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The impact of capital on lending in publicly-traded and privately- held banks in the EU

100%
Olszak M., Pipień M., Kowalska I., Roszkowska S.
Faculty of Management Working Paper Series
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2015
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issue WPS 7/2015
1-25
EN
This paper extends the literature on the link between lending and capital by examining the role of equity ownership structure for this link in banks operating in the European Union. As theory predicts, publiclytraded banks are more prone to heightened agency problems (moral hazard and adverse selection) due to dispersed ownership and therefore have stronger incentives to engage in excessive risk-taking especially in economic expansions. This may bring about procyclical lending effect in economic downturns. Theory also predicts that these banks are also more affected by capital market frictions in economic downturns. Applying Blundell and Bond (1998) two step robust GMM estimator we predict and find that the link between lending and capital in economic downturns is stronger in publicly-traded banks than in privately- held banks, which may be a result of greater conditional accounting conservatism of publicly-traded banks. Additionally, the link between lending and capital during expansions is stronger in the case of privately- held banks reporting unconsolidated data, but not for banks reporting consolidated financial reports, consistent with the view that limited access to capital markets increases the cost of external finance of private banks. Finally, we find empirical support for the view that lending of privately- held banks is not constrained by capital ratio in economic downturns. Our results stress the importance of conditional conservatism for the effectiveness macroprudential policy, in particular countercyclical capital buffers.
2
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The Impact of IFRS 9 on the Link Between Lending and the Capital Ratio in Publicly Traded Banks in Poland

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Bojar P., Olszak M. A.
Journal of Banking and Financial Economics
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2022
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issue 1(17)
60-73
EN
This paper aims to determine the role of the expected credit loss approach as defined in IFRS 9 in the effects of capital ratio on loans growth in publicly traded banks in Poland. To resolve this problem, we apply semi-annual data of individual banks in 2012–2018. Using several estimation techniques, we find that in the period of implementation of the expected credit loss approach, the links between loans growth and the capital ratio were enhanced. In particular, lending growth is more sensitive to levels of the capital ratio. These results are important with respect to the goal of bank financial stability and have implications for the conduct of macroprudential policy.
3
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Macroprudential policy effect on the link between lending and capital ratio – the role of economic development and capital account openness

100%
Olszak M., Roszkowska S., Kowalska I.
FINANSE Czasopismo Komitetu Nauk o Finansach PAN
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2017
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issue 1(10)
315-329
EN
In this paper we ask about the role of macroprudential policies to affect the link between lending and capital ratio in countries differing in economic development and capital account openness. To resolve this problem we apply the GMM 2-step Blundell and Bond approach to a sample covering over 60 countries. Our results show that the effect of macroprudential policies on the association between lending and the capital ratio in non-crisis periods is stronger in advanced countries than in emerging countries. Differentiating by the level of capital account openness, we find that macroprudential policies are more effective in increasing the resilience of banks and thus weakening the association between loan supply and capital ratio for relatively closed economies but less effective for relatively open economies. Generally, with our study we are able to support the view that macroprudential policy has the potential to curb the procyclical impact of bank capital on lending.
4
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THE IMPACT OF CAPITAL RATIO ON LENDING OF EU BANKS – THE ROLE OF BANK SPECIALIZATION AND CAPITALIZATION

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Olszak M., Pipień M., Roszkowska S.
Equilibrium. Quarterly Journal of Economics and Economic Policy
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2016
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vol. 11
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issue 1
43-59
EN
In this paper we aim to find out whether bank specialization and bank capitalization affect the relationship between loans growth and capital ratio, both in expansions and in contractions. We hypothesize that the impact of bank capital on lending is relatively strong in cooperative banks and savings banks. We also expect that this effect is nonlinear, and is stronger in “low” capital banks than in “high” capital banks. In order to test our hypotheses, we apply the two-step GMM robust estimator for data spanning the years 1996–2011 on individual banks available in the Bankscope database. Our analysis shows that lending of poorly capitalized banks is more affected by capital ratio than lending of well-capitalized banks. Loans growth of cooperative and savings banks is more capital constrained that lending of commercial banks. Capital matters for the lending activity in contractions only in the case of savings and “low” capital banks.
5
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Do macroprudential policy instruments affect the link between lending and capital ratio? – cross-country evidence

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Olszak M., Roszkowska S., Kowalska I.
Faculty of Management Working Paper Series
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2016
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issue WPS 2/2016
1-50
EN
In this paper we ask about the capacity of macroprudential policies to reduce the positive association between loans growth and the capital ratio. We focus on aggregated macroprudential policy measures and on individual instruments and test whether their effect on the association between lending and capital depends on bank size, the economic development of a country as well as on the extent of capital account openness. Applying the GMM 2-step Blundell and Bond approach to a sample covering over 60 countries, we find that macroprudential policy instruments reduce the impact of capital on bank lending during both crisis and non-crisis times. This result is stronger in large banks than in other banks. Of individual macroprudential instruments, only borrower-targeted LTV caps and DTI ratio weaken the association between lending and capital. Our results also show that the effect of macroprudential policies on the association between lending and the capital ratio in non-crisis periods is stronger in advanced countries than in emerging countries. Additionally, differentiating by the level of capital account openness, we find that macroprudential policies are more effective in increasing the resilience of banks and thus weakening the association between loan supply and capital ratio for relatively closed economies but less effective for relatively open economies. Generally, with our study we are able to support the view that macroprudential policy has the potential to curb the procyclical impact of bank capital on lending and therefore, the introduction of more restrictive international capital standards included in Basel III and of macroprudential policies are fully justified.
6
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Do regulations and supervision shape the capital crunch effect of large banks in the EU?

88%
Olszak M., Pipień M., Kowalska I., Roszkowska S.
Faculty of Management Working Paper Series
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2015
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issue WPS 3/2015
1-27
EN
This paper extends the literature on the capital crunch effect by examining the role of public policy for the link between lending and capital in a sample of large banks operating in the European Union. Applying Blundell and Bond (1998) two-step robust GMM estimator we show that restrictions on bank activities and more stringent capital standards weaken the capital crunch effect, consistent with reduced risk taking and boosted bank charter values. Official supervision also reduces the impact of capital ratio on lending in downturns. Private oversight seems to be related to thin capital buffers in expansions, and therefore the capital crunch effect is enhanced in countries with increased market discipline. We thus provide evidence that neither regulations nor supervision at the microprudential level is neutral from a financial stability perspective. Weak regulations and supervision seem to increase the pro-cyclical effect of capital on bank lending.
7
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The impact of capital on lending in economic downturns and investor protection – the case of large EU banks

88%
Olszak M., Pipień M., Kowalska I., Roszkowska S.
Faculty of Management Working Paper Series
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2015
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issue WPS 6/2015
1-33
EN
This paper attempts to find out whether better quality of investor protection matters for the effect of capital ratio on loan growth of large EU banks in 1996-2011. We focus on several measures of the quality of investor protection with a proven track record in the banking literature, i.e.: anti-self-dealing index, ex-antecontrol and ex-post-control of anti-self-dealing indices, and creditor protection rights index. Our results show that better investor protection increases the procyclical impact of capital on lending in the sample of banks reporting unconsolidated data. This is consistent with the view that better shareholders rights protection induces bank borrowers to take more loans and to engage in more risk-taking, in particular during economic booms, which results in greater sensitivity of bank lending to capital ratios in economic downturns. The opposite effect is found in the sample of banks reporting consolidated data. This effect is consistent with the view that better minority shareholders protection may reduce risk-taking incentives of large banks and result in better risk management of credit portfolio (and other investments of such banks).
8
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Bank-specific determinants of sensitivity of loan-loss provisions to business cycle

88%
Olszak M., Chodnicka-Jaworska P., Kowalska I., Świtała F.
Faculty of Management Working Paper Series
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2016
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issue WPS 3/2016
1-43
EN
In this paper we explore several new factors which may affect the procyclicality of loan-loss provisions. In particular, we test whether there are visible differences in sensitivity of loan-loss provisions to the business cycle between commercial and cooperative banks as well as between large, medium and small banks. We also aim to find out whether the level of bank capital ratio and the application of discretionary income-smoothing affect procyclicality of loan-loss provisions. Our results show that loan-loss provisions of banks are procyclical. This procyclicality is particularly visible and stronger in the sample of commercial banks. We also find that loan-loss provisions of large banks are more negatively affected by the business cycle than those of medium or small banks. We show that banks with low capital ratios exhibit increased procyclicality of loan-loss provisions. And finally, we also find empirical evidence that banks with a greater degree of discretionary income-smoothing have loan-loss provisions more negatively affected by the business cycle, and thus more procyclical.
9
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The Impact of Capital on Lending in Economic Downturns and Investor Protection - the Case of Large EU Banks

75%
Olszak M., Pipień M., Roszkowska S., Kowalska I.
Central European Journal of Economic Modelling and Econometrics
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2018
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issue 2
10

Basel III as a new global paradigm of bank regulatory standard

75%
Gutsuliak T.
Studenckie Prace Prawnicze, Administratywistyczne i Ekonomiczne
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2012
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issue 12
95 - 104
EN
This paper focuses on the analysis of the implementation of the international banking regulatory capital requirements according to Basel III. Determined are the main provisions and their step by step realization. Reviewed are the qualitative impacts on banks and macroeconomics effects.
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