Dual Market Competition and Deposit Rate Setting in Islamic and Conventional Banks

This paper addresses the issue of competition in dual banking markets by analyzing the determinants of deposit rates in Islamic and conventional banks. Using a sample of 20 countries with dual banking systems over the 2000-2014 period, our results show significant differences in the drivers of Islamic and conventional banks' pricing behavior. Conventional banks with stronger market power set lower deposit rates but market power is not significant for Islamic banks. In predominantly Muslim environments, conventional banks set higher deposit rates and further higher when their market power is lower. Whereas conventional banks are influenced by the competitiveness of Islamic banks, Islamic banks are only affected by their peers in predominantly Muslim countries. Our findings have important implications regarding competition and bank stability in dual banking markets

The Benefits and Costs of Geographic Diversification in Banking

International audienceWe estimate the benefits of geographic diversification within states and across states for bank risk and return for all U.S. bank holding companies over 1994 to 2008, and assess whether such benefits depend on bank size.For small banks, only intrastate diversification increases risk-adjusted returns and reduces default risk while for very large institutions only interstate expansions are beneficial but only in terms of default risk. In all cases the relationship ishump-shaped indicating that at some point, the possible agency costs associated with banks getting wider and more geographically diversified outweigh the benefits.Our results indicate that small banks and very large banks could still benefit from further geographic diversification. Email Addresses: [email protected] (Céline Meslier),[email protected] (Donald P. Morgan) [email protected] (Katherine Samolyk), [email protected] (Amine Tarazi). The views herein do not necessarily reflect those of the Federal Reserve System.

Structure bancaire locale et évolution du crédit à l'échelle des départements français : l'expérience de la crise financière de 2007-2008

Cette étude constitue la première analyse de l'impact des caractéristiques structurelles bancaires sur l'évolution des encours de crédit appréciés au niveau départemental dans le cas français. Elle repose sur l'exploitation de données originales issues des Centralisations Financières Territoriales collectées mensuellement par la Banque de France et utilise la crise financière internationale de 2007-2008 comme une expérience naturelle d'un choc global frappant l'ensemble des banques exerçant sur le territoire français. Les réactions des systèmes bancaires locaux à cette crise financière sont identifiées pour chaque département par la date et l'intensité de la rupture constatée dans l'évolution des encours de crédit. Ces réactions sont ensuite expliquées par les caractéristiques structurelles des marchés bancaires locaux en mettant un accent particulier sur l'identification d'un rôle spécifique des banques régionales par rapport aux banques nationales, en termes de proximité géographique et relationnelle. Les résultats montrent qu'une part de marché des banques régionales plus forte dans un département peut effectivement favoriser la résistance à la crise mais les résultats sont très dépendants de l'inclusion ou non de l'Ile-de-France dans l'échantillon retenu. C'est, en fait, la construction originale d'une variable de dispersion spatiale moyenne des banques régionales présentes dans un département donné qui apporte les enseignements les plus stables. Plus le périmètre géographique moyen des banques régionales est faible, plus la rupture dans la distribution des crédits, à l'ensemble des agents ou aux seules entreprises, est atténuée, ce qui révèle un impact favorable de la proximité et du relationship-lending en cas de crise

Banking industry structure and economics activities: A regional approach for the Philippines

International audienceThis paper examines the link between banking industry structure and economic activity at the regional level in the Philippines. We apply a principal component analysis on regional banking and economic data for the period 1993 to 2005. We ranked the sixteen regions in three different groups depending on their average economic development. Our results show globally a positive link between regional indicators of economic development and banking development with a specific influence of rural banking mainly in the intermediate-developed regions, which is reinforced after the 1997 financial crisis. For the less developed regions, the more rural in the Philippines, commercial, thrift or rural banks do not seem to provide any significant contribution to economic development

The Benefits of Intrastate and Interstate Geographic Diversification in Banking

We estimate the benefits of intrastate and interstate geographic diversification for bank risk and return, and assess whether such benefits could be shaped by differences in bank size and disparities in economic conditions within states or across U.S. states. For small banks, only intrastate diversification is beneficial in terms of risk-adjusted returns but for very large institutions both intrastate and intrastate expansions are rewarding. However, in all cases the relationship is hump-shaped for both intrastate and interstate diversification indicating limits for banks of all size. Moreover, while our results indicate that the average 'very large' bank has already reached its optimal diversification level, the average 'small bank' could still benefit in terms of risk-adjusted returns from further geographic diversification. Higher economic disparity as measured by the dispersion in unemployment rates either across counties or states impacts the benefits of diversification. At initially low levels of diversification, moving to other markets with dissimilar economic conditions lowers the added value of diversification but it becomes more beneficial at higher diversification levels

Bank stock volatility, news and asymmetric information in banking: an empirical investigation

International audienceThe main objective of this paper is to empirically assess the issue of asymmetric information in banking within a framework based on the behaviour of bank stock prices. Following an event-study methodology for a sample of European listed banks during the Asian and Russian crises of 1997 and 1998, our results show that unexpected increases in bank stock volatility cannot be easily detected using standard proxies of bank asymmetric information derived from public data. Nevertheless, some indicators, particularly those based on the residuals of an earnings prediction model as suggested by Park [Journal of Regulatory Economics 16 (1999)], perform relatively well

Contribution of Rural Banks to Regional Economic Development: Evidence from the Philippines

International audienceContribution of rural banks to regional economic development: evidence from the Philippines, Regional Studies. The paper examines the link between banking and economic development in the Philippine regions and it focuses on the role of rural banks using a co-integration panel data analysis (1993-2005). No clear-cut evidence is found of a positive influence of banking development measured by traditional indicators built at the regional level for the whole banking industry. However, a consistent positive effect of rural banks is found in the intermediate and less-developed regions, with a stronger effect for the former, suggesting a threshold effect. Estimations on rolling subsamples confirm the differentiated impact of rural banks depending on the stage of regional development

Do Asymmetric Information and Ownership Structure Matter for Dividend Payout Decisions? Evidence from European Banks

We empirically examine whether banks' dividend decisions are influenced by their degree of opacity and ownership structure. We find that banks with concentrated or dispersed ownership structure pay lower dividends when they have high degrees of opacity. These results would be consistent with the entrenchment behavior hypothesis, with insiders (managers or majority shareholders) paying lower dividends to extract higher levels of private benefits when banks' opacity is high. Higher levels of shareholder protection and stronger supervisory regimes help to constrain entrenchment behavior of majority shareholders. Our findings have critical policy implications for the Basel 3 implementation of restrictions on dividend payouts

Reducing agency conflicts through bank dividend payout decisions: the role of opacity and ownership structure

International audienceWe empirically examine whether banks’ dividend decisions are influenced by their degree of opacity and ownership structure. We find that banks with concentrated ownership structure pay lower dividends when they have high degrees of opacity, in line with the hypothesis that majority shareholders pay lower dividends to extract higher levels of private benefits. We do not observe such expropriation behaviour from managers in widely held banks. Further analysis shows that higher levels of shareholder protection and stronger supervisory regimes help to constrain opportunistic behaviour of majority shareholders. Our findings have critical policy implications for the Basel 3 implementation of restrictions on dividend payouts

Structure bancaire locale et évolution du crédit à l'échelle des départements français : l'expérience de la crise financière de 2007-2008

Cette étude constitue la première analyse de l'impact des caractéristiques structurelles bancaires sur l'évolution des encours de crédit appréciés au niveau départemental dans le cas français. Elle repose sur l'exploitation de données originales issues des Centralisations Financières Territoriales collectées mensuellement par la Banque de France et utilise la crise financière internationale de 2007-2008 comme une expérience naturelle d'un choc global frappant l'ensemble des banques exerçant sur le territoire français. Les réactions des systèmes bancaires locaux à cette crise financière sont identifiées pour chaque département par la date et l'intensité de la rupture constatée dans l'évolution des encours de crédit. Ces réactions sont ensuite expliquées par les caractéristiques structurelles des marchés bancaires locaux en mettant un accent particulier sur l'identification d'un rôle spécifique des banques régionales par rapport aux banques nationales, en termes de proximité géographique et relationnelle. Les résultats montrent qu'une part de marché des banques régionales plus forte dans un département peut effectivement favoriser la résistance à la crise mais les résultats sont très dépendants de l'inclusion ou non de l'Ile-de-France dans l'échantillon retenu. C'est, en fait, la construction originale d'une variable de dispersion spatiale moyenne des banques régionales présentes dans un département donné qui apporte les enseignements les plus stables. Plus le périmètre géographique moyen des banques régionales est faible, plus la rupture dans la distribution des crédits, à l'ensemble des agents ou aux seules entreprises, est atténuée, ce qui révèle un impact favorable de la proximité et du relationship-lending en cas de crise