Deposit rates, credit rates and bank capital

Dermine, Jean

doi:10.1016/0378-4266(86)90022-1

Cited by 101 publications

(62 citation statements)

References 9 publications

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“…Revisiting the argument of Klein (1971) and Monti (1972) that the decisions about 1 It is arguable that deposits can also be seen as an output of the bank (Berger and Humphrey 1997); however, the more common view is to see them as inputs, as opposed to loans, which are outputs. loans and deposits are independent, Dermine (1986) found that the two decisions are interdependent if the bank faces very plausible situations such as a positive probability of default. Using data from Italian banks, Corradi et al (1990) showed that there was cointegration among bank free reserves, loans, and deposits and thus provided evidence in favour of the hypothesis that there is a causal nexus running from bank deposits to loans.…”

Section: Introductionmentioning

confidence: 99%

Operational Efficiency of Bank Loans and Deposits: A Case Study of Vietnamese Banking System

NGUYEN

Tripe

Ngo

2018

IJFS

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This paper examines whether there is a causal relationship between bank loans and deposits in the Vietnamese banking system and the efficiency of the use of loans and deposits by the Vietnamese banks. In a country such as Vietnam, where inter-bank money markets are relatively underdeveloped, one would expect a reasonably strong relationship between deposits and loans. A pooled cross-sectional sample of financial ratios is collected from annual reports of 44 Vietnamese banks covering the period 2008-2015. The explanatory power of instrumental variables in relation to the endogenous variables is tested. A deterministic frontier model based on corrected ordinary least squares, estimated by three-stage least squares on a simultaneous equations model, is employed to derive the frontiers for the sampled banks as well as to estimate the causality between bank loans and deposits. Our findings suggest that, in an underdeveloped banking system such as Vietnam, bank deposits have a positive and significant impact on bank loans, but the reverse relationship is not significant. It is further suggested that in deposit-taking and loan-creating activities, Vietnamese banks performed moderately well over the period examined; however, in the near future, they should start to focus more on deposit-taking activities.

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Section: Introductionmentioning

confidence: 99%

Operational Efficiency of Bank Loans and Deposits: A Case Study of Vietnamese Banking System

NGUYEN

Tripe

Ngo

2018

IJFS

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“…The whole concept actually relies on the fact that bank owners and managers are the ones choosing the bank risk level. In the same time, they are aware of the market power their bank has (no matter how much of it has been exercised) as Marcus (1984) and Dermine (1986) show in theoretical work. Similarly, Keeley (1990) set theoretical and empirical evidence on franchise value hypothesis with emphasize on the deregulation process as the driver of the increased competition and fragility.…”

Section: Relationship Between Bank Competition and Stabilitymentioning

confidence: 99%

Market power and stability of CEE banks

Huljak

2015

Business Systems Research Journal

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Background: In spite of growing number of empirical studies, especially after the start of financial crisis, literature fails to provide conclusive answers on the relationship between bank competition and stability. Objective: We contribute to the existing literature by conducting a bank level analysis of market power implications on CEE bank stability and test weather bank market power increases bank stability. Approach: On the sample of 415 CEE banks from 1997-2012, we use Distribution free approach to generate bank specific market power and efficiency indicators and then run a fixed effects panel regression. Results: We find evidence supporting the Competition -fragility view; banks with more market power are more stable. Also, we find evidence that this stability is a result of lower portfolio risk supporting the franchise value channel. Conclusions: For banks in CEE countries where economic crisis increased risk materialization, increasing competition from the early 2000s, may have been a factor decreasing bank stability which may bear significant implications for upcoming years when competition is likely to increase further.

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“…The present paper is closely related to the literature on endogenously-forming risk attitudes (cf Froot et al (1993) and Froot and Stein (1998)) as well as the literature on banks' decision making in the lending and deposit-taking business in situations of risk (cf, for instance, Wong (1997), Dermine (1986), Wahl and Broll (2000)). The model of the present paper is also related to the seminal papers of Diamond and Dybvig (1983) and Bryant (1980) by using a similar time structure.…”

mentioning

confidence: 99%

“…However, Dermine (1986) shows that the decisions on expected deposit rates and loan rates can be separated which also allows for a separation of a bank's decisions on the optimal volumes of deposits and loans.…”

mentioning

confidence: 99%