scholarly journals The internationalization of domestic banks and the credit channel of monetary policy

2021 ◽  
Author(s):  
Paola Morales ◽  
Daniel Osorio-Rodíguez ◽  
Juan S. Lemus-Esquivel ◽  
Miguel Sarmiento
Keyword(s):  
Monetary Policy ◽  
Risk Taking ◽  
Bank Lending ◽  
Policy Changes ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Level Data ◽  
International Banks ◽  
Domestic Banks ◽  
Loan Growth

How does the expansion of domestic banks in international markets affect the bank lending channel of monetary policy? Using bank-firm loan-level data, we find that loan growth and loan rates from international banks respond less to monetary policy changes than domestic banks and that internationalization partially mitigates the risk-taking channel of monetary policy. Banks with a large international presence tend to tolerate more their credit risk exposition relative to domestic banks. Moreover, international banks tend to rely more on foreign funding when policy rates change, allowing them to insulate better the monetary policy changes from their credit supply than domestic banks. This result is consistent with the predictions of the internal capital markets hypothesis. We also show that macroprudential FX regulation reduces banks with high FX exposition access to foreign funding, ultimately contributing to monetary policy transmission. Overall, our results suggest that the internationalization of banks lowers the potency of the bank lending channel. Furthermore, it diminishes the risk-taking channel of monetary policy within the limit established by macroprudential FX regulations.

The roles of domestic and foreign Islamic banks in Malaysian monetary transmission

2014 ◽  
Vol 7 (2) ◽  
pp. 161-169 ◽  
Author(s):  
Fidlizan Muhammad ◽  
Asmak Ab Rahman ◽  
Ahmad Azam Sulaiman
Keyword(s):  
Monetary Policy ◽  
Banking System ◽  
Bank Lending ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Bank Lending Channel ◽  
Content Type ◽  
Lending Channel ◽  
Level Data ◽  
Loan Supply

Purpose – The aim of this paper is to empirically test the presence of the bank lending channel for the Islamic banking system in Malaysia. Design/methodology/approach – Distributional effects from monetary policy changes were analyzed by three bank characteristics such as size, liquidity and capital. Using the econometric model by Kashyap and Stein (1995), the implementation of a policy contraction leads to reduction in loan supply because some banks may not able to offset a reduction in deposits. The paper explores the response shown between domestic and foreign Islamic banks in Malaysia using bank-level data from 2005 to 2010. Findings – The empirical result indicates presence of the bank lending channel in the Islamic banking system in Malaysia, size and liquidity as sources of difference response of financing supply in domestic bank and capital for foreign Islamic bank and Islamic interbank rate as an efficient tool in conducting monetary policy especially in the Islamic banking system. Originality/value – The paper manages to explore the effectiveness of Islamic the monetary policy tools in the Islamic Banking system in Malaysia. Using Islamic interbank rate as a policy tool, it provides valuable view to policy makers, who are analyzing for efficiency of transmission channel.

Bank lending channel in Zambia: empirical evidence from bank level data

2015 ◽  
Vol 42 (6) ◽  
pp. 1159-1174 ◽  
Author(s):  
Anthony Simpasa ◽  
Boaz Nandwa ◽  
Tiguéné Nabassaga
Keyword(s):  
Monetary Policy ◽  
Bank Lending ◽  
Dynamic Panel Data ◽  
Policy Framework ◽  
Relationship Lending ◽  
Bank Lending Channel ◽  
Content Type ◽  
Lending Channel ◽  
Level Data ◽  
Effect Of Monetary Policy

Purpose – The purpose of this paper is to explore the effect of monetary policy on the lending behaviour of commercial banks in Zambia using bank-level data. Design/methodology/approach – Dynamic panel data econometric analysis is used to uncover the evidence of monetary transmission mechanism in Zambian banking industry. Other specifications are used as robustness checks. Findings – Contrary to received evidence, the authors find that the bank lending channel in Zambia operates mainly through large banks. The effect of monetary policy on medium-sized banks is moderate while it is virtually non-existent for smaller banks. Furthermore, the data does not show evidence of relationship lending for smaller banks. Originality/value – Overall, the findings of this investigation suggest that price signals, rather than quantity aggregates, matter the most in the transmission of monetary policy in Zambia. The results therefore lend support to the central bank’s recent shift in monetary policy framework from using monetary aggregates to interest rate targeting as a means to strengthen effectiveness of monetary policy.

Bank-Lending Channel of Monetary Policy Transmission: Evidence from ASEAN

2019 ◽  
Vol 21 (4) ◽  
pp. 892-905
Author(s):  
Fazelina Sahul Hamid ◽  
Norhanishah Mohd Yunus
Keyword(s):  
Monetary Policy ◽  
Bank Lending ◽  
Governance Structure ◽  
Policy Changes ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Consumer Loans ◽  
Policy Transmission ◽  
Commercial Loans ◽  
Effect Of Monetary Policy

This article examines the existence of a bank-lending channel in Association of Southeast Asian Nations (ASEAN) using a sample of 328 banks from 2009 to 2015. The findings confirm that a bank-lending channel is effective. In particular, we find that consumer loans and commercial loans are sensitive to changes in monetary policy, but mortgage and corporate loans are not. We also find that commercial banks are vulnerable to monetary policy changes, but both investment and Islamic banks are not. On the contrary, special purpose banks are able to overcome the effect of monetary policy tightening by supplying more loans. The effectiveness of a bank-lending channel in ASEAN also holds when we control for the differences in governance structure of the countries. Policymakers need to take these into consideration in designing an effective monetary policy.

scholarly journals The Bank Lending Channel of Monetary Policy? The Panel Evidence from Egypt

2014 ◽  
Vol 16 (3) ◽  
pp. 255 ◽  
Author(s):  
Mohamed Aseel Shokr ◽  
Zulkefly Abdul Karim ◽  
Mansor Jusoh ◽  
Mohd. Azlan Shah Shah Zaidi
Keyword(s):  
Monetary Policy ◽  
Interest Rates ◽  
Empirical Studies ◽  
Bank Lending ◽  
Bank Loans ◽  
Bank Loan ◽  
Bank Lending Channel ◽  
Lending Channel ◽  
Level Data ◽  
Effect Of Monetary Policy

This paper examines the relevance of the bank lending channel of monetary policy in Egypt using bank-level data. Previous empirical studies in Egypt that used macro-level data have not supported the relevance of the bank lending channel. However, using a sample of 32 commercial banks for the period from 1998 until 2011 and a dynamic panel GMM technique, the empirical findings revealed the relevance of the bank lending channel of monetary policy in Egypt. Moreover, there is a heterogeneity effect of monetary policy on bank loans according to bank size, in which the small banks are more affected during a monetary contraction than larger banks. This finding signals that the monetary authorities in Egypt should take cognizance of the stability of interest rates in order to stabilize the bank loan supply.       

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

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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