Loan and financing diversification and bank stability in dual-banking systems

Our investigation of 46 conventional and 22 Islamic banks from the Gulf Cooperation Council (GCC) countries during 2008–2021 reveals that sectoral diversification effects on stability are nonlinear and different for the two bank types. While Islamic banks' stability is worsened only by moderate levels of diversification, conventional banks' stability is enhanced by high levels and impaired by low levels of diversification. Furthermore, diversification acted as a stabilizer during the global financial crisis but exacerbated the adverse effects of the Covid-19 pandemic. Although regulators usually call for bank diversification, our results imply that it can be a double-edged sword. © 2022

Green financing for sustainable development: Insights from multiple cases of Vietnamese commercial banks

Although the public sector is seen as the main party responsible for taking action on climate change and sustainable development, private commercial banks are in a unique position to support or shift the funding focus on green investment. By employing a qualitative research approach based on six commercial banks, this paper aims to investigate the current practices of how commercial banks are contributing to advance green business initiatives. Accordingly, this research examines and identifies the facilitators and challenges in domestic and foreign commercial banks in Vietnam which support green business initiatives. In addition to addressing the recent calls for the investigation of the role of commercial banks in facilitating green finance, our study expands the emerging literature by demonstrating the current efforts of Vietnam's commercial banks in fostering green finance during the Covid-19 pandemic. © 2022 ERP Environment and John Wiley & Sons Ltd.

Banking infrastructure and the Paycheck Protection Program during the Covid-19 pandemic

In response to the Covid-19 pandemic, the US federal government distributed US$800 billion in Paycheck Protection Program (PPP) loans to small businesses to preserve employment. Since PPP funding was transmitted through private banks, the characteristics of the regional banking market may have unevenly affected the programme's reach. This paper examines how variations in market concentration and the presence of community banks contributed to PPP disbursement in US counties. It finds that greater regional banking market concentration correlates with fewer PPP loans, but this negative relationship is mitigated by a greater presence of community banks in highly concentrated markets. © 2022 Regional Studies Association.

Augmenting commercial banks' other income through off-balance sheet activities in relation to their determinants in the Indian banking system

COVID-19 has a devastating impact on the global economy, particularly on robustness and resilience of emerging and developing economies' (EMDE's) economic-cum-financial systems. Reinventing banking practices with strategies are indispensable for sustainable growth. EMDEs like India have distinct country-specific business models. We aim to devise a sustainable model for augmenting banks' other income;analyzing off-balance sheet (OBS) activities in India, which may be applied in EMDEs' efficacy. We apply least-squares dummy variables and ordinary least squares models for fixed-effect regression analysis on OBS from 1996-2019. Regulatory determinants like capital adequacy, net non-performing assets, liquidity have more significant impact on OBS than bank-specific variables like bank size or macroeconomic like GDP. OBS can generate revenue is exemplified by strong relation to other income. Findings reveal that while assessing impact of COVID-19 on-balance sheets, banks should prioritize capital and contingency liquidity planning, focusing on OBS activities to augment other income in the revival strategy. © 2021 Informa UK Limited, trading as Taylor & Francis Group.

COVID-19 and Eye Banking: Ongoing Impacts of the Pandemic

Purpose:The purpose of this study was to assess the impact of ongoing waves of the COVID-19 pandemic and resulting guidelines on the corneal donor pool with resumption of clinical operations.Methods:A retrospective analysis of donors deemed eligible for corneal transplantation at an eye bank from July 1, 2020, through December 31, 2021. Donors ineligible due to meeting Eye Bank Association of America (EBAA) COVID-19 guidelines or a positive postmortem COVID-19 testing were examined. The correlation between COVID-19 rule outs and state COVID positivity was calculated. The number of scheduled surgeries, suitable corneas, imports, and international exports was compared with a pre-COVID period. Postmortem testing was reduced for the final 5 months of the study, and numbers were compared before and after the policy change.Results:2.85% of referrals to the eye bank were ruled out because of EBAA guidelines. 3.2% of postmortem tests were positive or indeterminate resulting in an ineligible tissue donor (0.42% of referrals). Over the 18-month period, there was a 4.30% shortage of suitable corneas compared with transplantation procedures. There was a significant correlation between postmortem testing and state COVID-19 positivity (r = 0.37, P <0.01), but not with EBAA guidelines (r = 0.19, P = 0.07). When postmortem testing was reduced, significantly more corneas were exported internationally.Conclusions:Although corneal transplant procedures were back to normal levels, there was a shortage of suitable corneal tissue. The discontinuation of postmortem testing was associated with a significant increase in international exports of corneal donor tissue. © 2023 Lippincott Williams and Wilkins. All rights reserved.

Global assessment of the COVID-19 impact on IFRS 9 loan loss provisions

PurposeThis article aims to analyze the impact of COVID-19 measures by governments and central banks on International Financial Reporting Standards (IFRS) 9 loan loss provisions (LLPs). Changes in the total amount of LLPs, distribution of outstanding loan balance among IFRS 9 stages and credit risk parameters used for calculation are investigated for each world region where banks report under IFRS.Design/methodology/approachData for a global selection of 105 banks reporting under IFRS were collected from 2019 to 2020 annual reports, financial statements, and Pillar III reports. These data provide the basis to empirically analyze the impact of COVID-19 on LLPs.FindingsIn most world regions Stage 2 balances increase while Stage 3 balances remain comparatively stable. The credit risk parameters used for computing LLPs remained stable in 2020. However, in China, the impact of COVID-19 on banks was not detected. Mean Stage 1 balances for Chinese banks increased slightly during the pandemic. Aside from the COVID-19 impact, we find that LLPs, credit risk parameters, and loss absorption capacities are significantly lower for banks in Canada, Oceania and Western Europe compared to those in the rest of the world.Originality/valueThere exists previous research examining the COVID-19 impact on financial stability, implementation of emergency rules and country-wide analyses to anticipate default rates depending on recovery scenarios. However, this is the first global study on the immediate impact of COVID-19 on LLPs. It reveals the significant differences between world regions and provides implications about their resilience against future credit shocks.

Should investors rely on central bank asset purchases to backstop markets?

During the global financial crisis, central banks in advanced economies cut policy rates to near zero, and then provided further stimulus via balance sheet expansion. In many instances this took the form of quantitative easing — central banks creating new money with which to purchase securities. With years of quantitative easing behind us, and aggressive measures from central banks during the COVID-19 pandemic, should investors now expect central banks to backstop financial markets? This paper examines asset purchases from the twin perspectives of monetary and financial stability, and argues that investors should not expect central banks to always come to their rescue. © Henry Stewart Publications 1752-8887 (2023).

Drivers of trust in the ECB during the pandemic

Trust in the European Central Bank (ECB) is vital. However, little is known about trust in the ECB during the COVID-19 pandemic. We use the rich pilot microdata from the ECB Consumer Expectations Survey during 2020–2021 on six key euro area countries to shed light on trust in the ECB during the pandemic. Our findings suggest that there is ample room to improve consumers' trust in the ECB. Personal COVID-19 experiences play a role: respondents who reduced the number of hours worked due to COVID-19 have lower trust in the ECB than those with unchanged working hours. Trust in the ECB varies within countries. It is highest among males and people with a good financial situation. It increases with financial knowledge, education, income, and wealth.

Bank lending during the COVID-19 pandemic: A comparison of Islamic and conventional banks

Using a sample of 421 banks from 17 countries, we find that the lending growth of Islamic and conventional banks decreased during the initial phase of the COVID-19 crisis. However, the decrease is significant for conventional banks only. Credit growth for Islamic banks grew around 2.5% faster than that for conventional banks, especially in countries with a macroprudential framework in place in the year leading up to the crisis. Our evidence remains unchanged with alternative empirical methodologies, definitions of bank lending, variations in the pre-crisis period, and proxies for the severity of COVID-19 in different countries.

Covid-19 pandemic, a catalyst for aggressive earnings management by banks?

This paper investigates the effects of the Covid-19 pandemic on the financial reporting quality of European banks by examining the occurrence of earnings management specifically income smoothing. Using a sample of listed European banks, we employ panel estimation to compare income smoothing in the pre-pandemic period (2019Q1-2019Q4) and the pandemic period (2020Q1-2021Q4). We find that earnings management has significantly increased during the pandemic years, evidencing how the quality of financial reporting is affected during the crisis period. Our findings further suggest that amid the crisis, governance quality limits the incidence of earnings management and emphasizes how the strength of country-level governance and institutional framework affects the quality of financial reporting. Further analysis shows that though banks are inclined to manage earnings during a crisis, nevertheless, the presence of high-quality audit is a limiting factor on the incidence of earnings management in the face of crisis. Our findings which are relevant to investors, market participants, and regulators among others make a significant contribution to the accounting literature and specifically complement the strand of literature on the discretionary use of loan loss provision for earnings management during crisis. © 2022 Elsevier Inc.

Weaponisation of finance: the role of European central banks and financial sanctions against Russia

In response to Russia's full-scale invasion of Ukraine, the Group of Seven (G7) countries and the European Union (EU) adopted a variety of financial sanctions, including the freezing of foreign reserve assets of the Central Bank of Russia held by other central banks. Drawing on a Principal-Agent framework and on speeches, newspaper articles and interviews with policy-makers, this study examines what it means for the ECB and the central banks of the Eurosystem to be involved in these sanctions. As a consequence of these actions, these central banks have been enlisted in monetary and financial warfare. Moreover, the three-fold objective of the ECB has de facto effectively been reweighted somewhat, as the focus on 'price stability' (primary objective) has become seemingly temporarily less prominent. Instead, the secondary and tertiary objectives have moved centre-stage, favouring geopolitical considerations.