157 research outputs found

    Lending relationships and credit rationing: the impact of securitization

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    Do lending relationships mitigate credit rationing? Does securitization influence the impact of lending relationships on credit rationing? If so, is its impact differently in normal periods versus crisis periods? This paper combines several unique data sets to address these questions. Employing a disequilibrium model to identify credit rationing, we find that more intense lending relationships, measured through their length and lower number, considerable improve credit supply and reduce the degree of credit rationing. In general, we find that a relationship with a bank that is more involved in securitization activities relaxes credit constraints in normal periods; however, it also increases credit rationing during crisis periods. Finally, we study the impact of different types of securitization – covered bonds and mortgage-backed securities (MBS) – on credit rationing. While both types of securitization reduce credit rationing in normal periods, the issuance of MBS by a firm’s main bank aggravates these firm’s credit rationing in crisis periods.lending relationships;financial crisis;securitization

    Investigating Diversity in the Banking Sector in Europe: The Performance and Role of Savings Banks. CEPS Paperbacks. June 2009

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    In the aftermath of the financial crisis, the foundations of modern and innovative financial systems developed over decades have suffered serious damage. This has triggered massive state interventions and has led authorities to revamp the regulatory structures and frameworks. While many voices have called for a return to more traditional approaches to banking and finance, no one has argued the merits of diversity. This book investigates the merits of a diverse banking system with a special focus on the performance and role of savings banks in selected European countries where they are still prominent (Austria, Germany and Spain) and where they have progressively disappeared (Belgium and Italy). The theoretical and empirical arguments that are developed in this book tend to support the view that it is economically and socially beneficial to have ‘dual bottom-line’ institutions, such as savings banks. For those who accept this premise, it would suggest that policy-makers should not take or support actions that could jeopardise this valuable element of the financial system in various countries in Europe and of the emerging integrated European financial system

    The diffusion pattern of non-cash payments: evidence from China

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    Exploiting an original dataset of non-cash payments during the period between 1996 and 2005, this study analyses the diffusion patterns of non-cash payments in China. Based on both exponential and Gompertz curves, the point of sale (POS) terminal has shown a higher diffusion rate than that of automatic teller machines (ATMs). This result is also robust when a time trend is interacted with rivals' precedence, network effects and market concentration. The diffusion rates of both ATM and POS terminals have accelerated after 2002, when UnionPay was established in China. The diffusion rate of ATMs is found to be mainly driven by rivals' adoption of them. Market concentration boosts the diffusion of POS terminals. In spite of the rising number of POS terminals and merchants, the volume of POS transactions is low. The diffusion rate of POS is, however, negatively affected by interchange fees

    The role of interchange fees in two-sided markets: An empirical investigation on payment cards

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    We study the impact of reductions in interchange fees on payment card services. We find that consumer and merchant acceptance and transaction volumes increased when interchange fees were reduced. Our results suggest that a 10 percent reduction in the rate of decline per quarter in the average interchange fee by an acquirer resulted in a rate of increase in merchant acceptance per quarter of up to 1.4 percent. Additionally, a 10 percent increase in the rate of interaction of merchant acceptance and the total number of cards increased the rate of quarterly issuer transaction volumes up to 1.7 percent

    Estimating the intensity of price and non-price competition in banking

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    We model bank oligopoly behaviour using price and non-price competition as strategic variables in an expanded conjectural variations framework. Rivals can respond to changes in both loan and deposit market prices as well as (non-price) branch market shares. The model is illustrated using data for Spain which, over 1986-2002, eliminated interest rate and branching restrictions and set off a competitive race to lock-in expanded market shares. Banks use both interest rates and branches as strategic variables and both have changed over time. We illustrate the results using a regional vs. a national specification for the relevant markets.non-price competition, banking, market shares

    Trade credit, the Financial Crisis and Firms Access to Finance

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    We analyse for the first time whether trade credit provided an alternative source of external finance to SMEs during the credit crisis. Using firm level panel data on over 40,000 Spanish SMEs we find that credit constrained SMEs depend on trade credit, but not bank loans, to finance capital expenditures and that the intensity of this dependence increased during the financial crisis. Unconstrained firms, in contrast, are dependent on banks loans not trade credit. Overall, this suggests substitution between bank loans and trade credit that is conditional on the level of financing constraints and is more intense during the crisi

    Estimating the intensity of price and non-price competition in banking: an application to the Spanish case

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    We model bank oligopoly behaviour using price and non-price competition as strategic variables in an expanded conjectural variations framework. Rivals can respond to changes in both loan and deposit market prices as well as (non-price) branch market shares. The model is illustrated using data for Spain which, over 1986-2002, eliminated interest rate and branching restrictions and set off a competitive race to lock-in expanded market shares. Banks use both interest rates and branches as strategic variables and both have changed over time. We illustrate the results using a regional vs. a national specification for the relevant markets. (97 words)non-price competition, banking, market shares
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