InGlobalizing in Hard Times, Leonardo Martinez-Diaz examines the sudden and substantial increase in cross-border ownership of commercial banks in countries where bank ownership had long been ...restricted by local rules. Many parties-the World Bank and the IMF, the world's largest commercial banks, their home governments, and their negotiators-had been pushing for a relaxation of ownership rules since the early 1980s and into the 1990s, when bank profitability levels in advanced industrial societies went flat. In their hunt for higher returns on assets, the major banks looked to expand business overseas, but through the mid-1990s their efforts to impose more liberal ownership regimes in nationalist countries proved largely unsuccessful.
Martinez-Diaz illustrates the ongoing political resistance to liberalized ownership rules in Mexico, Indonesia, Brazil, and South Korea. He then demonstrates the importance of a series of events-the Mexican crisis and the Brazilian banking shock in 1994-1995 and the Asian crisis of 1997-1998 among them-in finally knocking down barriers to foreign ownership of banks. After these upheavals, policymakers who were worried about their political survival-and who were sometimes pressed by the IMF and foreign governments-reshaped the regulatory environment in key emerging markets. Self-proclaimed global banks eagerly grasped the opportunity to expand their operations worldwide, but after the initial shock, domestic politics reasserted themselves, often diluting the new, liberal rules.
•We investigate the relationship among bank capital, risk and profitability in WAEMU.•We consider bank ownership, business cycles and the rise of Pan-African banks.•In WAEMU, as bank capital ratios ...increase, risk-taking and profitability also go up.•Bank capital positions comove positively with the business cycle, mimicking Basel III.•Overall, Pan-African cross-border bank ownership increases bank risk.
We investigate the simultaneous relationship among bank capital, risk and profitability, but also considering bank ownership and the emergence of Pan-African cross-border banks. We specify a simultaneous equation model and estimate it using hand-collected bank level data from all West African Economic and Monetary Union (WAEMU) countries for 2000–2014. We split the countries into lower middle-income (LMICs) and low-income (LICs) according to the World Bank classification. We uncover evidence that the sensitivity of bank profitability to an increase in capital ratio seems to be somewhat higher in LMICs (+0.10) than in LICs (+0.05). Moreover, we find that bank capital positions tend to comove positively with the business cycle in LICs, mimicking a key postulate of Basel III. After differentiating between cross-border Pan-African banks and foreign banks from outside the continent, we find that the overall effect of bank ownership on risk depends on the origin of banks (French versus Pan-African). These findings are robust to alternative estimation techniques and the use of competing measures of risk and profitability.
Inside the engine-room of China's economic growth—the China Development BankAnyone wanting a primer on the secret of China's economic success need look no further than China Development Bank ...(CDB)—which has displaced the World Bank as the world's biggest development bank, lending billions to countries around the globe to further Chinese policy goals. In China’s Superbank, Bloomberg authors Michael Forsythe and Henry Sanderson outline how the bank is at the center of China's domestic economic growth and how it is helping to expand China's influence in strategically important overseas markets.100 percent owned by the Chinese government, the CDB holds the key to understanding the inner workings of China's state-led economic development model, and its most glaring flaws. The bank is at the center of the country's efforts to build a world-class network of highways, railroads, and power grids, pioneering a lending scheme to local governments that threatens to spawn trillions of yuan in bad loans. It is doling out credit lines by the billions to Chinese solar and wind power makers, threatening to bury global competitors with a flood of cheap products. Another $45 billion in credit has been given to the country's two biggest telecom equipment makers who are using the money to win contracts around the globe, helping fulfill the goal of China's leaders for its leading companies to 'go global.'Bringing the story of China Development Bank to life by crisscrossing China to investigate the quality of its loans, China’s Superbank travels the globe, from Africa, where its China-Africa fund is displacing Western lenders in a battle for influence, to the oil fields of Venezuela.Offers a fascinating insight into the China Development Bank (CDB), the driver of China's rapid economic developmentTravels the globe to show how the CDB is helping Chinese businesses 'go global'Written by two respected reporters at Bloomberg NewsAs China's influence continues to grow around the world, many people are asking how far it will extend. China’s Superbank addresses these vital questions, looking at the institution at the heart of this growth.
Using a unique database for 74 countries and for firms of small, medium, and large size we assess the effect of banking market structure on the access of firms to bank finance. We find that bank ...concentration increases obstacles to obtaining finance, but only in countries with low levels of economic and institutional development. A larger share of foreign-owned banks and an efficient credit registry dampen the effect of concentration on financing obstacles, while the effect is exacerbated by more restrictions on banks' activities, more government interference in the banking sector, and a larger share of government-owned banks.
Central banks have evolved over many years, and sometimes centuries, as policy-making, not profit-making, institutions, and yet they are structured legally and financially like ‘for-profit’ companies ...of the twenty-first century. The question is what is an appropriate level of equity, or capital, for a central bank to have so that it can function for policy effectiveness over profit-maximisation, without hindrance to the achievement and maintenance of policy goals?
This collection takes the reader through historical, theoretical and factual discussions on why central banks exist and the role – actual and intended – they have in assisting their home nation in achieving monetary and financial stability. The contributions analyse the different ways central banks are funded and how funding arrangements may impact on their independence. The objective is to explore these themes first from the academic and practitioner’s views – those of the economist, accountant and lawyer’s – and then to introduce practical experiences from a range of different central banks, in terms of their economic and socio-political environments. It will be the first time that the theorist and practitioner, the accountant, the economist and the lawyer come together in one volume. The reader will be able to access the full breadth of views on this important subject.
The main observations are that there is no single, quantifiable formula that central banks can use to calculate capital levels. Factors to consider are the historical context of central banks and whether capital was ever appropriate to needs at their foundation; the cultural, social and political contexts; and, in terms of the presentation of financial statements, profit and loss sharing arrangements and what accounting conventions are being used. If these are considered alongside the, often idiosyncratic, mandates individual central banks have, a qualitative understanding of what is an appropriate level of capital is achieved. This collection will be of interest to postgraduates and researchers focusing on the role of central banks in monetary economics; as well as a professional audience of central bankers, the BIS, the IMF, World Bank, EBRD and government departments.
Sue Milton works in the Bank of England’s Centre for Central Banking Studies, where she is an adviser on central bank governance.
Peter Sinclair is Professor of Economics at the University of Birmingham, UK.
1. Central bank’s capital: An Introduction Peter Sinclair and Sue Milton 2. Central bank finances and independence: how much capital should a central bank have? Alex Cukierman 3. Central bank financial strength and macroeconomic policy performance Peter Stella 4. Financing the central bank: capital adequacy and financial independence – an accountant’s perspective Robin Darbyshire 5. Securing financial independence in the legal basis of a central bank Fabian Amtenbrink 6. Central bank capital adequacy: the cases of central banks with or without monetary policy Luca Papi 7. Exchange rate appreciation and negative central bank capital: is there a problem? Jan Frait and Tomáš Holub 8. Central bank losses, electronic money and contestable central banking Yúksel Górmez 9. Funding models for central banks: is the European Central Bank a special case? Ian Ingram 10. The evolving financial arrangements and independence of the National Bank of Poland Wojciech Kolodziej 11. Central bank funding models and their risk-return profile J Ramón Martínez-Resanó 12. How asset liability management techniques can help central banks Age Bakker, Han van der Hoorn and Leonard Zwikker
Risk Management for Islamic Banks Imam Wahyudi, Fenny Rosmanita, Muhammad Budi Prasetyo, Niken Iwani Surya Putri
2015, 2015-09-02, 2015-09-01
eBook
Gain insight into the unique risk management challenges within the Islamic banking system Risk Management for Islamic Banks: Recent Developments from Asia and the Middle East analyzes risk management ...strategies in Islamic banking, presented from the perspectives of different banking institutions. Using comprehensive global case studies, the book details the risks involving various banking institutions in Indonesia, Malaysia, UAE, Bahrain, Pakistan, and Saudi Arabia, pointing out the different management strategies that arise as a result of Islamic banking practices. Readers gain insight into risk management as a comprehensive system, and a process of interlinked continuous cycles that integrate into every business activity within Islamic banks. The unique processes inherent in Islamic banking bring about complex risks not experienced by traditional banks. From Shariah compliance, to equity participation contracts, to complicated sale contracts, Islamic banks face unique market risks. Risk Management for Islamic Banks covers the creation of an appropriate risk management environment, as well as a stage-based implementation strategy that includes risk identification, measurement, mitigation, monitoring, controlling, and reporting. The book begins with a discussion of the philosophy of risk management, then delves deeper into the issue with topics like: * Risk management as an integrated system * The history, framework, and process of risk management in Islamic banking * Financing, operational, investment, and market risk * Shariah compliance and associated risk The book also discusses the future potential and challenges of Islamic banking, and outlines the risk management pathway. As an examination of the wisdom, knowledge, and ideal practice of Islamic banking, Risk Management for Islamic Banks contains valuable insights for those active in the Islamic market.
Small states face special hurdles in achieving development gains. These states spend significantly more of their GDP on producing public goods and services, and they face higher connectivity costs ...than do their larger brethren. Small States, Smart Solutions examines how some small states use international trade and telecommunications technology to outsource services such as justice, banking supervision, public utilities regulation, high-quality medicine, and education. Sourcing these services internationally poses unique challenges but also opens broad opportunities. The eight case studies in this book, based on interviews with government officers and citizens, describe pioneering initiatives undertaken by some small states to better the quality of life of their citizens.
This article develops a model that speaks to the goals and methods of financial stability policies. There are three main points. First, from a normative perspective, the model defines the fundamental ...market failure to be addressed, namely, that unregulated private money creation can lead to an externality in which intermediaries issue too much short-term debt and leave the system excessively vulnerable to costly financial crises. Second, it shows how in a simple economy where commercial banks are the only lenders, conventional monetary policy tools such as open-market operations can be used to regulate this externality, whereas in more advanced economies it may be helpful to supplement monetary policy with other measures. Third, from a positive perspective, the model provides an account of how monetary policy can influence bank lending and real activity, even in a world where prices adjust frictionlessly and there are other transactions media besides bank-created money that are outside the control of the central bank.
This paper analyzes the relationship between oil price shocks and bank profitability. Using data on 145 banks in 11 oil-exporting MENA countries for 1994-2008, we test hypotheses of direct and ...indirect effects of oil price shocks on bank profitability. Our results indicate that oil price shocks have indirect effect on bank profitability, channeled through country-specific macroeconomic and institutional variables, while the direct effect is insignificant. Investment banks appear to be the most affected ones compared to Islamic and commercial banks. Our findings highlight systemic implications of oil price shocks on bank performance and underscore their importance for macroprudential regulation purposes in MENA countries.
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