Statistics BIS statistics on the international financial system shed light on issues related to global financial stability. Read more about our statistics.
Banking services The BIS offers a wide range of financial services to central banks and other official monetary authorities. Read more about our banking services. Visit the media centre. In this section:. The banking system in emerging economies: how much progress has been made? Summary Banking crises in emerging markets in the s were associated with major macroeconomic disruptions: sharp increases in interest rates, large currency depreciations, output collapses and lasting declines in the supply of credit.
Recent trends in bank credit After peaking in the second half of the s, bank credit to the private sector has recently risen in a number of emerging market economies, partly because of stronger demand for loans associated with robust growth and low interest rates, and partly because of greater supply of loans associated with improved bank balance sheets.
The pace of structural change Banking systems in emerging economies have been transformed by privatisation, consolidation and foreign bank entry. Evolution in and management of risks facing banks Macroeconomic vulnerabilities particularly to external shocks appear to have declined, reflecting a mix of favourable temporary conditions as well as improved policies higher foreign reserves, more flexible exchange rates, domestic debt market development and improved fiscal policies. Preventing systemic banking crises One indicator of stronger banking systems is that the volatility of output and inflation has fallen in emerging market economies while their capital ratios have risen significantly.
Changing financial intermediation: implications for monetary policy Bank deregulation and global integration has on the one hand made monetary policy in emerging markets more potent by allowing a wider range of transmission channels, including asset market and exchange rate channels. BIS background papers The banking system in emerging economies: how much progress has been made? Banks and aggregate credit: what is new? Is financial stability policy now better placed to prevent systemic banking crises?
Fostering a sound and progressive financial sector. Top Share this page. Stay connected. Reserve Banks conduct research on regional, national and international economic issues. Research plays a critical role in bringing broad economic perspectives to the national policymaking arena and supports Reserve Bank presidents who all attend meetings of the Federal Open Market Committee FOMC.
Each Reserve Bank's board of directors oversees the management and activities of the District bank.
8 Major Functions of Central Bank – Discussed!
Reflecting the diverse interests of each District, these directors contribute local business experience, community involvement and leadership. The board imparts a private-sector perspective to the Reserve Bank. Each board appoints the president and first vice president of the Reserve Bank, subject to the approval of the Board of Governors.
All member banks hold stock in Reserve Banks and receive dividends. Unlike stockholders in a public company, banks cannot sell or trade their Fed stock. Reserve Banks interact directly with banks in their Districts through examinations and financial services and bring important regional perspectives that help the entire Federal Reserve System do its job more effectively. Approximately 38 percent of the 8, commercial banks in the United States are members of the Federal Reserve System.
National banks must be members; state-chartered banks may join if they meet certain requirements. The member banks are stockholders of the Reserve Bank in their District and as such, are required to hold 3 percent of their capital as stock in their Reserve Banks. In addition to the approximately 3, member banks, about 17, other depository institutions provide the American people checkable deposits and other banking services. These depository institutions include nonmember commercial banks, savings banks, savings and loan associations, and credit unions.
Although not formally part of the Federal Reserve System, these institutions are subject to System regulations, including reserve requirements, and have access to System payments services. We include in our estimation the interaction term of accounting standards with financial dependence, and these results are reported in Table The coefficient on the interaction term between accounting standards and financial dependence is significant and positive.
Our findings for accounting standards are in agreement with earlier studies for example,[ 4 , 20 , 40 ]. What is important for our analysis is that the coefficient on the interaction of financial dependence and financial development is significant. Thus our results are not driven by availability of better quality information.
In contrast, the existence of foreign banks can increase competition and improve efficiency, which ultimately increases the credit supply [ 58 — 61 ]. Similarly, a reduced cost of borrowing as a result of foreign acquisitions can lead to firms having greater access to credit [ 62 ]. The coefficient on the interaction term between financial dependence and state owned banks is negative and significant, thus supporting the argument that a higher share of state owned banks depresses industrial growth.
The coefficient ton the interaction term between foreign banks and financial dependence is positive and significant, implying that a higher share foreign banks increases the access to credit and therefore fosters the growth of financially dependent industries. Our findings for state owned banks are in agreement with [ 48 ]; however, for foreign banks our results contrast with his findings. According to [ 20 ], it is possible that the relationship between market structure and industrial growth suffers from an endogeneity bias because the bank market structure may adjust to the industrial structure.
Following [ 54 ] and [ 4 ], we deal with endogeneity problem by estimating the results with instrumental variable IV approach and the Two-step System GMM dynamic panel model with [ 66 ] corrected standard errors and small sample adjustments. Also the coefficients on all the other variables are significant and with expected signs.
Although, the fluctuations in industrial growth in pre and post financial crisis periods have been accounted for by introducing country, industry and time fixed effects, as an additional robustness check, the analysis has also been performed on different sample periods we are thankful to anonymous referee for this valuable insight i. Sample has been divided in three groups on the basis of i insights from earlier studies [i.
Although, not reported in table for brevity, the coefficients on these years are significantly negative indicating that industrial growth has been lower during the financial crisis. Table 14 shows the estimation results for subsamples —, —, and — The analysis has been performed using all measures of market structure, however, we only report results from CR5 and Lerner Index to conserve the space results from other measures are qualitatively similar to the overall results.
Important for this analysis are the coefficients on market structure variables, the interaction between market structure and financial dependence and the interaction between financial development and financial dependence. Coefficients on both CR5 and Lerner Index across all the sample periods are significant with negative sign.
Similarly, the coefficients on the interaction terms between market structure and financial dependence, and the financial dependence and financial development are significant with the expected sign. Moreover, the behavior of other variables across all the sample periods is also similar to results from the main estimation. We have taken into account two structural and two non-structural measures of market structure and applied them to industry level data on the manufacturing industries from 10 emerging Asian economies, including China, over the period of — The results show that bank concentration as measured by CR5 and HHI may slow down the growth of externally financially dependent industries.
This finding lends support to the idea that firms in a concentrated banking industry have low access to credit, which leads to less economic growth [ 18 , 19 ], and that higher concentration in banking sectors leads to less new firm creation and less economic growth [ 45 , 46 ]. On the other hand, bank competition as measured by the Lerner Index and Boone Indicator may allow financially dependent industries to grow faster. This finding supports the notion that a higher degree of competition in the banking industry reduces the holdup problems, reduces the cost of intermediation and encourages financially dependent firms to access bank credit [ 4 ].
These findings are robust when subjected to a number of sensitivity checks including alternative measures of financial dependence, and other channels that might explain the relationship between market structure concentration and competition and the growth of financially dependent industries. Other factors explaining this relationship include institutional ones, such property rights, quality of accounting standards and ownership of banks. In conclusion, our study suggests that industries in need of external finance grow more in a less concentrated and more in competitive banking environment.
The study provides important implications for anti-trust policies.
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For example, in the aftermath of the Asian financial crisis —98 and the global financial crisis —09, there has been an unprecedented increase in bank consolidations. Based on concentration-stability hypothesis, the idea was to strengthen the financial institutions in the events of financial downturns. The concentration-stability hypothesis suggests that larger banks in concentrated banking industries can reduce the financial system risk. However, the literature reveals that concentrated banking industries may prove to be counterproductive for financial stability, bank efficiency, monetary policy transmission and the economic growth.
This study provides the evidence of such counterproductive effects of bank concentration on the economic growth of financially dependent industries. Therefore, consolidation policies must be pursued carefully. Browse Subject Areas? Click through the PLOS taxonomy to find articles in your field. Abstract In this study, we examine the role of market structure for growth in financially dependent industries from 10 emerging Asian economies over the period of — Introduction The significance of financial institutions for economic growth is well established in economics and finance literature.
Literature Review Earlier evidence on the role of financial institutions for economic growth comes from [ 1 ], who argue that good financial systems boost economic growth by enhancing the probability of successful innovations. Methodology To determine the role of the banking market structure for industrial growth in emerging Asian markets, the methodology is the one applied by earlier studies, such as [ 20 ], [ 4 ], [ 48 ]. Data and Variables Industrial Growth. Download: PPT. Market Structure. Lerner Index.
Banking Structures in Major Countries | George G. Kaufman | Springer
It is calculated as the ratio of mark-up to price of output: Where Price i , t is the price of the total assets and MC i , t is the marginal cost of producing an additional unit of output. Boone Indicator. External Financial Dependence. Financial Development.
The banking system in emerging economies: how much progress has been made?
Empirical Results Descriptive Statistics and Correlation Analysis This section provides country wise descriptive account of variables of the study. Results and Discussion Basic Model. Extended Model. Table 6. Robustness Check In this section we conduct a number of robustness checks to ensure that the results reported in Table 6 reflect the true relationship between market structure and the growth of externally financially dependent industries.
Growth opportunities. Table 7. Accounting for Growth Opportunities by Industrial Sales. Table 8. Property Rights. Accounting Standards. Bank Ownership. Dealing with Endogeneity. Table Policy Implications The study provides important implications for anti-trust policies. References 1. King RG, Levine R.
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Journal of International Money and Finance. Yokoi-Arai M, Kawana T. Competition policy in the banking sector of Asia. Bikker JA, Haaf K. Competition, concentration and their relationship: An empirical analysis of the banking industry. Learning by lending, competition, and screening incentives in the banking industry.