Search results for " lending"
showing 10 items of 40 documents
The impact of quantitative easing on UK bank lending: Why banks do not lend to businesses?
2021
Abstract The growing proportion of UK bank lending to the financial sector reached a peak in 2007 just before the onset of the Global Financial Crisis (GFC). This marks a trend in the dwindling amount of bank lending to private sector non-financial corporations (PNFCs), which was exacerbated with the Great Recession. Many central banks aimed to revive bank lending with quantitative easing (QE) and unconventional monetary policy. We propose an agent based computational economics (ACE) model which combines the main factors in the economic environment of QE and Basel regulatory framework to analyse why UK banks do not prioritize lending to non-financial businesses. The lower bond yields caused…
Economic Support during the COVID Crisis. Quantitative Easing and Lending Support Schemes in the UK
2021
Abstract We investigate how UK bank business lending responded to the simultaneous use of quantitative easing, leverage ratio capital requirements, and government COVID lending support schemes. We find no evidence that the Brexit wave increased lending to nonfinancial businesses, compared to the previous waves, except for QE-banks subject to the UK leverage ratio, suggesting that the ratio incentivised QE-banks to lend to businesses. The government schemes helped expand lending especially to SMEs post the COVID wave, indicating that complementing QE with other credit easing programmes can reinforce its impact on lending to the real economy. During COVID-stress, changes to the UK leverage ra…
Strategic quantitative easing: Stimulating investment to rebalance the economy
2013
The Bank of England’s programmes of Quantitative Easing (QE) and Funding for Lending (FLS) are failing to stimulate GDP and rebalance the economy. Both policies falsely assume that the UK’s risk-averse capital markets, corporate sector and constrained banking system can be nudged into supporting the productive economy. We propose a new approach: one that channels investment directly into new housing, infrastructure and SME lending, boosting productivity and exports. QE must become less scattergun and more strategic, with reformed governance structures to match.
Local bank competition and small business lending after the onset of the financial crisis
2016
This paper examines whether the effects of the financial crisis on the volumes and prices of small business loans depended on the pre-crisis local competitive environment. To address this question, I employ a unique data set on Finnish cooperative banks. I find that the monthly volumes of new business loans decreased and the average loan margins increased after the onset of the crisis. The decrease in volumes and the increase in margins were greater in local banking markets that were more competitive before the crisis. The results for the loan margins are more robust than those obtained for the volumes. Auxiliary analyses suggest that the greater effects in the more competitive markets are …
How Law Affects Lending
2006
A voluminous literature seeks to explore the relation between law and finance, but offers little insights into dynamic relation between legal change and behavioral outcomes or about the distributive effects of law on different market participants. The current paper disentangles the law-finance relation by using disaggregate data on banks’ lending patterns in 12 transition countries over a 8 year period. This allows us to control for country level heterogeneity and differentiate between different types of lenders. Employing a differences-in-differences methodology in an exclusive ”laboratory” setting as well as unique hand collected datasets on legal change as well as changes in bank ownersh…
Networked relationships in the e-MID Interbank market: A trading model with memory
2014
Interbank markets are fundamental for bank liquidity management. In this paper, we introduce a model of interbank trading with memory. Our model reproduces features of preferential trading patterns in the e-MID market recently empirically observed through the method of statistically validated networks. The memory mechanism is used to introduce a proxy of trust in the model. The key idea is that a lender, having lent many times to a borrower in the past, is more likely to lend to that borrower again in the future than to other borrowers, with which the lender has never (or has in- frequently) interacted. The core of the model depends on only one parameter representing the initial attractiven…
The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?
2020
The aim of this paper is to examine whether and to what extent bank capital requirements and liquidity standards influence the level of bank stability. Our approach is that both capital and liquidity affect lending growth, which in turn affects bank stability. We construct a panel dataset on a sample of 2,054 commercial banks from 117 developed and developing countries during the 2000–16 period. By applying a two-stage least squares (2SLS) empirical methodology, our findings show that capital and liquidity have a negative direct impact on the level of bank stability. However, this influence is counteracted by an indirect positive effect through the increased level of credit. Our results are…
The asset reallocation channel of quantitative easing. The case of the UK
2022
We investigate the impact of the Bank of England's asset purchase program (APP) on the composition of assets of UK banks with unique data on the received reserves injections. The Monetary Policy Committee (MPC) didn't expect there to be strong transmission of the APP's impact through the bank lending channel. We find that compared to the control group, treated banks reallocated their assets towards lower risk-weighted investments, such as government se-curities, but did not provide more credit to the real economy. Overall, our findings suggest that when banks are not adequately capitalised, risk-based capital constraints can limit the effec-tiveness of expansionary unconventional monetary p…
Credit reporting e intermediazione creditizia: scelte di “make or buy” tra relationship e transaction banking.
2016
Il presente lavoro prende in esame, con una prospettiva di analisi economico-aziendale, il ruolo del mercato del credit reporting nell’esercizio della funzione creditizia delle banche, nonche il vario articolarsi delle scelte di make-or-buy informativo nella catena del valore dell’intermediazione creditizia, tra approcci di relazione di clientela di tipo relationship banking e transaction banking. In particolare, il lavoro e volto a sistematizzare le teorie ed a comprendere le determinanti del ricorso delle banche al mercato dell’informazione creditizia. Il paper e strutturato nel modo seguente. La sezione 2 introduce il tema dell’economia dell’informazione nel mercato creditizio. La sezion…
Empirical Analyses of Networks in Finance
2018
Abstract The recent global financial crisis has triggered a huge interest in the use of network concepts and network tools to better understand how instabilities can propagate through the financial system. The literature is today quite vast, covering both theoretical and empirical aspects. This review concentrates on empirical work, and associated methodologies, concerned with the evaluation of the fragility and resilience of financial and credit markets. The first part of the review examines the literature on systemic risk that arise from banks mutual exposures. These exposures stem primarily from interbank lending and derivative positions, but also, indirectly, from common holdings of oth…