The Macro-prudential aspects of loan-to-deposit-ratio-linked reserve requirement

Satria, Dadang M.; Harun, Cicilia A.; Taruna, Aditya Anta

doi:10.1080/00036846.2015.1073840

Cited by 9 publications

(11 citation statements)

References 4 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Removal of lending quotas for MSEs could make more credit available for MLEs. We argue against this possibility by noting that banks in Indonesia typically fail to get close to exhausting their credit limit, based on reserves (Hamada 2016;Satria et al 2016). In addition, the banks did not totally abandon MSE financing to relocate the whole body of funding to MLEs.…”

Section: Empirical Methodologymentioning

confidence: 99%

The effect of a credit policy change on microenterprise upward transition and growth: evidence from Indonesia

Auwalin

2020

Eurasian Bus Rev

View full text Add to dashboard Cite

This paper attempts to establish a causal relationship between a government micro and small enterprises (MSEs) credit promotion policy and MSEs' upward transitions and growth. Indonesian firm level data in conjunction with the cancellation of a mandatory MSE credit policy in 2001 by the Indonesian government are employed in the analysis. Firstly, estimations of the year-on-year micro to small size category transitions indicate the negative effect of the policy change on the upward transition of micro firms. Secondly, causal effect analysis using difference-in-differences (DiD) estimation, by employing the policy change as an exogenous shock on the MSE credit availability and setting medium and large enterprises (MLEs) as the counterfactual group, suggests that the policy cancellation reduces the probability of a micro firm to become a small firm by 1.3% relative to the MLEs' probability of transitioning between size categories. The negative effect on turnover growth is also identified.

show abstract

Section: Empirical Methodologymentioning

confidence: 99%

The effect of a credit policy change on microenterprise upward transition and growth: evidence from Indonesia

Auwalin

2020

Eurasian Bus Rev

View full text Add to dashboard Cite

show abstract

“…Due to their profit motives, banks tend to behave pro-cyclically (Satria et al , 2016), lending less in a recession, more during a boom. While this occurs because banks are aggressively pursuing profits, risk is underestimated in booms and overestimated in busts (Lowe, 2002; Lowe and Stevens, 2006).…”

Section: Introductionmentioning

confidence: 99%

“…Theoretically, there is an optimal intermediation function given the level of liquidity that banks need to maintain (Satria et al , 2016). However, LTD as a measure of liquidity is only accurate if banks rely on third-party deposits for their source of funding which is rarely the case; when aggregate deposit inflows into banks weaken and banks’ LTD widens (Acharya and Mora, 2015), banks tap into the wholesale funding markets to maintain profitability and liquidity.…”

Section: Introductionmentioning

confidence: 99%

“…While LTD may not be fully appreciated by the academic community, it is a regulatory standard used by central banks (Office of the Comptroller of the Currency, 2016; DiSalvo and Johnston, 2017; European Banking Authority, 2017; Boďa and Zimková, 2020). Since the 2007–2008 financial crisis, there has been increasing focus on the use of LTD as a measure of liquidity and a tool for macro prudential policy to mitigate liquidity risk (Goodhart, 2014; Van den End, 2016; Satria et al , 2016; Boďa and Zimková, 2020, 2021) and a predictor of bank vulnerability to crises (Jordà et al , 2021). By way of Trend analysis and Panel Regression, we examine the impact of changing severity of government controls on LTD ratio for the period 1945–2012 for Major British Banking Group (MBBGs) [1].…”

Section: Introductionmentioning

confidence: 99%

“…Loan-to-deposit ratio (hereafter LTD) is a measure of the extent to which stable funds cover loans. When more loans are extended for stable deposits, banks risk their capability to fulfil their obligation towards deposit withdrawal as they then operate with a funding gap, which they may have to cover by sourcing funds in the wholesale financial markets ( Van den End, 2016;Satria et al, 2016;Boďa and Zimkov a, 2020). This has implications for bank JEL classification -G01, G18, G210, G280, G230, E520 liquidity, the interrelationship between the two sides of the balance sheet, as well as bank level and system wide liquidity risk.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

UK Government controls and loan-to-deposit ratio

Mabwe

Jaffar

2022

JFRC

View full text Add to dashboard Cite

Purpose This paper aims to present an analysis of the UK bank loans and deposits in tandem, linking the loan-to-deposit (LTD) ratio to macroprudential policy and funding restrictions. LTD ratio is used by micro and macroprudential authorities to address both structural (long-term) and cyclical (short-term) liquidity risks. It is an outcome of several political and economic factors and should be evaluated against this background. Design/methodology/approach The authors use trend analysis and panel regression to investigate LTD ratio of Major British Banking Groups from 1945 to 2012 in the midst of changing the UK Government policies. Findings The results show that wholesale funding, government intervention and repression were the major forces behind LTD trends. Originality/value The authors recommend the use of LTD as a complement to other liquidity ratios in micro and macro-prudential regulation, particularly in the context of current reforms to banking capital requirements.

show abstract

Overcoming the loan-to-deposit ratio by a financial intermediation measure — A perspective instrument of financial stability policy

Boďa

Zimková

2021

Journal of Policy Modeling

View full text Add to dashboard Cite

The Macro-prudential aspects of loan-to-deposit-ratio-linked reserve requirement

Cited by 9 publications

References 4 publications

The effect of a credit policy change on microenterprise upward transition and growth: evidence from Indonesia

The effect of a credit policy change on microenterprise upward transition and growth: evidence from Indonesia

UK Government controls and loan-to-deposit ratio

Overcoming the loan-to-deposit ratio by a financial intermediation measure — A perspective instrument of financial stability policy

Contact Info

Product

Resources

About