• The Journal of Asian Finance, Economics and Business
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• 제9권8호
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• pp.145-155
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• 2022

Since 2014, the IFRS 9 has been the focus of the attention of many scholars across disciplines. The futuristic prediction of bank loan provision via a flexible ECL model has been observed as a game changer from the prior models offered in IAS 39. This study has two objectives; the first is to examine the impact on loan loss provisions (LLP), nonperforming loans (NPL), and the impairment loan losses (ILL) after the IFRS 9 in gulf banks. The second is to capture any variation in LLP, NPL, and ILL before and after IFRS9. The study used the two-way fixed effect model (TWFE) estimation and the DiD approach to attain its objectives. 54 gulf banks were selected from the periods between 2012 and 2020. The results indicate that LLP has significantly increased after the transition to IFRS 9, while the NPL has significantly decreased. The results did not capture a significant change in ILL after IFRS9 implementation. The results also indicate more consistency in LLP and NPL reporting after implementing the ECL model adopted in IFRS9. The study concluded that ECL model outcomes are in tandem with prior observation worldwide and pointed out some improvement opportunities for the future.

• The Journal of Asian Finance, Economics and Business
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• 제10권1호
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• pp.181-187
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• 2023

The study aimed to study the effect of the inflation rate, the real domestic product, the interbank lending interest rate, and the total deposits on credit facilities in Jordan for 2012-2021 through quarterly data. The study adopted the ARDL model. The study used the time series analysis method, as the study tests the stationarity of the time series. The results showed that the impact of inflation on the total credit facilities was negative. In contrast, the impact of each of the total deposits, real GDP, and the interest rate of interbank loans on the total credit facilities was positive and significant. The study recommended the need for the banking sector in Jordan to develop risk management mechanisms in a way that allows it to adapt to economic cycles and crises by conducting stress tests and developing scenarios that ensure the formation of sufficient provisions to meet emergencies. The study also recommended that the macroeconomic policy should be based on creating a stable macroeconomic environment that allows the efficient employment of resources in all economic sectors in a way that achieves high economic growth rates, which contributes to the promotion of economic recovery and is reflected in income. Hence, individuals have a greater ability to repay loans.

• KDI Journal of Economic Policy
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• 제28권2호
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• pp.239-262
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• 2006

The paper suggests that there has been a shift in the allocation of bank credit from large firms to small firms before and after the economic crisis. The paper also suggests that the improved lending practices of financial institutions, at least partially, contributed to this shift of corporate loans from large firms to small firms. Comparing the periods before and after the economic crisis also suggests that some important changes occurred to the corporate bond market. The effect of firm size on the corporate bond market differs before and after the economic crisis. Before the crisis, the larger the firms, the more they could borrow in the corporate bond market. However, after the crisis, it is not the case. The following interpretation could be put forward. Before the crisis, investors in the corporate bond market expected that the government would rescue large firms if they face the risk of bankruptcies. However, the collapse of Daewoo Group in 1999 shattered the TBTF (Too Big To Fail) myth of the public. The liquidity crisis of Hyundai Group in 2000-2001 reinforced the disintegration of the TBTF myth.

• International Area Studies Review
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• 제22권1호
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• pp.123-140
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• 2018

This paper analyzes herd behavior observed in the loan market from 2001 to 2014 using a panel data on commercial banks including state-owned banks, domestic private banks, foreign banks, and Islamic banks. The paper finds evidence that herd behaviors of domestic private and foreign banks have been pronounced and long-lasting around the 2008 global financial crisis when state-owned banks did not show such a behavior. This result shows that since private banks tend to be keen on maximizing profits and avoid financial risks exposed by lending during a financial crisis, their lending decisions are not independent but dependent on whether other banks increase loans or not. On the other hand, Islamic banks do not show herd behavior during the financial crisis. This finding is consistent with earlier studies that Islamic banks have different characteristics, such as profit and operation mechanisms, from other private banks. Another interesting finding is that when it comes to rural loans, all the banks' herd behavior is short-lived and the herding indexes are quite volatile. This finding is attributable to distinct features of rural loans. Usually maturities of rural loans are shorter than city loans and related to the cycle of farming. Agricultural production is heavily dependent on unpredicted factors, such as floods and droughts, not previous year's production. Lastly, the paper finds a herding across bank type that state-owned, foreign, and Islamic banks follow domestic private banks'lending decisions.

• KDI Journal of Economic Policy
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• 제25권1호
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• pp.99-145
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• 2003

Quasi-fiscal activities (QFAs) refer to those activities that public corporations carry out to achieve policy objectives of the government. QFAs often lead to the understatement of the government involvement in the economy and the overstatement of its financial balance, thereby lowering fiscal transparency and hiding fiscal risks. Central banks, as public corporations, perform various QFAs in many countries. I define QFAs in this case as those activities that are not directly related to the intrinsic function of central banks, whose responsibility lies in the administration of monetary policy and the provision of banking services for the government and commercial banks. In Korea, the Bank of Korea (BOK) has been an active source of QFAs. Of particular importance are the policy loans to commercial banks to promote their lending to small- and medium-sized enterprises and others. The outstanding stock of policy loans increased rapidly in the aftermath of the recent economic crisis, and stood at 7.6 trillion won (20 percent of the reserve money) at the end of 2002. Another important QFA by BOK stems from the transfer of part of its profits to the central government. The accumulated transfer during 1998-2002 amounted to 9.9 trillion won. My calculation shows that if these and other QFAs had been carried out by the government as explicit fiscal activities, the consolidated central government financial balance would have been below the actual balance by about 0.5 percent of GDP in each year since the economic crisis. It is suggested that the QFAs by BOK be reduced in coming years not only to enhance fiscal transparency but also to expand the flexibility of BOK's reserve management. Abolishing policy loans and minimizing transfers to the government would be the first step in this direction. BOK should also consider paying interest on the government deposit held in BOK.

• The Journal of the Convergence on Culture Technology
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• 제10권1호
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• pp.153-158
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• 2024

Recently, concerns about the spread of credit risk in China's real estate market are gradually increasing. Therefore, it is very meaningful to diagnose the management stability of Chinese commercial banks. This study analyzes the impact of housing prices on the loan proportion and management stability of Chinese commercial banks. In addition, we classify Chinese commercial banks according to size and verify whether there are differences in loan proportion and management stability. If there is a difference by scale, the effect of interaction with housing price changes is also verified. The analysis results are summarized as follows. First, it was found that as the housing price growth rate increases, the proportion of loans from Chinese commercial banks increases. Second, as the rate of increase in housing prices and the proportion of total loans increases, management stability appears to decrease. Third, larger banks were found to have a higher proportion of loans, and smaller banks were found to have greater management stability. The results of this analysis show that Chinese commercial banks' aggressive expansion of their loan proportion is lowering their management stability. Therefore, it is necessary to adjust the loan ratio to the appropriate size level and secure stability with differentiated strategies according to the loan ratio

• Economic Analysis
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• 제27권3호
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• pp.1-32
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• 2021

This study empirically analyzes whether bank capital channel and risk-taking channel for monetary policy work for domestic banks in South Korea by analyzing the impact of the expansionary monetary policy on the rate spread between deposit and loan, capital ratio, and loan amount. For the empirical analysis, the Uhlig (2005)'s sign-restricted SVAR(Structural Vector Auto-Regression) model is used. The empirical results are as follows: the bank's interest rate margin increases, the capital ratio improves, risk-weighted asset ratio increases, and the amount of loans increases in response to expansionary monetary shock. This empirical results confirm that bank capital channel and risk-taking channel work in domestic banks, similar to the previous research results. The implications of this study are as follows. Although the expansionary monetary policy has the effect of improving the bank's financial soundness and profitability in the short term as bank capital channel works, it could negatively affect the soundness of banks by encouraging banks to pursue risk in the long run as risk-taking channel works. It is necessary to note that the capital ratio according to the BIS minimum capital requirement of individual banks may cause an illusion in supervising the soundness of the bank. So, the bank's aggressive lending expansion may lead to an inherent weakness in the event of a crisis. Since the financial authority may have an illusion about the bank's financial soundness if the low interest rate persists, the authority needs to be actively interested in stress tests and concentration risk management in the pillar 2 of the BIS capital accord. In addition, since system risk may increase, it is necessary to conduct regular stress tests or preemptive monitoring of assets concentration risk.

• KDI Journal of Economic Policy
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• 제13권1호
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• pp.35-63
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• 1991

Currently, Korea's banking industry holds a sizable amount of non-performing loans which stem from the government-led bailout of many troubled firms in the 1980s. Although this burden was somewhat relieved with the aid of banks' recapitalization in the booming securities market between 1986-88, the insolvent credits still resulted in low profitability in the banking sector and have been detrimental to the progress of financial liberalization and internationalization. This paper surveys the corporate bailout experiences of major advanced countries and Korea in the past and derives a rationale for readjustment measures against non-performing loans, in which rescue plans depend on the nature of the financial system. Considering the features of Korea's financial system and the banking sector's recent performance, it discusses possible means of liquidation in keeping with the rationale. The conflict of interests among parties involved in non-performing loans is widely known as one of the major constraints in writing off the loans. Specifically, in the case of Korea, the government's excessive intervention in allocating credits has preempted the legitimate role of the banking sector, which now only passively manages its past loans, and has implicitly confused private with public risk. This paper argues that to minimize the incidence of insolvent loan readjustment, the government's role should be reduced and that the correspondent banks should be more active in the liquidation process, through the market mechanism, reflecting their access to detailed information on the troubled firms. One solution is that banks, after classifying the insolvent loans by the lateness or possibility of repayment, would swap the relatively sound loans for preferred stock and gradually write off the bad ones by expanding the banks' retained earnings and revaluing the banks' assets. Specifically, the debt-equity swap can benefit both creditors and debtors in the sense that it raises the liquidity and profitability of bank assets and strengthens the debtor's financial structure by easing the debt service burden. Such a creditor-led or market-led solution improves the financial strength and autonomy of the banking sector, thereby fostering more efficient resource allocation and risk sharing.

• Journal of Korea Society of Industrial Information Systems
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• 제28권5호
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• pp.55-66
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• 2023

This study analyzes the characteristics of customer's preferences on banking channels (branches, automated machines, telebanking, internet banking, and mobile banking) and examines the factors influencing channel usage. To accomplish this, ANOVA and multiple regression analysis are performed using customer data from Bank A. The analysis reveals that customers primarily utilizing branch counter transactions have a significant impact on the profitability of 1st and 2nd grade banks, particularly among the age group of 50 years and above. Additionally, it is observed that as customers' loan, deposit, and financial product holdings increase, branch counter transactions also increase. On the other hand, it is found that as the usage of mobile banking decreases in terms of loans and deposits, transaction volume increases.

• The Journal of Asian Finance, Economics and Business
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• 제4권1호
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• pp.5-18
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• 2017

Total debt in the People's Republic of China surged to nearly 290% as a ratio to GDP by the second quarter of 2016, mostly on account of non-financial corporate debt. The outpouring of credit to stem the impact of the global financial crisis accentuated industrial overcapacity in traditional sectors, such as steel, cement, and energy, while feeding asset bubbles in the property, equity and bond markets. At the Chinese corporate level, this has translated into weakened fundamentals and a fall in industrial profits, particularly of SOEs. As debtors struggle to service interest payments, non-performing loans (NPLs) have been on the rise. This paper assesses the financial fragility of the Chinese economy by looking at risk factors in the non-financial sector. We apply quantile regressions to a dataset containing all Chinese listed companies in Standard & Poor's IQ Capital database. We find higher sensitivity over time of corporate leverage to some of its key determinants, particularly for firms at the upper margin of the distribution. In particular, profitability increasingly acts as a curb on corporate leverage. At a time of falling profitability across the Chinese non-financial corporate sector, this eases the brake on leverage and may contribute to its continuing increase.