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JRFM
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Bank Lending and Monetary Policy
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Bank Lending and Monetary Policy

A special issue of Journal of Risk and Financial Management (ISSN 1911-8074). This special issue belongs to the section "Banking and Finance".

Deadline for manuscript submissions: closed (30 June 2023) | Viewed by 25383

Special Issue Editor

Prof. Dr. Raghbendra Jha

E-Mail Website
Guest Editor
Arndt-Corden Department of Economics, College of Asia and the Pacific, Australian National University, Canberra, ACT 0200, Australia
Interests: bank balance sheets and risk; bank lending and monetary policy in developing countries; negotiating capital flows to developing countries

Special Issue Information

Dear Colleagues,

During the COVID-19 pandemic, less developed countries (LDCs) have faced very serious challenges in conducting monetary and fiscal policies. On the one hand, even before the pandemic, several LDCs were running large fiscal deficits (some to the extent of having unsustainable public debt), and their commercial banks had weak balance sheets. With the pandemic-induced collapse of economic activity and supply chains and several rounds of fiscal stimuli and monetary policy easy easing, the conduct of macroeconomic policy in the post-pandemic world has become even more challenging.

This Special Issue of JRFM will address four key issues. First, the links between loan guarantees given during and immediately after the pandemic and growth of non-performing assets (NPAs) in the banks in LDCs will be analysed. Implications for banking and regulatory policies will be drawn out. Second, the tools used to conduct monetary policy and support the commercial banking sector will be analysed. Best practices will be identified and broader lessons for LDCs’ monetary policies will be articulated. Third, links between monetary and fiscal policy, in particular, the role of central banks and commercial banks in financing or restructuring the public debt will be studied. Finally, the potential role the international development community could play in supporting post pandemic monetary and fiscal policies will be studied.

This Special Issue of the Journal of Risk and Financial Management covers the issue of bank lending and monetary policy in LDCs in the immediate aftermath of the COVID-19 pandemic. The issue will address matters relating to the growth of non-performing assets during the pandemic and its implications for the conduct of monetary policy in LDCs. Links between monetary and fiscal policies during and immediately after the pandemic will be explored, as will the design of appropriate international support for the conduct of monetary and fiscal policies in less developed countries.

Prof. Dr. Raghbendra Jha
Guest Editor

Manuscript Submission Information

Manuscripts should be submitted online at www.mdpi.com by registering and logging in to this website. Once you are registered, click here to go to the submission form. Manuscripts can be submitted until the deadline. All submissions that pass pre-check are peer-reviewed. Accepted papers will be published continuously in the journal (as soon as accepted) and will be listed together on the special issue website. Research articles, review articles as well as short communications are invited. For planned papers, a title and short abstract (about 100 words) can be sent to the Editorial Office for announcement on this website.

Submitted manuscripts should not have been published previously, nor be under consideration for publication elsewhere (except conference proceedings papers). All manuscripts are thoroughly refereed through a single-blind peer-review process. A guide for authors and other relevant information for submission of manuscripts is available on the Instructions for Authors page. Journal of Risk and Financial Management is an international peer-reviewed open access monthly journal published by MDPI.

Please visit the Instructions for Authors page before submitting a manuscript. The Article Processing Charge (APC) for publication in this open access journal is 1400 CHF (Swiss Francs). Submitted papers should be well formatted and use good English. Authors may use MDPI's English editing service prior to publication or during author revisions.

Keywords

  • Commercial banks in LDCs during the pandemic
  • Commercial banks and monetary policy in LDCs
  • Monetary and fiscal policy during the pandemic
  • International support for post-pandemic monetary and fiscal policies in LDCs

Published Papers (5 papers)

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Research

126 pages, 14996 KiB  
Article
Target2: The Silent Bailout System That Keeps the Euro Afloat
by David Blake
J. Risk Financial Manag. 2023, 16(12), 506; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm16120506 - 07 Dec 2023
Viewed by 1725
Abstract
Target2 is the Eurozone’s cross-border payment system, which is mandatory for the settlement of euro transactions involving Eurozone central banks. It is being used to save the Eurozone from imploding. A key underlying problem is that the Eurozone does not satisfy the economic [...] Read more.
Target2 is the Eurozone’s cross-border payment system, which is mandatory for the settlement of euro transactions involving Eurozone central banks. It is being used to save the Eurozone from imploding. A key underlying problem is that the Eurozone does not satisfy the economic conditions for being an Optimal Currency Area, i.e., a geographical area over which a single currency and monetary policy can operate on a sustainable, long-term basis. The different business cycles in the Eurozone, combined with poor labour and capital market flexibility, mean that systematic trade surpluses and deficits will build up because inter-regional exchange rates can no longer be changed. Surplus regions need to recycle the surpluses back into deficit regions via transfers to keep the Eurozone economies in balance. But the largest surplus country—Germany—refuses to formally accept that the European Union is a ‘transfer union’. However, deficit countries, including the largest of these—Italy—are using Target2 for this purpose. Target2 has become a giant credit card for Eurozone members that import more than they export to other members, but with two differences compared with normal credit card debt: neither the debt nor the interest that accrues on the debt ever needs to be repaid. Furthermore, the size of the deficits being built up is causing citizens in deficit countries to lose confidence in their banking systems, leading them to transfer their funds to banks in surplus countries. Target2 is also being used to facilitate this capital flight. However, these are not viable long-term solutions to systemic Eurozone trade imbalances and weakening national banking systems. There are only two realistic outcomes. The first is a full fiscal and political union, with Brussels determining the levels of tax and public expenditure in each member state—which has long been the objective of Europe’s political establishment. The second outcome is that the Eurozone breaks up. Full article
(This article belongs to the Special Issue Bank Lending and Monetary Policy)
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23 pages, 1573 KiB  
Article
Credit Risk Management and the Financial Performance of Deposit Money Banks: Some New Evidence
by Oritsegbubemi Kehinde Natufe and Esther Ikavbo Evbayiro-Osagie
J. Risk Financial Manag. 2023, 16(7), 302; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm16070302 - 21 Jun 2023
Cited by 1 | Viewed by 6724
Abstract
This study examined credit risk management and return on equity of Nigerian deposit money banks (DMBs) twelve (12) years (2010–2021) post-adoption of the common accounting year-end as mandated by the Central Bank of Nigeria (CBN) in 2009. Our data set comprises independent variables [...] Read more.
This study examined credit risk management and return on equity of Nigerian deposit money banks (DMBs) twelve (12) years (2010–2021) post-adoption of the common accounting year-end as mandated by the Central Bank of Nigeria (CBN) in 2009. Our data set comprises independent variables of capital adequacy ratio (CAR), liquidity ratio (LQR), loan-to-deposit ratio (LDR), risk asset ratio (RAR), non-performing loans ratio (NPLR), loan loss provision ratio (LLP), and size (SZ). Our dependent variable is the return on equity (ROE). Using a panel data regression analysis, we found that CAR, RAR, NPLR, and SZ are the significant determinants of ROE. We also found that Nigerian DMBs now significantly rely on offshore borrowings in Eurobonds to create risk assets to overcome CBN’s constriction on using local depositors’ funds to create risk assets. Furthermore, we found that shareholders of DMBs with international banking licenses in Nigeria within the study period were not significantly more compensated for their risk exposure than investors in risk-free assets (treasury bills). Therefore, the CBN should continue strengthening its regulatory functions with regular reviews that would compel improvements of the DMBs’ credit risk management systems to mitigate the likely failure of the credit life cycle of granted loans. Additionally, a review of its current regulatory cash reserve ratio of 37.5% is imperative to reduce DMBs’ dependence on offshore funding and its associated foreign exchange risk. Full article
(This article belongs to the Special Issue Bank Lending and Monetary Policy)
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17 pages, 4700 KiB  
Article
Consumption Loan Augmented Divisia Monetary Index and China Monetary Aggregation
by William A. Barnett, Kun He and Jingtong He
J. Risk Financial Manag. 2022, 15(10), 447; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15100447 - 02 Oct 2022
Viewed by 1246
Abstract
Simple sum monetary aggregates are based on accounting conventions and have no aggregation theoretic foundations in economic theory. In contrast, Divisia monetary aggregates are directly derived from aggregation and index number theory. Credit card services cannot be included in simple sum monetary aggregates [...] Read more.
Simple sum monetary aggregates are based on accounting conventions and have no aggregation theoretic foundations in economic theory. In contrast, Divisia monetary aggregates are directly derived from aggregation and index number theory. Credit card services cannot be included in simple sum monetary aggregates since accounting conventions cannot aggregate over assets and liabilities. However, microeconomic aggregation theory aggregates over service flows, not stocks, regardless of whether from assets or liabilities. As a result, it has recently been shown that Divisia monetary aggregates can be augmented to include credit card services and are available from the Center for Financial Stability in New York City. Other sources of consumer credit cannot be included in Divisia monetary aggregates for the United States since other sources of consumer credit in the United States are linked to specific groups of consumer goods and hence, violate the weak separability condition for the existence of an aggregator function. However, China produces a unique opportunity to broaden the Divisia monetary aggregates since sources of consumer credit, not limited to credit cards, are applicable to all consumption purchases and hence, do not violate the existence condition for an aggregator function. We report initial results with a broader Chinese Divisia monetary aggregate, including not only credit card services but also other broadly acceptable consumer loan services. Full article
(This article belongs to the Special Issue Bank Lending and Monetary Policy)
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18 pages, 674 KiB  
Article
The Impact of Banking Sector Development on Economic Growth: The Case of Vietnam’s Transitional Economy
by Phuc Tran Nguyen
J. Risk Financial Manag. 2022, 15(8), 358; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm15080358 - 11 Aug 2022
Cited by 11 | Viewed by 11766
Abstract
The objective of this paper is to examine the role of the banking system in the growth of the Vietnamese economy in the process of the transition that started in the early 1990s. An ARDL approach-based multivariate regression technique is applied to shed [...] Read more.
The objective of this paper is to examine the role of the banking system in the growth of the Vietnamese economy in the process of the transition that started in the early 1990s. An ARDL approach-based multivariate regression technique is applied to shed light on the impact on the growth of banking development, which is measured by broad money and bank credit. The empirical findings confirm a positive long-term effect of banking development on growth, reflecting the important role of the banking system in a typical bank-based financial system in mobilizing and supplying capital to the economy, thus contributing to growth throughout the process of economic transition. The empirical findings also indicate a nonlinear effect and a diminishing marginal effect of banking development in the sub-period 2007–2020. The thresholds for the two measures of banking development are estimated to be around 107% and 101% of the GDP, respectively. This finding suggests that bank credit expansion needs to be closely controlled to be adaptive to the capital-absorptive capacity of the economy. To a certain extent, this finding is also an indicator of the ongoing extensive growth model adopted in Vietnam, which relies heavily on the quantity of invested capital. Full article
(This article belongs to the Special Issue Bank Lending and Monetary Policy)
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25 pages, 824 KiB  
Article
Catch the Heterogeneity: The New Bank-Tailored Integrated Rating
by Daniela Arzu, Marcella Lucchetta and Guido Max Mantovani
J. Risk Financial Manag. 2021, 14(7), 312; https://0-doi-org.brum.beds.ac.uk/10.3390/jrfm14070312 - 08 Jul 2021
Cited by 1 | Viewed by 2626
Abstract
The purpose of this article is to develop a bank-oriented rating approach, tailored by incorporating the various heterogeneity dimensions characterizing financial institutions, named “Bank-Tailored Integrated Rating” (BTIR). BTIR is able to catch the financial cycle, including the pandemic crisis, and the ongoing change [...] Read more.
The purpose of this article is to develop a bank-oriented rating approach, tailored by incorporating the various heterogeneity dimensions characterizing financial institutions, named “Bank-Tailored Integrated Rating” (BTIR). BTIR is able to catch the financial cycle, including the pandemic crisis, and the ongoing change in banking normative from a microeconomic perspective, and it is inherently coherent with the challenging frontier of forecasting tail risk in financial markets in similar ways as in De Nicolò and Lucchetta (2017), although their approach is macroeconomic) since it considers the downside risk in the theoretical framework. The method employed was an innovative integrated rating (IR) statistical and econometrical panel pre-selection analysis that takes into account the characteristics of risk and the greater heterogeneity of the banks. The result is a challenge rating procedure delivering forward-looking preselection requested by the new International Financial Reporting Standard (IFRS-9). The future direction is extremely promising given the increase in idiosyncratic and systemic risks in financial markets. Full article
(This article belongs to the Special Issue Bank Lending and Monetary Policy)
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