Bank market power and lending during the global financial crisis

Cubillas, Elena; Suárez, Nuria

doi:10.1016/j.jimonfin.2018.08.003

Cited by 26 publications

(15 citation statements)

References 88 publications

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“…Bank required capital which measures capital adequacy for absorbing shocks is averagely 16.572% of risk-adjusted assets. Compared to the average capital adequacy of 35.43% in 17 European economies used in the study of Cubillas and Suárez (2018), the average capital adequacy of 16.572% in this present study is lower. Growth potential in this current study is averagely 5% while the growth potential of 19.430% is reported in Cubillas and Suárez (2013).…”

Section: Variablescontrasting

confidence: 85%

“…This is an indication that growth potentials in the 75 economies used in the study are lower compared to the growth potential of the 64 economies used in Cubillas and Suárez (2013). Although the Z-Score which measures banking stability is reported to have a mean logged value of 2.376, the logged mean values of 1.0504 and 1.3181 reported in Cubillas and Suárez (2013) and Cubillas and Suárez (2018) respectively, implying that banking stability in the 75 economies used in this study is higher compared to the economies in Cubillas and Suárez (2013) and Cubillas and Suárez (2018). Bank diversification and efficiency are reported to be 38.878% and 56.37%, respectively.…”

Section: Variablesmentioning

confidence: 82%

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Financial sector transparency, financial crises and market power: Across‐countryevidence

et al. 2020

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The study investigates how financial sector transparency moderates the influence of financial crises on bank market power across seventy-five economies between 2004 and 2014. Employing two-step dynamic system generalized method of moments the study shows that while public sector-led financial sector transparency reduces bank market power, private sector-led financial sector transparency promotes bank market power given that private sector-led transparency gives financial cost advantage to financially sound banks to solidify the market power and dominance. Similarly, while financial crises reduce the market power of banks implying that during financial crises banks lose their market power, financial sector transparency promotes the negative effect of financial crises on bank market power. This implies that during financial crises, financial sector transparency whether enforced through private or public sector, boosts the weakening effect of financial crises on bank market power. These findings imply that regulators can rely on financial transparency to tame bank market power to enhance banking competitiveness. The findings and results are consistent even when country, time and continental effects are controlled for.

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Section: Variablescontrasting

confidence: 85%

Section: Variablesmentioning

confidence: 82%

Financial sector transparency, financial crises and market power: Across‐countryevidence

et al. 2020

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“…We use the Z‐Score ( ZSCORE ) to proxy for the level of bank stability . This variable has been traditionally used as an inverse measure of bank risk (Cubillas and Suárez, ). It is computed equaling the return on assets plus the capital asset ratio divided by the standard deviation of asset returns.…”

Section: Methodsmentioning

confidence: 99%

“…First, we use a wide set of bank‐level control variables to rule out the possibility that effects attributed to capital and liquidity are caused by alternative bank characteristics. Following previous studies, we include control variables that have been traditionally considered as factors explaining both lending and stability (Cubillas and Suárez, ; Leroy, ). In particular, we consider bank size, proxied by the natural logarithm of bank total assets (SIZE).…”

Section: Methodsmentioning

confidence: 99%

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

Polizzi¹,

Scannella²,

Suárez

2020

Global Policy

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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 not homogeneous across legal and institutional environments. In particular, we provide evidence on more relevant relationships in countries with higher level of protection of creditor rights and lower restrictions on non-traditional banking activities. Our empirical findings are robust to different specifications of the empirical model and to potential endogeneity problems. Policy Implications• Notwithstanding the tightening Basel III regulation, lending has increased in the presence of higher capital requirements and liquidity coverage ratios. However, this increased in lending is not independent upon the legal and institutional setup.• Although it is fundamental to study the direct effects of capital and liquidity requirements on stability, policymakers should deal not only with these direct effects, but also with the different channels of this transmission mechanism and, specifically, with the lending channel.

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“…During such times, banks face an overall decrease in funding, and thus they prefer lending to borrowers with whom they have a longer lending relationship. Moreover, banks become more cautious to lend due to the potential increases in loan defaults, leading to an overall reduction in lending (Ivashina and Scharfstein, 2010;Lou and Yin, 2014;Cubillas and Suárez, 2018). Such reductions in the credit supply in crisis times have severe implications on the real economy, propagating the overall decrease in investments or employment (Berger et al 2020).…”

Section: Introductionmentioning

confidence: 99%

ESG activity and bank lending during financial crises

Danışman

Tarazi

2022

SSRN Journal

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HAL is a multi-disciplinary open access archive for the deposit and dissemination of scientific research documents, whether they are published or not. The documents may come from teaching and research institutions in France or abroad, or from public or private research centers. L'archive ouverte pluridisciplinaire HAL, est destinée au dépôt et à la diffusion de documents scientifiques de niveau recherche, publiés ou non, émanant des établissements d'enseignement et de recherche français ou étrangers, des laboratoires publics ou privés.

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Bank market power and lending during the global financial crisis

Cited by 26 publications

References 88 publications

Financial sector transparency, financial crises and market power: Across‐countryevidence

Financial sector transparency, financial crises and market power: Across‐countryevidence

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

ESG activity and bank lending during financial crises

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