The effect of bank ownership and deposit insurance on monetary policy transmission

Andries, Natalia; Billon, Steve

doi:10.1016/j.jbankfin.2010.07.010

Cited by 22 publications

(10 citation statements)

References 23 publications

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“…Next to the fact that insured deposits constitute the bulk of total deposits, insured deposit holders may display different behaviour than uninsured deposit holders with respect to monetary shocks (Demirgüç‐Kunt & Kane, ; Karas, Pyle, & Schoors, ). Andries and Billon (), for instance, theoretically show that deposits under insurance exhibit a more stable pattern in response to a monetary shock. In the case of increasing bank risk and corresponding monetary policy interventions, for instance, uninsured deposit holders’ response to monetary shocks is augmented with the risk of bank failure.…”

Section: Methodsmentioning

confidence: 99%

Bank lending channel in a dual banking system: Why are Islamic banks so responsive?

2017

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We examine the interest rate sensitivity of both deposits and credits at Islamic and conventional banks in Turkey. We find that the bank lending channel is especially operative for Islamic banks. Impulse responses for conventional and Islamic banks reveal that Islamic bank depositors’ sensitivity to policy rate changes is substantially larger than that of conventional bank depositors. Next to heavily dependence on deposit funding, we consider that inertia in Islamic bank deposit rates impedes these banks to keep those depositors who consider the opportunity cost of monetary policy rates is unbearable. On the lending side, we obtain similar results, implying that tight monetary policy leads to a larger contraction in Islamic bank credits. This finding is a reflection of the favourable attitude of Islamic banks towards small and medium‐sized enterprise (SME) financing. When similar relationships are analysed for currency and inflation shocks, we again find larger responses for Islamic banks showing the cyclical nature of SME credits.

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Section: Methodsmentioning

confidence: 99%

Bank lending channel in a dual banking system: Why are Islamic banks so responsive?

2017

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“…It is vital for the central bank to understand how different types of risks could emanate in different types of banks, in response to monetary policy actions. While the literature has studied how differences in ownership structures of banks affect the lending channel of monetary policy transmission (Andries & Billon, 2010; Bhaumik, Dang, & Kutan, 2011), the effect of ownership on the risk-taking channel is less explored. The role of ownership is particularly important for emerging economies that have banking systems characterised by mixed ownership.…”

Section: Introductionmentioning

confidence: 99%

Risk-taking Channel of Monetary Policy: Evidence from Indian Banking

Sarkar¹,

Sensarma²

2018

Margin: The Journal of Applied Economic Research

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Some recent articles have studied the link between the central bank’s monetary policy stance and the risk-taking behaviour of banks in the context of advanced economies. Loose monetary policy can encourage banks to reach for yield, which will increase their share of risky assets, and also induce them to use more short-term funding. We empirically examine the existence of this risk-taking channel of monetary policy transmission in India. We find that expansionary monetary policy may increase default risk particularly for foreign banks and new private sector banks. We also find that tightening of monetary policy leads to lower liquidity risk and market risk and the effects are stronger for foreign banks than for other bank groups. In terms of market risk, the effect on foreign banks is weaker in cases of monetary tightening compared to expansion. JEL Classification: G21, G28, G32

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“…This suggests that government-owned banks are able to raise loan supply during periods of tighter monetary policy. Andries and Billon (2010) and Brei and Schclarek (2015) postulated that government-owned banks are able to source additional funds during periods of monetary policy tightening, and as a result, they are not required to reduce their lending activities. This happens because government-owned banks can obtain stable deposits due to better deposit guarantee (Micco & Panizza, 2006).…”

Section: Discussionmentioning

confidence: 99%

Bank-Lending Channel of Monetary Policy Transmission: Evidence from ASEAN

Hamid

Yunus

2019

Global Business Review

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This article examines the existence of a bank-lending channel in Association of Southeast Asian Nations (ASEAN) using a sample of 328 banks from 2009 to 2015. The findings confirm that a bank-lending channel is effective. In particular, we find that consumer loans and commercial loans are sensitive to changes in monetary policy, but mortgage and corporate loans are not. We also find that commercial banks are vulnerable to monetary policy changes, but both investment and Islamic banks are not. On the contrary, special purpose banks are able to overcome the effect of monetary policy tightening by supplying more loans. The effectiveness of a bank-lending channel in ASEAN also holds when we control for the differences in governance structure of the countries. Policymakers need to take these into consideration in designing an effective monetary policy.

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The effect of bank ownership and deposit insurance on monetary policy transmission

Cited by 22 publications

References 23 publications

Bank lending channel in a dual banking system: Why are Islamic banks so responsive?

Bank lending channel in a dual banking system: Why are Islamic banks so responsive?

Risk-taking Channel of Monetary Policy: Evidence from Indian Banking

Bank-Lending Channel of Monetary Policy Transmission: Evidence from ASEAN

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