scholarly journals A NEW PRICING APPROACH FOR SME LOANS ISSUED BY COMMERCIAL BANKS BASED ON CREDIT SCORE MAPPING AND ARCHIMEDEAN COPULA SIMULATION

2019 ◽  
Vol 20 (4) ◽  
pp. 618-632
Author(s):  
Chang Liu ◽  
Haoming Shi ◽  
Yujun Cai ◽  
Shu Shen ◽  
Dongtao Lin
Keyword(s):  
Interest Rates ◽  
Credit Rating ◽  
Risk Measures ◽  
Economic Capital ◽  
Archimedean Copula ◽  
Capital Adequacy ◽  
Loan Pricing ◽  
Loan Portfolio ◽  
Credit Score ◽  
Loan Interest Rates

The traditional loans pricing methods are usually based on risk measures of individual loan’s characteristics without considering the correlation between the defaults of different loans and the contribution of individual loans to the entire loan portfolio. In this study, using account-level loans data of 2010-2016 abstracted from 2 databases kindly provided by a Chinese commercial bank, the authors choose Archimedean Copula to fit the default relationship between loans, combined with the loss distribution function constructed to measure the economic capital of the loan portfolio, to propose a loan pricing method that is more suitable for measuring the unique risk characteristic of SMEs loans. Empirical evidence shows that compared with the traditional loan pricing model, this new proposed one, requiring lower loan interest rates from customers with higher credit rating, while higher loan interest rates from customers with lower credit rating, could thus be able to provide higher risk-adjusted returns, higher economic capital adequacy ratios, and ultimately stronger banks’ capabilities to tolerate risk events. Although there might still be some issues and limitations in the study, the method proposed in this study could be of interest not only to the banks’ management, but also to banking regulators as well.

scholarly journals Is Economic Uncertainty a Risk Factor in Bank Loan Pricing Decisions? International Evidence

Risks ◽  
2021 ◽  
Vol 9 (5) ◽  
pp. 81
Author(s):  
Badar Nadeem Ashraf
Keyword(s):  
Interest Rates ◽  
Bank Loans ◽  
Bank Loan ◽  
Policy Uncertainty ◽  
Economic Uncertainty ◽  
Loan Pricing ◽  
Standard Deviation Increase ◽  
Economic Agents ◽  
Country Level ◽  
Loan Interest Rates

Uncertainty in economic environment leads economic agents to act cautiously. In this paper, we postulate that such uncertainty leads banks to charge higher interest rate on loans. Measuring aggregate country-level economic uncertainty with the World Uncertainty Index (WUI) and using a bank-level dataset from 88 countries over the period 1998–2017, we find that heightened economic uncertainty increases bank loan interest rates. Specifically, bank loan interest rates rise by 20.67 basis points with a one standard deviation increase in WUI. Our results are robust when we use alternative proxy of uncertainty, include additional controls in the model, and extend the sample size. We also observe that WUI index is better at measuring local economic uncertainty as compared to the Economic Policy Uncertainty (EPU) index. Overall, this study provides evidence that bank price in economic uncertainty is an important risk while setting interest rates on bank loans.

scholarly journals Capital Adequacy Ratio dan Tingkat Suku Bunga Kredit Terhadap Penyaluran Kredit di Bursa Efek Indonesia

2017 ◽  
Vol 1 (1) ◽  
pp. 59
Author(s):  
Fitri Malini
Keyword(s):  
Interest Rates ◽  
Stock Exchange ◽  
Capital Adequacy ◽  
Independent Variables ◽  
Capital Adequacy Ratio ◽  
Negative Effect ◽  
Loan Interest Rates ◽  
The Interest Rate ◽  
Research Period ◽  
Positive Effect

His study aimed to determine the effect of the Capital Adequacy Ratio (CAR), and the interest rate loans to total lending in the banking companies in the Indonesia Stock Exchange. The method used in this research is the method of explanation, the independent variables used in this study consisted of Capital Adequacy Ratio (CAR), and loan interest rates while the dependent variable is the amount of lending. The population in this study were banking companies in the Indonesia Stock Exchange, samples taken amounted to 10 (ten) companies with the research period between 2009 and 2013. Partially Capital Adequacy Ratio (CAR), significant negative effect on the amount of lending, and loan interest rates are not significant positive effect on the amount of lending. While simultaneously Capital Adequacy Ratio (CAR), and loan interest rates not significant effect on the amount of lending to the banking company in BEI 2009-2013.

The Loan Pricing Study of Supply Chain Finance Based on Cloud Muster Warehouse (CMW)

2013 ◽  
Vol 462-463 ◽  
pp. 940-943
Author(s):  
Yong Ming Pan ◽  
Yun Li Tong ◽  
Guan Xu Mi
Keyword(s):  
Interest Rates ◽  
Risk Model ◽  
Small And Medium Enterprises ◽  
Model Parameters ◽  
Loan Pricing ◽  
Financing Mode ◽  
Supply Chain Finance ◽  
Return On Capital ◽  
Loan Interest Rates ◽  
Medium Enterprises

The CMW loan-pricing model is established by RAROC (risk adjusted return on capital) with consideration of performance measurement and risk management. The model was presumed interest income as all revenue and credit risk of economic capital the only risk. Model parameters were calculated with large amounts of processed data by cloud computing and internet of things. By donging this, financial institutions determined loan interest rates provided to SMEs (small and medium enterprises) in financing mode of CMW.

Strategi Pengelolaan Risiko dan Peningkatan Kualitas Pengelolaan Kas Negara

2017 ◽  
Vol 2 (2) ◽  
pp. 43-54
Author(s):  
Agung Mulyono
Keyword(s):  
Interest Rates ◽  
Financial Risk ◽  
Vector Autoregression ◽  
Secondary Market ◽  
Key Factors ◽  
Bond Price ◽  
Hedging Strategy ◽  
Foreign Loan ◽  
Term Operation ◽  
Loan Interest Rates

Cash management is  one of treasury’s main functions in which has a potential financial risk. A potential financial risk emerges when State Treasurer manages cash surplus and or/ shortages in order to maintain optimum liquidity. By applying Vector Autoregression (VAR) system on empirical data provided by Bank Indonesia and the Ministry of Finance of Indonesia, we found that currency value  flunctuation is a significant factor for repayment value of foreign loan. Interest rates and amount of government’s bond held by foreign investors are also variables impacted on government’s bond price movement in secondary market. Currency value  flunctuation and price of government’s bond in secondary market are the key factors that have to be considered by State Treasurer (BUN) in managing state’s money. Hedging strategy by using derivatif product is possible to be utilized by State Treasurer (BUN) due to it’s flexibility for short-term operation.   Abstrak Pengelolaan kas negara merupakan salah satu fungsi pokok perbendaharaan yang dalam proses pelaksanaannya menyimpan potensi berbagai risiko keuangan. Risiko keuangan, khususnya dalam investasi berpotensi muncul ketika Bendahara Umum Negara (BUN) melakukan kegiatan pengelolaan kelebihan dan/ kekurangan kas dalam rangka menjamin ketersediaan dan optimalisasi kas. Dengan menggunakan analisis Vector Autoregression (VAR) atas data empiris yang diperoleh dari Bank Indonesia dan Kementerian Keuangan Indonesia, penulis menemukan bahwa fluktuasi nilai tukar mata uang merupakan faktor yang signifikan terhadap besaran pembayaran utang luar negeri pemerintah. Tingkat suku bunga acuan dan pergerakan besaran kepemilikan SUN oleh investor asing juga merupakan variabel yang berpengaruh terhadap pergerakan harga SUN di pasar sekunder. Fluktuasi nilai tukar mata uang dan pergerakan harga SUN di pasar sekunder menjadi faktor penting dalam pelaksanaan investasi yang dilakukan BUN dalam rangka pengelolaan kelebihan dan/ kekurangan kas. Berdasarkan hasil tersebut, strategi pengelolaan risiko atau hedging dengan menggunakan produk-produk derivatif dalam pengelolaan kelebihan dan/ kekurangan kas jangka pendek – menengah sangat dimungkinkan karena sifat instrumen derivatif yang fleksibel.

The Effect of Repayment Through Payroll Deduction on Personal Loan Interest Rates

2006 ◽  
Author(s):  
Eduardo Augusto de Souza Rodrigues ◽  
Victorio Chu ◽  
Leonardo S. Alencar ◽  
Tony Takeda
Keyword(s):  
Interest Rates ◽  
Loan Interest Rates

scholarly journals Savings Level Determinants and Sustainability of Commercial Banks in Rwanda: A Case of I&M Bank Rwanda

2022 ◽  
Vol 6 (1) ◽  
pp. 10-27
Author(s):  
Aimable Nshimiyimana ◽  
◽  
Eugenia Nkechi Irechukwu ◽  
Keyword(s):  
Interest Rates ◽  
Commercial Banks ◽  
Financial Institution ◽  
Secondary Data ◽  
Income Level ◽  
Access To Credit ◽  
Credit Score ◽  
Descriptive Research ◽  
Specific Objective ◽  
Finance Department

The purpose of this study was to investigate the effect of savings level determinant on sustainability in I&M Rwanda. The specific objectives were to establish the effect of interest rate, income level and access to credit on the sustainability of I&M Bank. This study implemented a descriptive research design and utilized coefficient of correlation to assess the effect of each specific objective on the sustainability of the Bank. The population comprised of 12,057 including 12,050 customers and 7 staff of finance department of I&M Bank Rwanda. A sample size of 99 was calculated using Yamane (1967) simplified formula. To accomplish this aim, both primary and secondary data are used. The researcher used simple random and purposive sampling techniques. A questionnaire and interview have used to collect data. Quantitative data was obtained using questionnaire while a financial statement of I&M Bank covering 2016-2020 was used as secondary data. Descriptive and inferential statistical analysis showing mean, standard deviation, correlation and regression was used statistical Package for Social Sciences (SPSS) version 26.0 to analyze statistical information while content analysis used to analyze qualitative information. The findings and recommendations for this study addressed to the I & M Bank Rwanda, for decision-making and policies. The study found that interest rates, income level and access to credit have significant positive effect on sustainability of commercial banks in Rwanda at 78%, 90.5% and 92.9% respectively. The relationship among saving level determinants and sustainability of business bank was also determined to be linear with increase in get admission to credit score by means of clients. The researcher concluded that saving degree and get admission to credit volatility had more effect on sustainability of banks. The study endorsed that guideline to be installed vicinity to boom financial institution lending and ensure monitoring the same. Keywords: Savings Level Determinant, Sustainability, Commercial Banks, I&M Bank, Rwanda

scholarly journals High Lending Rates in Indonesia: Inflation Rates and Bank Inefficiencies

2020 ◽  
pp. 95-100
Author(s):  
Ari Christianti
Keyword(s):  
Interest Rates ◽  
Inflation Rate ◽  
Positive Impact ◽  
Panel Data Analysis ◽  
Consumer Credit ◽  
Commercial Banking ◽  
Working Capital ◽  
Operating Income ◽  
Lending Rates ◽  
Loan Interest Rates

Inefficient banking systems will affect the Indonesian economy resulting in a high lending rate structure which impacts the cost of capital in real sectors. This study aims to determine if the high lending rates in Indonesia are caused by the high inflation rate and bank inefficiencies. Using monthly panel data analysis from four categories of commercial banking in Indonesia for the period January 2009-December 2017, the results of the study show that operating expenses operating income (OEOI) and net interest margin (NIM) factors, as a measure of efficiency, have a positive impact on loan interest rates for working capital loans, investment loans and consumer loans. Furthermore, inflation rate has a positive effect on loan interest rates for working capital and investment loans only. However, this contrasts with consumer credit where the inflation rate has a negative effect on consumer credit rates. This might be attributed to the fact that interest rates for consumer credit consider default risk factors and high demand rather than inflation factors.

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