The New Theory of Commercial Banking and Bank Lending Behavior

Ahtiala, Pekka

doi:10.1111/j.1467-9485.2005.00366.x

Cited by 5 publications

(5 citation statements)

References 25 publications

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“…According to this idea, if commercial banks issue self-liquidating productive loans for a short period of time, the central bank should lend to the banks on the security of such short-term loans. This concept ensures that each bank has the right amount of liquidity, and that the entire economy has the right amount of money supply Ahtiala (2005). By rediscounting sanctioned loans, the central bank was anticipated to raise or eliminate bank reserves.…”

Section: Theoretical Review Conceptual Review and Hypotheses Formulationmentioning

confidence: 99%

Bankers’ Perspective on Challenges of Bad Debt Recovery: Empirical Evidence from Commercial Banks of Nepal

Dhakal,

Khanal,

Devkota

et al. 2023

J. Bus. Soc. Sci. Res.

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The purpose of this paper is to investigate bankers’ perspective on challenges of bad debt recovery in commercial banks of Nepal. This study is based on liquidity management theory and adopts explanatory research design to determine causal relationship between variables. Primary data has been collected from 220 bankers through the structured questionnaire by using KOBO Toolbox. SEM is used to analyze data inferentially. Findings indicate that lending decision and loan risk monitoring are significant to bad debt recovery. Unfavorable methods, availability of accurate and proper information about the loans, lack of payment visibility, and lack of flexible payment options are major challenges of bad debt recovery. Thus, commercial banks of Nepal must develop proper monitoring mechanism and government should develop proper regulation for debt collection.

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Section: Theoretical Review Conceptual Review and Hypotheses Formulationmentioning

confidence: 99%

Bankers’ Perspective on Challenges of Bad Debt Recovery: Empirical Evidence from Commercial Banks of Nepal

Dhakal,

Khanal,

Devkota

et al. 2023

J. Bus. Soc. Sci. Res.

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“…The conceptual framework of this research was based on the wealth maximisation theory [1]. Within the context of banking, this theory got reinterpretation where the wealth of the bank's shareholders directly depends on the credit portfolio's economic performance [2,3]. A value-based approach was used for the twofold purpose: first to develop the econometric models for the main types of credits to estimate the economic effectiveness of credit for the lender [4], , and second to design compensative models assuming the problem loans terms' rescheduling to grant the lender the planed economic effect [5].…”

Section: Previous Researches and Scientific Problemmentioning

confidence: 99%

Econometric modelling of bank activities: value-based approach to the problem loans terms’ rescheduling

2021

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The permanent state of the financial crisis has predictably brought to the forefront such traditional problem of banking as problem loans. This research aims to work out an econometric approach to the solution of the problem of loans terms’ rescheduling. For this purpose, we, firstly, treated credit as a bank’s investment project with cashflows’ chart including initial outflow (principal) and following inflows represented by loan payments. Secondly, we combined the schematic representation of loan’s cashflows with NPV formula accustomed to loan’s cashflows and it allowed to create the econometric models for three types of loan: classic, annuity, serial. Thirdly, for the case when borrower breaks a loan’s payment schedule and it leads to the reduction of loan’s NPV and loss of the wealth of bank’s shareholders, respectively, we outlined special compensative models of cashflows where default in payment is interpreted by the lender as an additional forced loan. We suggested modifying the loan terms (interest rate or effective period of the loan agreement) for the rest of payment periods. Fourthly, we laid the special compensative models of forced loans’ cashflows a top corresponded initial cashflows of loans and this has made it possible to get formulas calculating the modified interest rate and the additional number of loans’ payment periods with the aid of backward calculation. As a result, we developed the econometric models of the loan terms’ modifications based on the prolongation of the initial credit period and the increasing of the initial interest rate.

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“…The customer relation is the bank's main asset (Ahtiala, 2005). Competitions among banks causes banks to make any efforts to maintain their customers as well as to find the new ones.…”

Section: Ii41the Customer Relationship Doctrinmentioning

confidence: 99%

Interdependence of Loan and Deposit Volumes at Government-Owned, Private, and Joint-Venture Banks in Indonesia During 2003-2017

Gazali

Mustafa

2020

Proceeding on International Conference of Science Management Art Research Technology

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This study examines the interdependence of loans and deposits at government-owned banks, private banks, and joint-venture banks in Indonesia. This study uses monthly time series of loans and deposits from January 2003 to December 2017. The Combined Loans and Combined Deposits from each group of banks are used for this empirical study. Based on Augmented Dickey-Fuller tests, this study finds that all the series are stationary after first-differencing. This study also finds that loan and deposit volumes are cointegrated at government owned banks and private banks but not at joint-venture banks. Analyzing the interdependence of loans and deposits, this study uses the vector error correction model (VECM) for government-owned as well as private banks and the vector autoregressive (VAR) model for joint-venture banks. Based on Granger Causality tests, the results show that the interdependence of loans and deposits exists only in government-owned banks. In private banks, the causality was in one direction in which loan volumes depend on deposit volumes. No causality of loans and deposits was found in joint venture banks. The intense competition in the banking industry affects the strategy adopted include aggressive marketing executed by the bank's relationship managers. They initiate loans, and funding will follow. Hence, in modern banking, deposits affect loans, and loans affect deposits only observed at governmentowned banks. Private banks follow the traditional intermediary theory, while joint-venture banks follow no theory.

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The New Theory of Commercial Banking and Bank Lending Behavior

Cited by 5 publications

References 25 publications

Bankers’ Perspective on Challenges of Bad Debt Recovery: Empirical Evidence from Commercial Banks of Nepal

Bankers’ Perspective on Challenges of Bad Debt Recovery: Empirical Evidence from Commercial Banks of Nepal

Econometric modelling of bank activities: value-based approach to the problem loans terms’ rescheduling

Interdependence of Loan and Deposit Volumes at Government-Owned, Private, and Joint-Venture Banks in Indonesia During 2003-2017

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