scholarly journals The Banking Sector: Economies of Scale Afoot

2015 ◽  
Author(s):  
Michael Khromov
Keyword(s):  
Economies Of Scale ◽  
Banking Sector

scholarly journals Bank-Specific and Macroeconomic Determinants of Profitability: A Revisit of Pakistani Banking Sector under Dynamic Panel Data Approach

2020 ◽  
Vol 8 (3) ◽  
pp. 42 ◽  
Author(s):  
Habib-ur Rahman ◽  
Muhammad Waqas Yousaf ◽  
Nageena Tabassum
Keyword(s):  
Panel Data ◽  
Interest Rates ◽  
Economies Of Scale ◽  
Banking Sector ◽  
Unobserved Heterogeneity ◽  
Dynamic Panel Data ◽  
Capital Adequacy ◽  
Bank Failures ◽  
Dynamic Panel ◽  
Macroeconomic Determinants

This study aims to examine the effect of the bank-specific and macroeconomic determinants of profitability for the banking sector of Pakistan. To incorporate the issues of endogeneity, unobserved heterogeneity, and profit persistence, we apply a generalised method of moments (GMM) technique under the Arellano–Bond framework to a panel of Pakistani banks that covers the period 2003–2017. The results of a dynamic panel data approach reveal that capital adequacy accelerates the profitability of the banking sector in Pakistan. Capital adequacy helps the financial system to absorb any negative shock by reducing the number of bank failures and losses. Conversely, our empirical investigation reveals that the liquidity ratio, business mix indicators, interest rates, and industrial production deteriorates the bank profitability. Liquidity risks enhance the probability of default risks and transmit into the unpaid loans and hence the lower return. Our empirical evidence further reveals that Pakistani banks are not getting any benefit of the economies of scale in terms of financial performance.

scholarly journals Bank Competition, Efficiency, and Stability in Macau

2019 ◽  
Vol 8 (4) ◽  
pp. 157
Author(s):  
Harry Xia ◽  
Kevin Lei ◽  
Jiaochen Liang
Keyword(s):  
Economies Of Scale ◽  
Banking Sector ◽  
Banking System ◽  
Bank Loans ◽  
Bank Competition ◽  
Income Volatility ◽  
Bank Efficiency ◽  
Insolvency Risk ◽  
Relationship Of ◽  
The Relationship

Macau has the uppermost population density and the fourth-highest GDP per capita in the world. Macau’s banking system is regarded as one of the most important indicators of Macau’s macroeconomic growth and stability during its transformation into a wealthy and modern metropolis. In this study, we use a sample of 26 banks to explore the relationship of bank competition, efficiency and stability in Macau from its return to China in 1999 to 2016. Our results demonstrate that bank competition does cause efficiency in Macau throughout the study period. We also find indications of a positive but not significant connection between bank market power and bank fragility including income volatility and insolvency risk. Moreover, this study finds no evidence that the size of operations proxied by total bank loans and total assets would impact bank efficiency, indicating that economies of scale or bank market share don’t necessarily bring about efficiency in Macau. Our evidence contributes to the literature by being the first to thoroughly examine the relation of bank competition, efficiency and stability in Macau. The findings provide meaningful implications to the practitioners and policymakers to make sound decisions accordingly, especially to closely monitor and maintain a proper level of competition in Macau’s banking sector.

Retail banking in the Middle East will be subdued

2016 ◽  
Keyword(s):  
Middle East ◽  
Economic Integration ◽  
Economies Of Scale ◽  
Banking Sector ◽  
Oil Prices ◽  
Gulf Cooperation Council ◽  
Retail Banking ◽  
Retail Market ◽  
Content Type ◽  
The Future

Significance Low global oil prices are weighing heavily on the profitability of the Gulf Cooperation Council (GCC) banking sector. Moody's Investors Service in March downgraded 26 GCC banks. This raises questions about the future of retail banking in the region. Impacts GCC governments' commitment to developing financial hubs will support retail banking. However, lack of economic integration in the region will prevent regional Gulf banks from benefitting from economies of scale. Fragmentation in the retail market means that each country will be dominated increasingly by their largest banks.

Measurement and determinants of total factor productivity: evidence from Indian banking industry

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Biswabhusan Bhuyan ◽  
Subhamitra Patra ◽  
Ranjan Kumar Bhuian
Keyword(s):  
Total Factor Productivity ◽  
Economies Of Scale ◽  
Banking Sector ◽  
Value Added ◽  
Productivity Index ◽  
Annual Data ◽  
Fiscal Deficit ◽  
Factor Productivity ◽  
Content Type ◽  
Frontier Analysis

PurposeThe purpose of this study is to measure the level of total factor productivity of the Indian banking sector and to identify both the bank-specific and macroeconomic determinants of the total factor productivity after the global subprime mortgage crisis.Design/methodology/approachThe research sample consists of 61 commercial banks including 21 public sector banks, 18 private sector banks and 22 foreign banks. The annual data is collected from the website of Reserve Bank of India from 2008 to 2019. The authors employed the non-parametric DEA approach to estimate Malmquist total factor productivity index for each bank as well as across different ownership groups. The panel data estimation technique was used to identify the determinants of total factor productivity.FindingsThe results suggested that an increase in the technological shift raised the bank's productivity above the optimal frontier. Among the bank-specific determinants, the bank size and bank diversifications are significantly declining productivity, whereas credit-deposit ratio and return on asset significantly increasing productivity. Among the macro-specific determinants, inflation, growth rate and fiscal deficit ratio negatively affect productivity, whereas capital formation to the GVA ratio boosts the level of productivity.Research limitations/implicationsThe authors have used intermediate method to select the inputs and outputs as per the suitability to the context. However, the disaggregate level such as state and district level analysis can be done using production and value-added approaches to explore the regional variations of the banking performance. Furthermore, the parametric methods such as stochastic frontier analysis can be used to examine banking performance, which the authors left for the future research.Practical implicationsThis study suggested that banks should increase the economies of scale of their total assets and focus on the interest-earning activity. The banks need to proactively operate the business policy by following the changing path of inflation. The banks need to reduce their rate of fiscal-deficit to the GVA with the purpose to boost their level of productivity.Originality/valueThe study provides an important implication for bankers and policymakers in terms of heightening the banking performance during the period of dynamic economic events.

scholarly journals The Impact of Consolidation and Modernisation on Banking Scale and Scope Economies

2016 ◽  
Vol 8 (5) ◽  
pp. 169 ◽  
Author(s):  
Ali Awdeh ◽  
Chawki EL-Moussawi ◽  
Wafaa Nasser
Keyword(s):  
Economies Of Scale ◽  
Banking Sector ◽  
Maximum Likelihood Method ◽  
Physical Capital ◽  
Likelihood Method ◽  
Economies Of Scope ◽  
Scope Economies ◽  
The Past ◽  
Production Factors ◽  
The Impact

Lebanese banks recorded an enormous increase in size, customers’ base, and products variety over the past two decades, which suggests the development of economies of scale and scope in the Lebanese banking sector. This study aims at testing the presence of these economies of scale and scope in the Lebanese banking sector, particularly over the period 2000-2013. The estimation of a translogarithmic cost function by the maximum likelihood method shows that the Lebanese banks are – in general – characterised by the existence of increasing economies of scale. The analysis of economies of scope also reveals a complementarity between different outputs. Finally, the analysis of price elasticities of demand for production factors shows an important substitutability between labour and physical capital.

India’s ‘bad’ bank brings risks and opportunities

2021 ◽  
Keyword(s):  
Economies Of Scale ◽  
Banking Sector ◽  
Content Type ◽  
Bankruptcy Code ◽  
The Government

Significance This ‘bad’ bank, an asset reconstruction company, will work in tandem with a debt resolution firm. It will be partially backed by government guarantees. Impacts Resolution professionals, seen as possessing special skills, will play a key role in the workings of the new debt resolution firm. India will rely less on its 2016 Insolvency and Bankruptcy Code to tackle non-performing loans. The government will count on PSB mergers to moderate competition and reap economies of scale in the banking sector.

Transformation of the Banking Sector in the Digital Era

2020 ◽  
pp. 110-118
Author(s):  
Pavlo M. Rubanov
Keyword(s):  
Financial Services ◽  
Economies Of Scale ◽  
Banking Sector ◽  
Development Trend ◽  
Specific Product ◽  
Banking Services ◽  
Digital Era ◽  
Tangible Assets ◽  
Application Programming ◽  
Four Levels

In the context of global digitization of the economy and development of alternatives to banking services, the transition to open platforms and their integration with the FinTech sector becomes relevant. The article identifies four levels of integration between banks and FinTech companies: traditional banking, digital banking, open banking and Open-X banking. At the current stage, the first three models coexist. Traditional banking includes classic banking services (loans, deposits, payments) for individuals and corporate clients, as well as investment banking. Digital banking involves the use of various channels of banking services for clients, among which the digital channel plays a significant role. The analysis of digital banking let to define its main features in terms of the financial services consumers and the bank. Open banking is based on the bank’s ability to engage non-banking intermediaries ecosystems and third parties to the banking service provision and to interact with them through such technologies as application programming interfaces (API). In the research of the оpen banking the main reasons for the cooperation of FinTech companies with banks are considered. These include inhanced visibility by partnership with an established brand, achieving economies of scale, etc. The highest level of integration of banks and FinTech companies and the future development trend of the banking sector is Open-X banking. The main features of Open-X banking include: sharing rather than sole ownership; information is a primary resource instead of tangible assets; partnerships between market actors are formed instead of developing the product independently or purchasing ready-made software solutions; focus on providing a positive customer experience from working with the bank instead of offering a specific product. Key words: banking sector, banking services, digital banking, digitalization, FinTech, integration, open banking.

Scale Economies in Indian Commercial Banking Sector

2011 ◽  
Vol 2 (4) ◽  
pp. 13-30 ◽  
Author(s):  
Biresh K. Sahoo ◽  
Dieter Gstach
Keyword(s):  
Economies Of Scale ◽  
Banking Sector ◽  
Cost Model ◽  
Scale Economies ◽  
Commercial Banking ◽  
Foreign Banks ◽  
Constant Input ◽  
Diseconomies Of Scale ◽  
Translog Cost ◽  
Estimation Models

Two alternative estimation models, i.e., a translog cost function and data envelopment analysis (DEA) based on a cost model are compared and contrasted in revealing scale economies in the Indian commercial banking sector. The empirical results indicate that while the translog cost model exhibits increasing returns to scale for all the ownership groups, the DEA model reveals economies of scale only for foreign banks, diseconomies of scale for nationalized banks, and both economies and diseconomies of scale for private banks. The divergence of the results obtained from these two estimation models should concern model builders. From an empirical perspective the definition of scale economies through a constant input mix is very restrictive. The DEA cost model is much more flexible in this respect: It neither requires the restrictive assumptions that the unit factor prices are always available with certainty, nor that these prices are exogenous to the firms. However, the very volatile nature of the banking industry might question the validity of the empirical estimates in this deterministic setting. Therefore, further research is required to examine the bank performance behavior using both SFA and chance constrained DEA for the comparison in a stochastic setting.

Scale Economies in Indian Commercial Banking Sector

2012 ◽  
pp. 239-259
Author(s):  
Biresh K. Sahoo ◽  
Dieter Gstach
Keyword(s):  
Economies Of Scale ◽  
Banking Sector ◽  
Cost Model ◽  
Scale Economies ◽  
Commercial Banking ◽  
Empirical Estimates ◽  
Diseconomies Of Scale ◽  
Translog Cost ◽  
Definition Of ◽  
Estimation Models

Two alternative estimation models, i.e., a translog cost function and data envelopment analysis (DEA) based on a cost model are compared and contrasted in revealing scale economies in the Indian commercial banking sector. The empirical results indicate that while the translog cost model exhibits increasing returns to scale for all the ownership groups, the DEA model reveals economies of scale only for foreign banks, diseconomies of scale for nationalized banks, and both economies and diseconomies of scale for private banks. The divergence of the results obtained from these two estimation models should concern model builders. From an empirical perspective the definition of scale economies through a constant input mix is very restrictive. The DEA cost model is much more flexible in this respect: It neither requires the restrictive assumptions that the unit factor prices are always available with certainty, nor that these prices are exogenous to the firms. However, the very volatile nature of the banking industry might question the validity of the empirical estimates in this deterministic setting. Therefore, further research is required to examine the bank performance behavior using both SFA and chance constrained DEA for the comparison in a stochastic setting.

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