Loan growth and riskiness of banks Foos, Daniel; Norden, Lars; Weber, Martin
Journal of banking & finance,
12/2010, Volume:
34, Issue:
12
Journal Article
Peer reviewed
Open access
We investigate whether loan growth affects the riskiness of individual banks in 16 major countries. Using Bankscope data from more than 16,000 individual banks during 1997–2007, we test three ...hypotheses on the relation between abnormal loan growth and asset risk, bank profitability, and bank solvency. We find that loan growth leads to an increase in loan loss provisions during the subsequent three years, to a decrease in relative interest income, and to lower capital ratios. Further analyses show that loan growth also has a negative impact on the risk-adjusted interest income. These results suggest that loan growth represents an important driver of the riskiness of banks.
Herein is described the switchable fluorescence response of poly(methyl methacrylate) (PMMA) brushes. Chain end fluorescein labeled PMMA brushes are prepared by combining surface‐initiated atom ...transfer radical polymerization (SI‐ATRP) with a copper‐catalyzed alkyne‐azide cycloaddition (CuAAC) click reaction. Successful attachment of fluorescein is confirmed by measuring fluorescence of the as‐prepared films. Utilizing co‐solvency of PMMA in isopropanol‐water mixtures, responsive behavior of the end‐functionalized brushes is demonstrated by measuring the changes in fluorescence intensity between the swollen and collapsed states.
Solvent‐dependent switchable fluorescence response of chain end dye labeled poly(methyl methacrylate) (PMMA) brushes is described. Fluorescent dye is attached to the chain end of PMMA brushes with a click reaction. The fluorescent response of the end‐labeled PMMA brush can be switched, utilizing their co‐solvency effect in isopropanol‐water mixtures.
•A decline of market capital from Covid-19 will increase the default likelihood.•The mining, construction and retail sectors are most vulnerable to market shock.•Given a moderate deterioration in ...economic profile, a tax deferral is sufficient.•For exacerbating shocks, debt and equity support is essential to avoid a meltdown.
The massive contagion of new coronavirus (Covid-19) has disrupted many businesses across the European Union. This has resulted in an immense drag on the revenues and cash flows that may lead to a significant increase in corporate bankruptcies. In this paper, we investigate the impact of Covid-19 on the solvency profile of the firms in the EU member states. We introduce multiple stress scenarios on the non-financial listed firms and report a progressive increase in the probability of default, an increase of debt payback, and declining coverages. Our results indicate that the solvency profile of all firms deteriorates. The manufacturing, mining, and retail sector are most vulnerable to a decline in market capitalization and a reduction in sales revenues. The paper also examines the possible policy interventions to sustain solvency at a pre Covid-19 level. Our findings suggest that for a moderate deterioration in economic conditions, a tax deferral is sufficient. However, in the event of exacerbating business shocks, there should be hybrid support through debt and equity to avoid a meltdown. This study has important implications for policymakers, corporate managers, and creditors.
The imperative of crisis management is to ensure sustainable risk management with respect to the financial and profit position of the company, which will not endanger the survival of the company, as ...well as to strengthen the ability to maintain financial vitality in times of crisis. The Covid-19 pandemic has been a completely new type of crisis because we cannot expect that the problems that have affected the economy and society as a whole will be recognized and solved in a short period of time. The paper aims to analyze the profit and financial position at the level of the mining sector in the Republic of Serbia. The research has included an analysis of operating income, operating and non-profit/loss parameters and then an analysis of key liquidity and solvency risk parameters for 2020 compared to the previous year, and compared to the average for the period 2015-2019 for sector B, namely Mining and its subsectors: coal exploitation, crude oil and natural gas exploitation, metal ore exploitation, other mining and service activities in mining and geological research. For the purpose of this research, the sample was taken from the Republic Bureau of Statistics of Serbia and from the official financial reports. The findings have shown that there was a decline in operating revenues in 2020 compared to 2019 in sector B, and that the downward trend in revenues was accompanied by a marked increase in operating and net profits, but also a marked increase in operating and net losses. The average values of the general liquidity ratio of companies in the analyzed subsectors show that they are far from the desired theoretical norm, which implies a significant level of risk connected to maintaining liquidity, which draws us to a conclusion that risk management should be considered as a priority.
We analyze the effects of borrower-based macroprudential policy at the household level. We exploit administrative Dutch tax and housing records in conjunction with the introduction of a mortgage ...loan-to-value (LTV) limit. We find that the regulation sharply reduces mortgage leverage with bunching at the LTV limit. While (regulation) affected households reduce total leverage and interest expenses, they also decrease cash balances to satisfy the LTV limit, generating an important solvency-liquidity trade-off. Nevertheless, affected households experience less financial distress after the introduction of the LTV regulation. Moreover, these households experience better liquidity management and smoother consumption following income loss. Overall, our results highlight the key financial stability and real effects of borrower-based macroprudential policy.
•Mortgage reform introducing LTV limit sharply reduces household borrowing.•Household leverage and cash reserves decline generating solvency-liquidity trade-off.•Regulation reduces instances of household financial distress.•Households exhibit better liquidity and smoother consumption after income loss.
In 2020, due to the COVID-19 pandemic, a moratorium was imposed on launching bankruptcy proceedings for enterprises in Ukraine. It was canceled in 2022 because of the war to encourage the company ...management to improve the efficiency of liquidity and solvency management, seeking ways to increase companies’ profitability and reduce the probability of bankruptcy. The study aims to determine the impact of liquidity on unprofitability, which can be considered an element in the management decision-making system to prevent bankruptcies of Ukrainian companies. The correlation-regression analysis was based on statistical data from Ukrainian companies for 2012–2019 and 2013–2020. The study found practically no connection between the unprofitability of Ukrainian companies and the decrease in the number of court cases in which a decision was made to recognize the bankruptcy of Ukrainian companies. On the other hand, there is a strong connection between Ukrainian companies’ liquidity and unprofitability. The constructed regression equation is statistically reliable and characterized by a high level of adequacy to real economic processes and phenomena. An increase in the general liquidity ratio by 1% leads to an increase in the unprofitability of Ukrainian companies by 0.0346%. According to the company size construct, the most substantial connection is recorded for medium-sized companies (the correlation coefficient is 0.927, the coefficient of determination is 0.860, and the built correlation-regression equation is characterized by statistical reliability and adequacy). In contrast, large, small, and micro enterprises have a weak and moderate connection.
We implement the stress test methodology of the banking industry in conjunction with a Logit model of bankruptcy with parameters estimated with data from the Great Recession (2008–2013) to predict ...which firms would face financial distress among Spanish hospitality firms during 2020 due to the Covid-19 disaster. The predictions from both methods rely on the last accounting data available and on the expected revenue drop for 2020. Both methods coincide to predict that 25% of these firms will face a financial distress situation if revenues drop 60%. This forecast raises up to 32% of firms if revenues drop 80%. Financial distress will affect mainly small firms. Most of the firms in financial distress will face solvency problems, with total assets being insufficient to pay all debts.
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