The Consequences of Bank Loan Growth: Evidence from Asia

This paper tries to check whether capital requirement policy has significant influence on bank loan growth by using a sample of regional banks in China from 2005–2008. The paper develops a simultaneous equation models to analyze the endogenous relationship between capital changes, loan growth and non-performing loans. The paper finds that during the sample years, capital condition indeed became a strict constraint for the loan growth of these banks This constraint also became more and more strict and significant across the sample years as the implementation of the policy carried on.

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TARP Funds Distribution and Bank Loan Growth

SSRN Electronic Journal ◽

10.2139/ssrn.1567073 ◽

2010 ◽

Cited By ~ 15

Author(s):

Lei Li

Keyword(s):

Bank Loan ◽

Loan Growth

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Does the financial structure of banks influence the bank lending channel of monetary policy? Evidence from Colombia

International Journal of Emerging Markets ◽

10.1108/ijoem-08-2019-0664 ◽

2020 ◽

Vol ahead-of-print (ahead-of-print) ◽

Author(s):

Jose Eduardo Gomez-Gonzalez ◽

Ali Kutan ◽

Jair N. Ojeda-Joya ◽

Camila Ortiz

Keyword(s):

Monetary Policy ◽

Financial Structure ◽

Bank Lending ◽

Bank Loan ◽

Bank Lending Channel ◽

Content Type ◽

Lending Channel ◽

Policy Transmission ◽

Loan Growth ◽

Different Levels

PurposeThis paper tests the impact of the financial structure of banks on the bank lending channel of monetary policy transmission in Colombia.Design/methodology/approachWe use a monthly panel of 51 commercial banks for the period 1996:4–2014:8.FindingsAn increase in the monetary policy interest rate significantly reduces bank loan growth. The magnitude of this effect depends on banks’ financial structure. Additionally, we identify an asymmetric effect in which the bank lending channel is stronger in monetary contractions than during expansions. We show that this behavior is due to the heterogeneous response of banks with different levels of solvency. This finding has important implications for the design and implementation of monetary policy and coordination of central bank’s policy with key economic agents.Practical implicationsThe fact that the BLC is stronger in times of monetary contraction is quite interesting for central banking, as it shows that monetary policy transmission is harder during macroeconomic downturns. When investment plans are depressed, monetary stimulus may prove insufficient to reactivate credit demand. This has proven to be true in advanced economies after a strong recession and our results suggest that is also true in emerging market economies for economic downturns in general. Central banks may have to provide stronger shocks to reactivate private credit when the economy is facing a slow economic recovery.Originality/valueOur findings point out that an increase in the monetary policy interest rate significantly reduces bank loan growth. However, the magnitude of this effect critically depends on two aspects. First, bank heterogeneity matters. Particularly, the loan supply of better capitalized banks is less sensitive to monetary policy shocks. Second, the response of credit supply to shifts in short-term interest rates critically depends on the monetary policy stance. The BLC is stronger in times of monetary contraction than during expansions. Moreover, we show that this asymmetric behavior is due to the heterogeneous response of banks with different levels of solvency to the monetary policy stance.

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Leaning Against Windy Bank Lending

IMF Working Papers ◽

10.5089/9781484312674.001 ◽

2017 ◽

Vol 17 (179) ◽

Author(s):

Giovanni Melina ◽

Stefania Villa

Keyword(s):

Bank Lending ◽

Dynamic Stochastic General Equilibrium ◽

Bank Loan ◽

Supply Shocks ◽

The Us ◽

Interest Rate Rule ◽

Dynamic Stochastic ◽

Loan Growth ◽

Leaning Against The Wind

Using an estimated dynamic stochastic general equilibrium model with banking, this paper first provides evidence that monetary policy reacted to bank loan growth in the US during the Great Moderation. It then shows that the optimized simple interest-rate rule features no response to the growth of bank credit. However, the welfare loss associated to the empirical responsiveness is small. The sources of business cycle fluctuations are crucial in determining whether a “leaning-against-the-wind” policy is optimal or not. In fact, the predominant role of supply shocks in the model gives rise to a trade-off between inflation and financial stabilization.

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Discretionary Accruals in Italian Private Firms and Non-Linear Bank Loan Granting

FINANCIAL REPORTING ◽

10.3280/fr2017-001004 ◽

2017 ◽

pp. 83-99

Author(s):

Elisabetta Mafrolla ◽

Viola Nobili

Keyword(s):

Financial Reporting ◽

Banking System ◽

Regulatory System ◽

Discretionary Accruals ◽

Bank Loans ◽

Bank Loan ◽

Banking Union ◽

Private Firms ◽

European Banking Union

This paper investigates whether and at what extent private firms reduce the quality of their accruals in order to signal a better portrait to the bank and obtain new or larger bank loans. We measure earnings discretionary accruals of a sample of Italian private firms, testing whether new and larger bank loans are associated with a higher (lower) quality of earnings in borrowers' financial reporting. We study bank loan levels and changes and how they impact discretionary accruals and found that, surprisingly, private firms' discretionary accruals are systematically positively affected by an increase in bank loans, although they are negatively affected by the credit worthiness rating assigned to the borrowers. We find that the monitoring role of the banking system with regard to the adoption of discretionary accruals is effective only when the loan is very large. This paper may have implications for policy-makers as it contributes to the understanding of the shortcomings of the banking regulatory system. This is an extremely relevant issue since the excessive amount of non-performing loans held by Italian banks recently threatened the stability of the European Banking Union as a whole.

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