In banking sector, the quality of customer service plays an important role, particularly in the context of growing competition and sustained business growth. The study is an attempt to ascertain the service quality provided by Public Sector Banks to Small & Medium Enterprises which play a key role in India’s economy. The major findings of the study have been that 1. Modernization and Communication affect the services to a large extent and there is a need of training to the staff for improvement of service to the SMEs customers; 2. The service quality of private banks is superior to that of Public sector banks; 3. Majority of the respondents revealed that the credit flow to SMEs sector is not sufficient and the Government will have to initiate necessary steps for making the required funds available easily on convenient terms; 4. Majority of the respondents feel that the policies for SME Sector of other countries are far better from the policies of India; 5. Delay in loan application processing due to unhelpful nature of the staff members, as claimed by the majority of the respondents. The banks usually provide finance against security and as high as 86% of the respondents are of the view that the banks ask for collateral security/guarantee from a third party even where the project has been assessed as viable and primary security is adequate.
{"title":"Service Quality Provided by Public Sector Banks to SME Customers: An Empirical Study in the Indian Context","authors":"G. Popli, D. Rao","doi":"10.2139/SSRN.1412791","DOIUrl":"https://doi.org/10.2139/SSRN.1412791","url":null,"abstract":"In banking sector, the quality of customer service plays an important role, particularly in the context of growing competition and sustained business growth. The study is an attempt to ascertain the service quality provided by Public Sector Banks to Small & Medium Enterprises which play a key role in India’s economy. The major findings of the study have been that 1. Modernization and Communication affect the services to a large extent and there is a need of training to the staff for improvement of service to the SMEs customers; 2. The service quality of private banks is superior to that of Public sector banks; 3. Majority of the respondents revealed that the credit flow to SMEs sector is not sufficient and the Government will have to initiate necessary steps for making the required funds available easily on convenient terms; 4. Majority of the respondents feel that the policies for SME Sector of other countries are far better from the policies of India; 5. Delay in loan application processing due to unhelpful nature of the staff members, as claimed by the majority of the respondents. The banks usually provide finance against security and as high as 86% of the respondents are of the view that the banks ask for collateral security/guarantee from a third party even where the project has been assessed as viable and primary security is adequate.","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-06-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133829971","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper addresses the type of portfolio optimisation problem that most European insurance companies will face after the introduction of Solvency II (the new regulatory framework in Europe to be introduced in 2013). Solvency II will limit the total Value at Risk of an insurance company. In this paper therefore we derive the optimal portfolio of hedgeable risks when also unhedgeable risks are present and the sum of both risks is constrained by a Value at Risk constraint. This paper extends the current literature on portfolio optimisation by including both a Value at Risk constraint and unhedgeable risks where in the current literature maximally only one of these two is included. To obtain flexibility with respect to assumptions regarding the probability functions of both the hedgeable and unhedgeable risks, the state price density and the utility function used, the problem is optimised numerically. An example shows the importance of a correct specification of the characteristics of the hedgeable risk. The results also show that the optimal portfolio is much less skewed than the optimal portfolio that is obtained when only hedgeable risks are present.
{"title":"Portfolio Optimisation with a Value at Risk Constraint in the Presence of Unhedgeable Risks","authors":"M. Janssen","doi":"10.2139/ssrn.1289284","DOIUrl":"https://doi.org/10.2139/ssrn.1289284","url":null,"abstract":"This paper addresses the type of portfolio optimisation problem that most European insurance companies will face after the introduction of Solvency II (the new regulatory framework in Europe to be introduced in 2013). Solvency II will limit the total Value at Risk of an insurance company. In this paper therefore we derive the optimal portfolio of hedgeable risks when also unhedgeable risks are present and the sum of both risks is constrained by a Value at Risk constraint. This paper extends the current literature on portfolio optimisation by including both a Value at Risk constraint and unhedgeable risks where in the current literature maximally only one of these two is included. To obtain flexibility with respect to assumptions regarding the probability functions of both the hedgeable and unhedgeable risks, the state price density and the utility function used, the problem is optimised numerically. An example shows the importance of a correct specification of the characteristics of the hedgeable risk. The results also show that the optimal portfolio is much less skewed than the optimal portfolio that is obtained when only hedgeable risks are present.","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"362 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122820957","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
The most general lesson of the crime prevention literature is taken to be that repeat victimization and repeat offending are concentrated in time and space; early intervention to prevent wider inflammation of such hot spots is more effective than reactive general deterrence (as in economic models of crime). That prescription is applied to how the 2008 financial crisis might have been prevented and how the crimes of Enron and Arthur Andersen might have been tackled to ameliorate the 2001 crisis. Negative licensing based on walking the beat and kicking the tyres at financial hot spots, with reduced reliance on economic models of risk, is one remedy advocated. Then the threat of negative licensing might be used to motivate restorative justice that transforms the ethical culture, particularly the bonus culture, of banks.
{"title":"Restorative Justice for Banks Through Negative Licensing","authors":"J. Braithwaite","doi":"10.1093/BJC/AZP038","DOIUrl":"https://doi.org/10.1093/BJC/AZP038","url":null,"abstract":"The most general lesson of the crime prevention literature is taken to be that repeat victimization and repeat offending are concentrated in time and space; early intervention to prevent wider inflammation of such hot spots is more effective than reactive general deterrence (as in economic models of crime). That prescription is applied to how the 2008 financial crisis might have been prevented and how the crimes of Enron and Arthur Andersen might have been tackled to ameliorate the 2001 crisis. Negative licensing based on walking the beat and kicking the tyres at financial hot spots, with reduced reliance on economic models of risk, is one remedy advocated. Then the threat of negative licensing might be used to motivate restorative justice that transforms the ethical culture, particularly the bonus culture, of banks.","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128296090","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Corporate Governance was ably defined by Sir Adrian Cadbury as the system by which companies are directed and controlled. Corporate Governance is critical to the soundness of financial systems world over. The Central Banks like everybody else needs to step up its corporate Governance practices and ensure that the Financial Institutions that they govern follow suit. This paper covers the following: 1) Why Corporate Governance is critical to Central Banks? 2) What Corporate Governance issues are relevant to Central Banks and the entities that they regulate? 3) What Corporate Governance issues are embedded in the guidelines set by Basel Committee on Banking Supervision?
阿德里安•吉百利爵士(Sir Adrian Cadbury)将公司治理巧妙地定义为指导和控制公司的制度。公司治理对全球金融体系的健全至关重要。央行和其他所有人一样，需要加强公司治理实践，并确保它们所管理的金融机构也能效仿。本文主要研究以下内容:1)为什么公司治理对央行至关重要?2)哪些公司治理问题与央行及其监管的实体相关?3)巴塞尔银行监管委员会制定的指导方针中包含哪些公司治理问题?
{"title":"Corporate Governance Issues for Central Banks","authors":"Miriam Musaali","doi":"10.2139/SSRN.1407443","DOIUrl":"https://doi.org/10.2139/SSRN.1407443","url":null,"abstract":"Corporate Governance was ably defined by Sir Adrian Cadbury as the system by which companies are directed and controlled. Corporate Governance is critical to the soundness of financial systems world over. The Central Banks like everybody else needs to step up its corporate Governance practices and ensure that the Financial Institutions that they govern follow suit. This paper covers the following: 1) Why Corporate Governance is critical to Central Banks? 2) What Corporate Governance issues are relevant to Central Banks and the entities that they regulate? 3) What Corporate Governance issues are embedded in the guidelines set by Basel Committee on Banking Supervision?","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"224 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117198917","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We quantify the importance of endogenous peer effects in group lending programs by estimating a static game of incomplete information. Endogenous peer effects describe how one's behavior is affected by the behavior of her peers. Using a rich data set from a group lending program in India, our empirical analysis presents a robust finding of large peer effects. The benchmark model suggests that the probability of a member making a full repayment would be 11 percentage points higher if all the fellow members were to make full repayment compared with a scenario in which none of the other members repay in full. We find that peer effects would be overestimated without controlling for unobserved group heterogeneity and that inconsistencies exist in the estimated effects of other variables without modeling peer effects and unobserved heterogeneity.
{"title":"How Important Are Endogenous Peer Effects in Group Lending? Estimating a Static Game of Incomplete Information","authors":"Shanjun Li, Yanyan Liu, K. Deininger","doi":"10.2139/ssrn.1402286","DOIUrl":"https://doi.org/10.2139/ssrn.1402286","url":null,"abstract":"We quantify the importance of endogenous peer effects in group lending programs by estimating a static game of incomplete information. Endogenous peer effects describe how one's behavior is affected by the behavior of her peers. Using a rich data set from a group lending program in India, our empirical analysis presents a robust finding of large peer effects. The benchmark model suggests that the probability of a member making a full repayment would be 11 percentage points higher if all the fellow members were to make full repayment compared with a scenario in which none of the other members repay in full. We find that peer effects would be overestimated without controlling for unobserved group heterogeneity and that inconsistencies exist in the estimated effects of other variables without modeling peer effects and unobserved heterogeneity.","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"30 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124307223","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization.
{"title":"Financial Integration and Business Cycle Synchronization","authors":"S. Kalemli‐Ozcan, E. Papaioannou, J. Peydró","doi":"10.2139/SSRN.1364375","DOIUrl":"https://doi.org/10.2139/SSRN.1364375","url":null,"abstract":"Standard theory predicts that financial integration leads to a lower degree of business cycle synchronization. Surprisingly, cross-country studies find the opposite. Our contribution is to document the theoretically predicted negative effect of financial integration on business cycle synchronization as a robust regularity. We use a confidential dataset on banks' international bilateral exposure over the past three decades in a panel of twenty developed countries. The rich panel structure allows us to control for time-invariant country-pair factors and global trends that affect both financial integration and business cycle patterns. In contrast to previous empirical work we find that a higher degree of financial integration is associated with less synchronized output cycles. We also employ two distinct instrumental variable approaches to identify the one-way effect of integration on synchronization. These specifications reveal that the component of banking integration predicted by legislative-regulatory harmonization policies and the nature of the bilateral exchange rate regime has a negative effect on output synchronization.","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"28 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114305231","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
During extreme financial crises, all of a sudden, the financial world that was once rife with profit opportunities for financial institutions (banks, for short) becomes exceedingly complex. Confusion and uncertainty follow, ravaging financial markets and triggering massive flight-to-quality episodes. In this paper we propose a model of this phenomenon. In our model, banks normally collect information about their trading partners which assures them of the soundness of these relationships. However, when acute financial distress emerges in parts of the financial network, it is not enough to be informed about these partners, as it also becomes important to learn about the health of their trading partners. As conditions continue to deteriorate, banks must learn about the health of the trading partners of the trading partners of the trading partners, and so on. At some point, the cost of information gathering becomes too unmanageable for banks, uncertainty spikes, and they have no option but to withdraw from loan commitments and illiquid positions. A flight-to-quality ensues, and the financial crisis spreads.
{"title":"Complexity and Financial Panics","authors":"Ricardo J. Caballero, Alp Simsek","doi":"10.2139/ssrn.1414382","DOIUrl":"https://doi.org/10.2139/ssrn.1414382","url":null,"abstract":"During extreme financial crises, all of a sudden, the financial world that was once rife with profit opportunities for financial institutions (banks, for short) becomes exceedingly complex. Confusion and uncertainty follow, ravaging financial markets and triggering massive flight-to-quality episodes. In this paper we propose a model of this phenomenon. In our model, banks normally collect information about their trading partners which assures them of the soundness of these relationships. However, when acute financial distress emerges in parts of the financial network, it is not enough to be informed about these partners, as it also becomes important to learn about the health of their trading partners. As conditions continue to deteriorate, banks must learn about the health of the trading partners of the trading partners of the trading partners, and so on. At some point, the cost of information gathering becomes too unmanageable for banks, uncertainty spikes, and they have no option but to withdraw from loan commitments and illiquid positions. A flight-to-quality ensues, and the financial crisis spreads.","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"5 7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-05-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134033847","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Oliver Entrop, A. Krombach, Christoph Memmel, Marco Wilkens
Non-maturing banking products are important asset and liability positions of banks. Their complexity inter alia arises from a non-trivial pass-through from market to product rates which makes the valuation and risk analysis challenging for both banks and banking supervisors. Based on a large data set, this paper provides a comprehensive analysis of the valuation and interest rate risk measurement of these products in the risk-neutral valuation framework of Jarrow and van Deventer (1998). We apply 6 term structure models and 4 interest rate pass-through models and estimate for each of these 24 model combinations the value and interest rate risk of 13 non-maturing product categories for up to 400 German banks on an individual bank level. We find that the choice of the term structure and the pass-through model is of limited importance for the valuation of non-maturing banking products. For ranking banks according to the interest rate risk of their products the pass-through process is of specific relevance. When the level of the interest rate risk is to be estimated, additionally an advanced term structure model should be chosen.
{"title":"Non-Maturing Assets and Liabilities of Banks: Valuation and Risk Measurement","authors":"Oliver Entrop, A. Krombach, Christoph Memmel, Marco Wilkens","doi":"10.2139/ssrn.1460185","DOIUrl":"https://doi.org/10.2139/ssrn.1460185","url":null,"abstract":"Non-maturing banking products are important asset and liability positions of banks. Their complexity inter alia arises from a non-trivial pass-through from market to product rates which makes the valuation and risk analysis challenging for both banks and banking supervisors. Based on a large data set, this paper provides a comprehensive analysis of the valuation and interest rate risk measurement of these products in the risk-neutral valuation framework of Jarrow and van Deventer (1998). We apply 6 term structure models and 4 interest rate pass-through models and estimate for each of these 24 model combinations the value and interest rate risk of 13 non-maturing product categories for up to 400 German banks on an individual bank level. We find that the choice of the term structure and the pass-through model is of limited importance for the valuation of non-maturing banking products. For ranking banks according to the interest rate risk of their products the pass-through process is of specific relevance. When the level of the interest rate risk is to be estimated, additionally an advanced term structure model should be chosen.","PeriodicalId":315176,"journal":{"name":"Banking & Insurance","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2009-04-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131404016","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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