Reserve Requirements, Liquidity Risk, and Bank Lending Behavior

Alper, Koray; Binici, Mahir; Demiralp, Selva; Kara, Hakan; Özlü, Pınar Özbay

doi:10.1111/jmcb.12475

Cited by 38 publications

(37 citation statements)

References 12 publications

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“…Alper et al (2016) argued that increasing reserve requirement (RR) is associated with banks' liquidity reduction. On the contrary, reserve requirement (RR) is negatively associated with financial stability.…”

Section: Modified Empirical Models: Credit Risk (Robustness Check)mentioning

confidence: 99%

“…Thus, the depleting stability may be due to the rising liquidity risk faced by banks. Alper et al (2016) argued that increasing reserve requirement (RR) is associated with banks' liquidity reduction. Furthermore, higher liquidity and credit risk are accounted for higher bank default probability (Imbierowicz & Rauch, 2017).…”

Section: Empirical Models: Overall Riskmentioning

confidence: 99%

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The Behaviour of Banking Financial Stability in ASEAN‐5

Oktaviyanti

Purnawan

2019

J of App Econs and Policy

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This research is aimed at analysing the cyclicality of banking financial stability, the impact of bank ownership status, bank size group and macroprudential policies on banking financial stability (Z‐score) of ASEAN‐5 countries. The study implements generalised method of moments system estimator and bank‐level data (2011:Q1–2017:Q1). The result indicates that the banking financial stability shows countercyclical behaviour. While government ownership does not affect financial stability, it tends to increase credit risk. Large and small bank group do not have significant different risk‐taking behaviour. Loan‐to‐Value ratio does not affect financial stability but significantly mitigates credit risk. An increase in reserve requirement lowers financial stability.

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Section: Modified Empirical Models: Credit Risk (Robustness Check)mentioning

confidence: 99%

Section: Empirical Models: Overall Riskmentioning

confidence: 99%

The Behaviour of Banking Financial Stability in ASEAN‐5

Oktaviyanti

Purnawan

2019

J of App Econs and Policy

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“…When we look at the determinants of the liquidity, we see that required reserve ratio has a significant effect on liquidity. Alper et al (2016) analyze Turkish banks for the years between 2010-2015 in order to find the interaction between required reserve ratio and lending and thus maintain that the requires reserve ratio affects funding need and liquidity of the banks, in return the change in liquidity need has significant impact on lending behavior. On the other hand, high loans to deposit ratio is another determinant of the liquidity ratio on account of the fact that the ratio restrains liquidity.…”

Section: Sectormentioning

confidence: 99%

The Effect of Global Financial Crisis on Securities Portfolio of Deposit Banks: A Difference-in-Differences Method for Turkey

Özdemir

Kayhan

2019

bmij

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This study analyzes the effects of the global financial crisis of 2008 upon public and private deposit banks’ securities portfolio in Turkey for the quarterly period between 2005 (Q1) and 2015 (Q4). Difference-in-Differences (DiD) method is employed to solve the research question of this paper, which is whether or not there exist a significant change in differences between Turkish public and private banks’ ratio of securities (financial assets) to total assets during and after the crisis. This study concludes by suggesting that after the global financial crisis, securities to assets ratio of publicly owned deposit banks significantly differed from that of privately owned ones in Turkey.Compared to the private deposit banks, there has been a significant decrease in the specified ratio of public deposit banks. This can be explained by taking into account the very nature of public banks. The results of the econometric analyses indicate that after the crisis, unlike the private deposit banks, state-owned deposit banks held fewer securities in their total assets in Turkey, which is in line with the behavior of lending more to eliminate the negative effects of the crisis of 2008.

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“…Reserve requirement is measured as the ratio of required reserves (Alper et al, 2018). According to previous literature (Elian, 2012) the reserve requirement is expected to have a positive impact on OBS activities.…”

Section: Obsamentioning

confidence: 99%

Untitled

2019

Asian Economic and Financial Review

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In recent decades, off-balance sheet activities have emerged as an innovation in banking and finance as it is the easiest source of additional fee income that is beyond a bank's balance sheet activities that avoids regulatory costs, and so they are increasingly popular in banking industries around the world. This paper presents a discussion of the determinants of using off-balance sheet activity in commercial banks in South Asia. The paper also presents an in-depth insight of different theoretical justifications, and empirical literature answers the whys and wherefores of off-balance sheet usage in commercial banks of south Asia. The conceptual model considers the impact of capital size, profitability, loan, credit risk, market concentration, capital adequacy, reserve requirement, real GDP, interest rate spread and inflation on off-balance sheet activities of banks. The Fixed effect and Arellano-Bond GMM method are used on the balance panel of 81 banks to achieve the research objectives of the current study. The results of the bank-specific factors on the off-balance sheet activities (OBSA) support the Market Power Theory. However, the positive and significant relationship between loan ratio and OBSA also supports the market portfolio theory, which argues that the increasing loans offer a continuous risk and can enhance credit risk. Therefore, banks must diversify their portfolios. The positive relationship between the reserve ratio and OBSA provides support for the regulatory and tax hypothesis. Contribution/ Originality: This study is a pioneer study, providing details about the factors that determine the off-balance sheet activities of South Asian commercial banks. The study has taken a comprehensive set of factors to determine the effects of these bank specific regulatory factors on the bank's off-balance sheet engagement decisions. This study would help in policy building to improve asset quality and optimal portfolio selection for income generation.

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Reserve Requirements, Liquidity Risk, and Bank Lending Behavior

Cited by 38 publications

References 12 publications

The Behaviour of Banking Financial Stability in ASEAN‐5

The Behaviour of Banking Financial Stability in ASEAN‐5

The Effect of Global Financial Crisis on Securities Portfolio of Deposit Banks: A Difference-in-Differences Method for Turkey

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