between shareholders and debt-holders. This result may also imply that the increased regulations on capital requirements influence the bank's decision to revisit their internal operations strategy in terms of strong corporate governance, risk assessment methods, credit evaluation procedures, employment of more qualified staffs, and enhanced internal control procedures. Another key finding is an inverse relationship between non-performing Loans (credit risk) and bank operating efficiency. The implication of this relationship may simply mean that the bank's total loan and advances in combination with total deposit either due from customers or from other banks are of little importance in determining the operational efficiency of banks. This probably implies that the amount of money banks loan out is too excessive, which would attract a greater chance of default. The paper lays down some recommendations: first, banks in Tanzania are advised to invest in more advanced technological innovations to reduce the staff costs and other operating expenses to increase their operational efficiency; and, second, bank management is also advised to be more careful in the loan screening process to reduce the incidence of non-performing loans.

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

The Empirical Analysis of the Impact of Bank Capital Regulations on Operating Efficiency

Lotto

2018

IJFS

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“…27 Lagged values of the dependent variable are mathematically correlated with bank xed e ects. 28 Fungáčová et al (2014) found the same results using similar data and argued that the annual frequency may not be a meaningful time-frame to evaluate lending persistence. 29 Campello (2002) and Ashcra (2006) documented that banks a liated with multi-bank holding companies are more likely to receive capital injections through access the parent has on public markets.…”

Section: Resultsmentioning

confidence: 64%

Sovereign Risk and Cross-Country Heterogeneity in the Transmission of Monetary Policy to Bank Lending in the Euro Area

Grandi

2018

SSRN Journal

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Is the transmission of monetary policy to bank lending heterogeneous across euro area countries? is paper employs annual bank level data to test whether the bank lending channel of monetary policy was heterogeneous in the euro area over the period 2007-2016. To do so it follows a simple procedure that allows direct testing of how monetary policy a ected similar banks located in di erent countries. Results indicate that the transmission of monetary policy to bank lending was heterogeneous across countries that were di erently exposed to the sovereign debt crisis. On average, the same 1% cut in the policy rate led to a 1.6% increase in lending by banks located in non-stressed countries as opposed to a 0.4% increase for banks located in countries under severe sovereign stress. Unconventional monetary policy -as captured by the ECB shadow rate -was also unevenly transmi ed to bank lending. Exposure to sovereign risk is identi ed as a key source of heterogeneity. Within stressed countries, banks with larger sovereign exposures reacted to monetary easing by expanding lending by less than banks with smaller exposures. As a result, monetary accommodation was smoothly transmi ed to lending only by banks with limited exposure to sovereign risk. In response to the same 1% policy rate cut, the credit expansion of highly exposed stressed countries banks was instead 2.75% weaker than that of banks in non-stressed countries.ese ndings support existing evidence on sovereign risk having direct adverse consequences for bank lending and highlight the extent to which sovereign risk aggravated heterogeneities in the transmission on monetary policy to the real economy via the banking system during the euro area debt crisis.

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“…The influence of monetary policy on credit depends on bank‐specific characteristics, the most important being liquidity and banking competition. Less liquid banks are more influenced by monetary contractions (Beltratti & Stulz, ; Matousek & Sarantis, ), while less market power (higher level of bank competition) means more influence of monetary policy (Fungáčová et al ., ).…”

Section: Literature Reviewmentioning

confidence: 97%

Money, Lending and Banking Crises

Peña

2017

J of App Econs and Policy

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This paper shows that the bank lending channel impacts on lending and on the risk of a banking crisis. The results show that an increase in interest rates will decrease future bank lending and the likelihood of a banking crisis. This effect is dampened during recessionary periods in European countries. Policy implications are also provided. The detrimental effects of a lax monetary policy on a crisis are reduced directly by a highly capitalised financial sector and indirectly in an economy with highly liquid financial entities via lending growth.

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Does competition influence the bank lending channel in the euro area?

Cited by 103 publications

References 34 publications

The Empirical Analysis of the Impact of Bank Capital Regulations on Operating Efficiency

The Empirical Analysis of the Impact of Bank Capital Regulations on Operating Efficiency

Sovereign Risk and Cross-Country Heterogeneity in the Transmission of Monetary Policy to Bank Lending in the Euro Area

Money, Lending and Banking Crises

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