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

The Governance and Disclosure of IFRS 9 Economic Scenarios

Extraordinary economic conditions during the COVID-19 pandemic caused many IFRS 9 impairment models to produce unreliable results. Severe market reactions, resulting from unprecedented events, prompted swift action from the regulatory authorities to maintain the financial system's stability. Banks managed the uncertainty and volatility in the models with expert overlays, increasing the risk of biased outcomes. This study examines new ways of enhancing the governance and transparency of the IFRS 9 economic scenarios within banks and suggests additional financial disclosures. Benchmarking is proposed as a useful tool to evaluate the IFRS 9 economic scenarios and ensure effective challenge as part of a model risk governance framework. Archimedean copulas are used to generate objective economic benchmarks. Ideas around benchmarking are illustrated for a set of South African economic variables, and the outcomes are compared to the IFRS 9 scenarios published by the six biggest South African banks in their annual financial statements during the pandemic.

Regional redistribution through SBA guaranteed loan programs

We document and quantify a new implicit transfer mechanism in the SBA 7(a) loan program that redistributes funds between US states. We use SBA 7(a) loan data in conjunction with Dealscan private corporate loan data to show that SBA 7(a) loan interest rates are much less responsive to predicted local loan default risk compared to private corporate loans. This redistributes funds from states with low default risk to states with high default risk. These transfers are positively correlated with the severity of local economic shocks during the Great Recession and the COVID-19 Recession. Therefore, even though it was unintended, the interest rates on SBA 7(a) loans acted as an automatic stabilizer mitigating regional economic shocks.

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.

Pre-Pack Resolution of Stressed Corporate MSMEs by Banks in India

Micro, Small and Medium Enterprises (MSMEs) in India experienced a steep decline in production, income and employment generation during the recent Covid-19 pandemic. Consequently, loan default on the part of stressed MSMEs has been on the rise. Appreciating the difficulties of such enterprises during the pandemic, the Government of India has recently initiated a major relief measure by amending the Insolvency Bankruptcy Code (IBC) to introduce a Pre-Pack Resolution Scheme, initially for corporate MSMEs. This is considered as an alternative route for faster and easy resolution of stressed corporate MSME debts if 66% of the financial creditors approve their plan to approach the adjudicating authority for insolvency, National Company Law Tribunal (NCLT). In the absence of such a scheme, they had to go through a long-drawn-out process under IBC. While there are several benefits of the scheme, stakeholders such as corporate MSMEs, lending institutions and NCLT have to face many challenges in implementing it successfully. This paper attempts to review the scheme by discussing its background, salient features, process, regulatory aspects and other issues.

Ad hoc government payments impact on non-real estate farm debt

Purpose>The authors examined the impact of the Market Facilitation Program (MFP) and Coronavirus Food Assistance Program (CFAP) payments to United States agricultural producers on non-real estate agricultural loans.Design/methodology/approach>The authors used quarterly, state-level commercial bank data from 2016–2020 to estimate dynamic panel models.Findings>The authors found MFP and CFAP payments not associated with the percentage of non-real estate agricultural loans with payments over 90 days late. However, these payments associated with the percentage of non-real estate agricultural loans with payments between 30 and 89 days late. The available data utilized cannot consider when producers received the actual payment and what they specifically did with those funds.Originality/value>The contribution of this study is for US policymakers and agricultural lenders. The findings could be helpful in designing and implementing future ad hoc payment programs and provide an understanding of potential shortcomings of the current safety net for agricultural producers in the Farm Bill. Additionally, findings can assist agricultural lenders in predicting the impact of ad hoc payments on their distressed loan portfolios.

The Biden Administration's Ambitious Higher Ed Agenda

The executive actions rescinded the Trump-era travel ban on several predominantly Muslim countries, preserved and fortified the Deferred Action for Childhood Arrivals (DACA) program, strengthened protections against discrimination based on gender identity and sexual orientation, and extended pandemic-related limits on student loan payments (White House 2021c, 2021b, 2021e, 2021d). The following month, the agency held a series of virtual hearings to collect initial comments on the proposed topics, with aacrao and other groups encouraging the department to ensure that the new federal student loan rules increase access while also strengthening oversight and enforcement to protect students and taxpayer dollars. [...]in October, the department convened the first of two negotiated rulemaking committees-composed of representatives of the student loan industry, state regulators, colleges, financial aid administrators, accrediting agencies, consumer advocacy organizations, students, and other stakeholders-to review current federal student aid programs and consider proposed changes to governing regulations. Affordability and Student Loan Rules The Affordability and Student Loans Committee met last fall to discuss rules for the Public Service Loan Forgiveness (pslf) program, borrower defense to repayment, interest capitalization on federal loans, income-driven repayment plans, Pell Grant eligibility for prisoners, mandatory pre-dispute arbitration and prohibition of class action lawsuits, and discharges for closed schools, false certification of eligibility, and total and permanent disability.

THE IMPORTANCE OF PUBLIC BANKS IN TURKIYE IN THE COVID 19 PANDEMIC

The Covid 19 epidemic, which emerged in China at the end of 2019 and spread all over the world, has caused hard times in all countries. In this time, the support of the public authority was needed due to the restriction of economic and social activities. In Türkiye, public supports were mostly implemented in the form of financial supports in order to maintain liquidity. It is seen that public banks play a major role in these financial supports. In this study, the behaviors of state-owned deposit banks during the pandemic and the support they provide to economic life were tried to be examined by comparing them with private and foreign deposit banks. According to the pre-pandemic situation, unlike other banks, it is seen that public banks are the group that gives the most loans in the sector. In addition, there has been no increase in the non-performing loans of public banks, thanks to opportunities such as postponement and restructuring of loan debts of companies and individuals. Due to these incentive loans of public banks, loan volumes reached enormous sizes, but it was observed that the profitability ratios did not increase at the same level. As a result, it has been clearly revealed that public banks work in a service-oriented manner instead of profit-oriented in order to prevent the economic recession caused by the pandemic, and that they are extremely important institutions in delivering government incentives to the public in times of economic depression. [ FROM AUTHOR]

Covid-19 Pandemi Sürecinin Banka Kredileri ve Bankaların Protestolu Senetleri Üzerine Etkileri

The pandemic, which emerged in the last of 2019 affected all countries social, cultural and economic aspects. The measures taken to stop the spread of the pandemic have also begun to force the country's economies. Because, at the beginning of these measures, full closure and social distance rules caused the demand and supply balance in the economies to deteriorate and increased the liquidity risk of the sectors. This situation experienced by the sectors especially affected the banks and the credit processes. In this context, it is aimed to examine the effect of Covid-19 on bank loans and protest bills with the Holt-Winters method, which is a estimation method. The loans were evaluated separately on a sector basis, thus it was aimed to evaluate the impact of the pandemic on the sector. More than one variable was used in the study and the years 2008-2021 were included in the study. The estimated data set covers the months of 2020 January-2021 February. In this context, consumer loans of banks, protest bills and commercial loans used by sectors were examined during the pandemic process.In this context, it has been observed that some sector loans have increased considerably but the loan demands of sectors such as education and health have decreased. It has been determined that consumer loans and protested bills of banks have increased significantly compared to

Impact of COVID-19 on financial performance and profitability of banking sector in special reference to private commercial banks: empirical evidence from Bangladesh

The current crisis caused by the COVID-19 pandemic has hit the global economy hard, causing significant damage to every aspect of the global banking system, and Bangladesh is no exception. For that reason, its performance and profitability have been affected. In this study, we investigate the impact of COVID-19 on the financial performance and profitability of the listed private commercial banks in Bangladesh. We initially compute each bank's financial performance index (FPI) to determine the position according to their financial performance individually before and the current period of COVID-19 by the standardized CAMELS rating system. After assessing the position, the fixed-effect regression model is used to explore the impact of the bank's specific variables and macroeconomic variables along with the banks' variables on the banks' profitability. The banks that performed better during the pre-pandemic period of COVID-19 also performed better during the pandemic period of COVID-19. The performance of AIBL, EBL, and BBL was almost autonomously higher during both periods. In the case of bank profitability, our paper discovered that during the pandemic period of COVID-19, high non-performing loan rates, holding more liquid assets, a high amount of hedging capital, and inappropriate bank size lessened the banks' profitability. In contrast, a low leverage position and inflation rate enhanced the bank's profitability during this period. The outcome of this study will help bank authorities detect the loopholes and take preventive measures that can improve their profitability during a crisis period like COVID-19. The investors and depositors who invest money in banks can precisely decide their portfolios.

Regional redistribution through SBA guaranteed loan programs

We document and quantify a new implicit transfer mechanism in the SBA 7(a) loan program that redistributes funds between US states. We use SBA 7(a) loan data in conjunction with Dealscan private corporate loan data to show that SBA 7(a) loan interest rates are much less responsive to predicted local loan default risk compared to private corporate loans. This redistributes funds from states with low default risk to states with high default risk. These transfers are positively correlated with the severity of local economic shocks during the Great Recession and the COVID-19 Recession. Therefore, even though it was unintended, the interest rates on SBA 7(a) loans acted as an automatic stabilizer mitigating regional economic shocks.

Italy's national recovery and resilience plan: context, content and challenges

The key policy instrument established by the European Union (E.U.) to address the socio-economic consequences of the COVID-19 pandemic is the "Next Generation E.U." (N.G.E.U.) Recovery Fund –– a ground-breaking initiative which has been compared to the post-WWII Marshall Plan. N.G.E.U. provides grants and loans to E.U. member states to rebuild their economies and enhance their resilience beyond the health crisis. With €191.5 billion of grants and loans, Italy is the prime beneficiary of N.G.E.U. money, absorbing by itself almost one third of the entire Recovery Fund's financial envelope. In order to program how to use this sizable amount of resources the Italian Government led by Mario Draghi has adopted in spring 2021, as required by E.U. legislation, a National Recovery & Resilience Plan (N.R.R.P.). The purpose of this article is to outline the context, content and challenges of Italy's N.R.R.P. To this end, the article surveys the formation of the Draghi Government in February 2021, explores the main features of the N.R.R.P., and discusses challenges that Italy faces in implementing the N.R.R.P. In particular, the article reviews the resignation of the Draghi Government in July 2022, and reflects on what this will entail for the future of the N.R.R.P., given incoming parliamentary elections. By providing the first English-language academic analysis of Italy's N.R.R.P., the article fills a gap in the literature. At the same time, by undertaking a case study of the most relevant N.R.R.P. among all E.U.27 member states, the article provides insight to assess the success of N.G.E.U. (English) [ FROM AUTHOR]

PANDEMIA Y DESIGUALDAD: UN ANÁLISIS EN TIEMPO REAL (*)

Diversos estudios bioarqueológicos han mostrado que las pandemias tienen un impacto muy relevante en el incremento de las desigualdades preexistentes. Una preocupación importante durante el periodo de propagación del COVID-19 fue que su impacto económico pudiera afectar de manera desproporcionada a los segmentos más vulnerables de la población. Un problema habitual con las medidas de desigualdad es que su cálculo se produce con bastante retraso y de forma muy infrecuente. En este artículo presentamos una metodología pionera para analizar la evolución de la desigualdad en tiempo real que permite reajustar las acciones de política económica para mitigar el impacto de un shock de desarrollo rápido, como la pandemia, sobre la desigualdad. Este trabajo es fruto de un proyecto pionero de colaboración público-privada entre la Universitat Pompeu Fabra-IPEG y el Departamento de Investigación de CaixaBank. Los resultados muestran el enorme aumento de la desigualdad que se produjo durante los primeros meses de la pandemia y el efecto que tuvieron los ERTE en la mitigación de dicho aumento. A principios de 2022 la desigualdad había vuelto al nivel prepandémico tanto en términos agregados como por subgrupos de la población.Alternate :Several bio-archaeological studies have shown that pandemics have a very significant impact on the increase in pre-existing inequalities. A major concern during the period of spread of COVID-19 was that its economic impact could disproportionately affect the most vulnerable segments of the population A common problem with inequality measures is that their calculation is produced with considerable delay and very low frequency. In this article, we present a pioneering methodology to analyze the evolution of inequality in real time that allows economic policy actions to be readjusted to mitigate the impact of a rapidly developing shock, such as the pandemic, on inequality. This work is the result of an innovative public-private collaboration project between the Universitat Pompeu Fabra-IPEG and the CaixaBank research department. The results show the enormous increase in inequality that occurred during the first months of the pandemic, and the effect that ERTE had in mitigating this increase. By early 2022, inequality had returned to the pre-pandemic level both at the aggregate level and by population subgroups.

Bank Loan Default Prediction Using Ensemble Machine Learning Algorithm

Banks play an integral role in the financial system of any country which directly affects its economic status and growth. The major roles of banks include accepting deposits from its customers, using those deposits to lend money to the borrowers in return for some interest, granting credits, discounting on bills etc. But the main source of profit for the banks is the interest it receives from lending money to the borrowers. And in a scenario of global pandemic like Covid-19, the number of people requiring financial aid from the banks has increased drastically. But a major problem faced by these banks is the failure of timely loan repayment by the borrowers. So, to tackle this problem, banks now a days use some models to predict the possibility of loan repayment from the borrower. Factors like annual income, employment status, home ownership, current debt etc are taken into consideration to categorize the loan request as bad loan or not. So, this paper basically aims to develop a similar model, but using ensemble machine learning algorithm of Random Forest Classification. And perform a comparative analysis with the model (Decision Tree Classification) that are currently in use. After complete implementation of all the models it was concluded that Random Forest Classifier Outperformed Decision Tree Classifier in terms of accuracy. © 2022 IEEE.

Determinants of non-performing loans in North Macedonia

This paper aims to examine macroeconomic and bank-specific determinants of non-performing loans (NPLs) in the case of the Republic of North Macedonia. Following the respective literature review that indicates the GDP and the unemployment rate as the most relevant macroeconomic variables, and weighted average interest rate, gross loans, and lagged NPLs as the bank bank-specific ones, we apply an ARDL bounds testing approach to investigate the determinants of NPLs of this landlocked, new NATO member country that seeks access to the EU. The studied period is from the first quarter of 2005 to the second quarter of 2022, which includes apart from the severe financial crises, i.e. the Global Financial Crisis (GFC) of 2007-2009 and the European Sovereign Debt Crisis of 2010-2012, the Pandemic Covid-19 period and the Russian Invasion of Ukraine. Our research output provides statistical evidence that the strongest long-run impact on NPLs comes from unemployment, GDP and interest rates;while Gross Loans seem not to have any significant effect. Our findings, holding both in the short- and the long-run, bear signs that are consistent with the economic theory. Overall, we add in the understanding, measuring, and forecasting of NPLs in a country under transition, and propose corrective macroeconomic policy measures in mitigating the related pressure and shocks, especially under periods of prolonged uncertainty.

Government debt accumulation and non-performing loans: An ARDL bounds testing approach

Following the financial and debt crises in the euro area and the global COVID pandemic, governments supported their economies by increasing borrowing and accumulating debt with ambiguous long-run effects on non-performing loans (NPLs). We empirically investigate the determinants of NPLs using quarterly (2003Q1-2020Q2) aggregate data for Greece and applying the autoregressive distributed lag (ARDL) bounds testing approach. We offer new policy-making relevant evidence by showing that government debt has a significant and positive long-term impact on NPLs irrespective of possible short-term dynamics that appear to provide a temporary relief. Fiscal balance, on the contrary, exerts a negative long-term effect justifying the quest for surpluses post-COVID.

The Robot and I: The Rise of Hybrid Service Teams

[...]an airport could install a hologram-based humanoid service robot every 50 meters to assist passengers and deal with common questions like arrival information and directions to check-in counters in all common languages. According to our expe- rience, however, often less than 12 months are required for payback of projects in successful implementations. * Mitigate potential risks of robot deployment x Organizations need to mitigate potential anxieties related to customer-facing service robots such as algorithm aversion, perceived loss of the human touch and consumer privacy. Specific decisions that managers need to make include whether, for instance, biometrics or data from social media accounts will be collected, whether variables will be used to build indices or financial scores to support decision-making, such as for approving loans and setting interest rates and when the information will be deleted from the company's database, e.g., on a bounced payment. Waist-high and dressed with coattails, they can fulfill guests' diverse needs by delivering an extra towel, a snack, a toothbrush and more. * At airports, robots are used to scan boarding passes and help passengers find the right departure gate.

Is a consumer loan a catalyst for confidence?

In the context of the global economic downturn, the approach guided by consumer loans (CL) to boost consumer confidence is a feasible way to promote the internal circulation of the Chinese economy. Therefore, we use a time-varying rolling-window approach to identify how CL affects the consumer confidence index (CCI). We find that CL can be seen as vital support for promoting confidence because it can ease liquidity constraints and improve consumption levels. The empirical outcome is supported by the Rational Expectations Perpetual Income Hypothesis (RE-PIH), emphasizing that increasing CL can boost consumer confidence. Conversely, CCI has both positive and negative effects on CL. The positive effects suggest that consumers’ optimistic confidence leads them to increase borrowing, which in turn creates a heavier debt burden. This statement cannot be supported by the negative effect due to consumers’ blind self-confidence will cause cognitive bias, which is not conducive to the loan market development. Against the backdrop of increased global uncertainty due to the COVID-19 pandemic and the government’s continuous adjustment of loan policies, consumers can effectively optimise their consumption decision-making through borrowing. The policymaker can maintain loan stability by effectively promoting consumer confidence and raising the consumption level of the whole society. © 2022 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.

Is a consumer loan a catalyst for confidence?

In the context of the global economic downturn, the approach guided by consumer loans (CL) to boost consumer confidence is a feasible way to promote the internal circulation of the Chinese economy. Therefore, we use a time-varying rolling-window approach to identify how CL affects the consumer confidence index (CCI). We find that CL can be seen as vital support for promoting confidence because it can ease liquidity constraints and improve consumption levels. The empirical outcome is supported by the Rational Expectations Perpetual Income Hypothesis (RE-PIH), emphasizing that increasing CL can boost consumer confidence. Conversely, CCI has both positive and negative effects on CL. The positive effects suggest that consumers' optimistic confidence leads them to increase borrowing, which in turn creates a heavier debt burden. This statement cannot be supported by the negative effect due to consumers' blind self-confidence will cause cognitive bias, which is not conducive to the loan market development. Against the backdrop of increased global uncertainty due to the COVID-19 pandemic and the government's continuous adjustment of loan policies, consumers can effectively optimise their consumption decision-making through borrowing. The policymaker can maintain loan stability by effectively promoting consumer confidence and raising the consumption level of the whole society.