Top PDF Credit operations of banks in the conditions of economic cycle

Credit operations of banks in the conditions of economic cycle

Credit operations of banks in the conditions of economic cycle

In the second section was given an assessment of bank lending in terms of economic cyclicality. The credit activity of PJSC "PrivatBank" in the conditions of economic cyclicality is analyzed, as well as corporate lending is considered separately. On the basis of the material discussed in the third section, the international experience of credit operations under conditions of economic cyclicality was investigated. A comparative analysis of the traditional and Islamic banking model is made. The main recommendations for improvement of credit operations of banks in the conditions of economic cyclicality are developed. Different approaches to assessing the creditworthiness of bank clients are analyzed.
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IRREVOCABLE LETTERS OF CREDIT AND THE RESPONSIBILITY OF THE BANKS

IRREVOCABLE LETTERS OF CREDIT AND THE RESPONSIBILITY OF THE BANKS

The principle of the autonomy means a letter of credit is independent of, and separate from, an underlying contract which is financed by the letter of credit. Malek QG et al (2009) state that ‘’ The bank should not take account of any other than the terms of credit and the documents which are presented to it. This is subject to the possible exception…’’. Therefore, generally a bank only deals with documents, not commodities or services as to the relationship with others parties involved in the letter of credit (Burnett and Vivienne 2009). To put it another way, the bank does not concern itself with an underlying contract (M. Bridge, 2007). Hence, banks should make decision based on documents only to accept or reject it in specific time (Paul, 2002). Generally, any conflict may arise between a vendor and a purchaser as to the agreement of sale, it will not affect the letter of credit, (Carr, 2010). and a purchaser could not block the payment, however, he only has the option to make a claim before a court (Chuah, 2005). This doctrine is mentioned in Article 4 and 5 of UCP 600 which latter states, ‘Banks deal with documents and not with goods, services or performance to which the documents may relate’. Furthermore, Article 4 (a) of UCP 600 declares that the letter of credit is independent from the agreement of sales. It has been pointed out that Article 5 of UCP 500 states that “In Credit operations all parties concerned deal with documents and not with goods, services and/or performances to which the documents may relate”. In contrast to, Article 5 of 600 omits the phrase ‘all parties’ because a buyer and a seller usually deal with goods. It should be emphasised that banks while dealing with the documents, must follow the procedures mentioned in UCP 600 (Ebenezer, 2009). “The problem of non – documentary conditions is addresses in UCP by Article 14 (h)” (Malek QG et al 2009, 178). Article 14 (h) of UCP 600 states that “If a credit contains a condition without stipulating the document to indicate compliance with the condition, banks will deem such condition as not stated and will disregard it”.
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Economic activity, credit market conditions and the housing market

Economic activity, credit market conditions and the housing market

found that housing prices are strongly in‡uenced by business cycle ‡uctuations, being driven by fun- damentals such as income growth, industrial production and employment rate (Hwang and Quigley, 2006). Others have highlighted the importance of …nancial variables, such as the interest rate and the monetary aggregates or the availability of credit (Agnello and Schuknecht, 2011). In spite of this, it is still di¢ cult to …nd a consensus about the causes of the housing market ‡uctuations. For instance, in the case of the US, the application of the static asset market approach to the case of housing valuation suggests that the fall of real long-term interest rates during housing booms is regarded as an important determinant of house prices (Poterba, 1984). In contrast, accounting for credit-constrained home buyers, elastic housing supply, mean-reverting interest rates, mobility and prepayment, the generalization of the standard user-cost model to housing prices shows that interest rates do not in‡uence house prices in a signi…cant manner and lower real interest rates only explain one-…fth of the rise in housing prices from 1996 to 2006 (Glaeser et al., 2010).
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A Decade of Microfinance Banks’ Operations and Economic Development in Nigeria

A Decade of Microfinance Banks’ Operations and Economic Development in Nigeria

Akujuobi and Onuora(2008) had earlier evaluated Community banks role in Nigeria and found out that due to inadequate capital structure, the banks gave nearly half of their credit facilities to commerce subsector that did not significantly contribute to economic development. Babagana(2010) carried out a study on impact assessment of the role of Microfinance banks in promoting small and medium enterprises(SMEs) in Nigeria. The area covered by the study was Bauchi in Bauchi State of Nigeria. The study revealed that Microfinance banks have contributed to the promotion of SMEs growth in Nigeria. Okpara(2010) focused on the critical factors that cause poverty in Nigeria and investigated the role of Microfinance banks in poverty alleviation. The data on reasons for poverty was generated by national Bureau of Statistics and the method of factor analysis was employed. The researcher equally employed regression analysis in quadratic equations model which is found to be most appropriate in explaining the variations between the two variables. The study identified five factors as critical. These are: low profit, high prices of commodities, harsh economic times, lack of finance to start or expand business and poor performance of business. Kehinde and Adejuwon(2011)researched on Financial Institutions as catalyst to economic development: the Nigerian experience and record that bottlenecks in the entire financial system retards development. In their opinion, the efficiency of the system rather than the volume of financial activities is deemed vital to facilitate development. It seems to us that both system efficiency and transactions volumes and varieties are both vital to economic growth and development.
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Economic Cycle and Credit Volume Interaction: Case of Lithuania

Economic Cycle and Credit Volume Interaction: Case of Lithuania

Economic (sometimes called “business”) cycle research is one of the most popular topics of scientific literature discussions over the last years encompassing global economy long-term grow and recession starting from 2007. Such cycles can also be observed in banking activities – decreasing crediting volumes can be noticed in the majority of countries. However, the interaction between financial and business cycles is not fully revealed and differs in different countries. In the case of Lithuania credit volume and business activeness cyclic interaction can be also named as specific, reflected in gross domestic product (GDP) and credit volume fluctuations. Based on various economic cycle stages identification methodologies, not every single fluctuations can be assigned as an economic cycle stage: some of them are not identified as significant and are not recognised as economic cycles, the others match an economic cycle stage and time criterions and can be recognized as economic cycles. In the current situation, when global economy and the situation in Lithuania show recovery signs from recession to growth, credit market reacts respectively. Though the question of business and credit volume cycles is very actual, because knowing credit market dynamics indications and synchronization level between credit and economic cycles different financial stability implementation politics measures can be developed. The importance of business and credit volume cycles interaction research is also evident from the number of theoretic studies, however, to investigate interaction between an economic cycle and crediting activities in Lithuania banks there was adopted methodology developed by Kress (2004) and Avouyi-Dovi et al. (2006), including these main stages: 1) identification of turning points according to Avouyi-Dovi et al. (2006) adopted Harding and Pagan methodology, identifying peaks and troughs when two different economic cycle indicators are selected (Industrial production (Lt) and GDP (Lt)) with three credit cycle indicators (Total loans (Lt); Household loans (Lt); Loans to non-financial corporations (Lt)); 2) Calculation of concordance index between economic cycle and banks provided credit volume using business and credit cycle indicators; 3) Valuation of dependence between economic indicators and banks credit activities ratios using correlation function; 4) Conclusions delivering. Research methodology consists of separate independent stages, what makes possible to compare the results in separate stages and deliver more comprehensive conclusions. Obtained results revealed that peak in Total loans indicator converge with the peak in economic cycle indicators, but the peak in Household loans is accessed
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Evaluation of the Nigerian Microfinance Banks Credit Administration on Small and Medium Scale Enterprises Operations

Evaluation of the Nigerian Microfinance Banks Credit Administration on Small and Medium Scale Enterprises Operations

The experience of micro- finance lending in Nigeria had not been quite successful from the formal model approach as observed Arogundade (2010). This is in line with the CBN Report (2005) that the formal financial system provides services to about 35% of the economically active population while the remaining 65% are often served by the informal sector (CBN 2005). The microfinance policy recognizes these informal institutions and bring them within the supervisory purview of the Central Bank of Nigeria (CBN).The total registered MFBs in Nigeria as at the end of 2011 stood at 993 (CBN web 2012, NDIC 2012) indicating presence in all the 774 local government in Nigeria. Provision of credit to SMEs is expected promote economic development and growth. Despite the efforts of government in the area of credit delivery to SMEs in the country, these micro enterprises have continued to be denied access from the formal financial institutions (Dada and Salisu 2008). Thus, many critics show that microfinance does not reach the poorest of the poor (Scully, 2004), or that the poorest are deliberately excluded from microfinance programs (Simanowitz, 2002). In addition, it has been argued that the size of the needed loan often exceeds the maximum amount that can be borrowed from microfinance institutions. Theoretically it is thus unclear whether microfinance really helps to reduce poverty.
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Credit Risk Management in Croatian banks

Credit Risk Management in Croatian banks

In its operations, banks are exposed to many risks. Risk management in the banking industry has two main goals, which are: to avoid the insolvency of and maximize the rate of return on equity adjusted for risk. The basis of financial management consists in good and efficient management of assets and liabilities, and collecting and investing funds. Loans and other advances to customers are invested in domestic, but also in foreign currency and represent the most important component of the bank assets. Credit risk is reflected in the inability of the debtor or issuer of the financial resources for the payment of interest and/or principal under the conditions specified in the loan agreement. About 80% of bank balance sheets relates to credit risk, therefore, that the risk is the most significant of all the risks faced by all banks. Banks managed placements and structuring its own loan portfolio, in order to diversify their investments in order to minimize credit risk. Today, according to a group of clients, most loans are granted to companies in private ownership, followed by citizens and ultimately the public sector. In order to minimize credit risk introduced standards for credit risk management. In Croatia, there are laws that govern the credit risk in the banking business. Basic indicators of credit risk Croatian credit institutions have capital adequacy ratio, qualifications balance sheet liabilities, coverage and structure of the loan portfolio. Bad placements and off-balance sheet commitments are often considered as the main factors, increasing their lead to significant losses of banks. They affect macroeconomic variables or other variables such as quality of management of banks, political decision, size and market power. In the second decade of opening up the financial and banking market and enable the inflow of foreign capital and banks and has been a growth in non-performing loans and off- balance sheet commitments. According to the conducted empirical research, the Croatian banking sector, the increase in non-performing loans and off-balance sheet commitments was accompanied by a drop in GDP, rising unemployment, rising interest rates and exchange rate depreciation. To avoid a crisis, effective bank management and regulatory / supervisory institutions should be able to identify and quantify these effects. Therefore, managers of banks, together with Croatian fiscal and monetary authorities should find ways to increase foreign investment and economic activity and reduce unemployment and maintaining interest rates and exchange rate stability.
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Credit Allocation of Japanese Banks in the 1990s: Evidence from the Short-term Economic Survey of Enterprises

Credit Allocation of Japanese Banks in the 1990s: Evidence from the Short-term Economic Survey of Enterprises

that are burdened with excessive debt. Second, all of the studies that incorporate firms’ balance sheet variables rely on micro data from banks and firms. Since listed firms’ information constitutes the micro data, the evidence supporting the evergreening argument is confined to large firms, with no information concerning small or medium-sized firms included. 2 It is worth noting that small or medium-sized firms are more dependent on bank loans, so investigation into how credit allocation is influenced by the balance sheet conditions of firms, as well as that of banks, is important. The benefit of examining micro data from firms and banks in the context of this study is that it enables us to make clear estimates of the effects of balance sheet conditions of firms and banks on credit allocation. However, we fail to obtain macro or industry level implications for credit allocations from micro level evidence. It is true that credit is constrained for some firms with heavy debts and is expanded for some firms with excessive debts, but micro level evidence is silent as to the aggregated consequences of credit allocations on the industry level. In the subsequent sections, we investigate how credit is allocated for small and medium-sized firms as well as large firms. The Tankan survey is an ideal data source that provides us with the information necessary for conducting empirical analysis along these lines.
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Experience of Greece on recapitalization of banks, marketing management and personnel retraining in conditions of economic recession

Experience of Greece on recapitalization of banks, marketing management and personnel retraining in conditions of economic recession

Low financial stability of Greece financial and credit sector determining the weakness of the balance of payments of the country is conditioned by the economic agents’ structure. It is important to note that majority of the economic agents is represented by the companies of small-scale and medium-scale businesses which are not engaged in foreign trade operations and do not manufactures export products. In the period of market changes a currency inflow into the country has always been limited, as economic agents have always oriented results of their production activity to the domestic market. Recently the production of services (maritime transport, transport risks insurance, tourism, etc.) was a strong competitive sector of Greek economy. At the same time promotion of these services to the world market did not provide a positive balance in trade of Greece with other countries.
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Stress Testing of Credit Risk Lithuania Banks under Simulated Economical Crisis Environment Conditions

Stress Testing of Credit Risk Lithuania Banks under Simulated Economical Crisis Environment Conditions

when the main risks of the bank sector arise due to the increased tension related to the situation of liquidity in the world markets, and also due to possible sudden decline of the quality of loan portfolios. The importance of financial crises and their effect on the economies of the countries is also shown by scientific research (Bordo, M. D. and Eichengreen, B. (2002); Laeven, L. and Valencia, F. (2008); Leika, M. (2008); Ingves, S. and Lind, G. (1996); Dahlheim, B. & Nedersjo, G. (1993); Martinaityte, E. (2008); Ramanauskas, T. (2005); Viotti, S. (2000)). Therefore upon evaluating the complex processes taking place in the world economies lately, it is very important to forecast the manifestations of possible crises in advance as well as to what extent they are going to affect the financial system of the country, and especially the bank sector, and form respective strategies, which would help to avoid huge financial losses, incurred when liquidating the consequences of crises. D. T. Llewellyn (2000) states that the majority of financial crises took place after a sudden and risky growth of real estate prices. He is also seconded by C. Borio, P. Lowe (2002), who maintain that periods of increase of bank crediting, growing real estate prices and high level of investment almost always cause problems to the financial system. C. Cottarelli, G. dell’Ariccia, and I. Vladkova- Hollar (2003), P. Hilbers, I. Otker – Robe, C. Pazarbasioglu, G. Johnsen (2005) summarized the experience of the banks of Middle and Eastern Europe and some Balkan states in relation to a rapid growth of crediting and established that many of the countries witnessed credit growth booms from the beginning of this decade, and their beginning actually coincided with the improved prospects of economic growth and increase
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Foreign banks and credit conditions in EMEs

Foreign banks and credit conditions in EMEs

How do FBP Rates in EMEs compare with the other dimensions of international credit discussed above? Graph 4 plots the four metrics for nine Asia-Pacific EMEs, and Graph 5 for nine EMEs in Latin America (top row), eastern Europe (middle row) and elsewhere (bottom row). For several of these economies, both the level and the evolution of the FBP Rates are similar to those for the other metrics. This is particularly true for Hungary, India, Indonesia and Russia, and to a lesser extent for the Philippines and Turkey. But in many others, the level of the FBP Rate is substantially higher than either the foreign currency share of credit (FRN Cur Share), or the share of direct and indirect cross-border credit in total credit (Direct+Indirect XB Share). This mainly reflects the fact that foreign banks in these countries have relatively large local operations that extend credit in the local currency. This drives up the FBP Rate but, if these foreign banks’ local credit is also funded locally and in the local currency, then there is no contribution to either foreign currency credit or cross-border credit. As shown in McGuire and von Peter (2016), local currency credit that was also locally funded proved to be a source of stability in the wake of the financial crisis.
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Strategic directions of credit activity of banks in the conditions of economic instability

Strategic directions of credit activity of banks in the conditions of economic instability

been determined that effective lending activity of banks in Ukraine can ensure the recovery of the financial sector and restoration of the growth rates of the real economy sector of the country. The author's concept of improvement of credit activity proves that it is the basic condition for maintaining favorable credit potential and efficient functioning of the bank. For the first time initial provisions are presented, the basis for building the entire credit process of any banking institution. The expediency of developing a scientifically based unified credit risk assessment methodology, which in general should cover both qualitative characteristics of credit risk and schemes for the identification and calculation of quantitative characteristics, is singled out. The conclusion is made on the necessity of developing a strategic vector of credit activity of Ukrainian banks, namely: organizational and economic mechanism of bank lending; alternative methods of risk assessment of lending activities of banks; organizational - functional model of providing effective lending activity.
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Guidelines on Credit Card Operations of Banks

Guidelines on Credit Card Operations of Banks

The term “Credit Card” generally means a plastic card issued by Scheduled Commercial Banks (SCBs) assigned to a Cardholder, with a credit limit, that can be used to purchase goods and services on credit or obtain cash advances. Credit Cards allow Cardholders to pay for purchases made over a period of time, and to carry a balance from one billing cycle to the next. Credit card purchases normally become payable after a free credit period during which no interest or finance charge is imposed. Interest is charged on the unpaid balance after the payment is due.
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CREDIT CARD OPERATIONS OF BANKS

CREDIT CARD OPERATIONS OF BANKS

Credit cards allow cardholders to pay for purchases made over a period of time, and to carry a balance from one billing cycle to the next. Credit card purchases normally become payable after a free credit period, during which no interest or finance charge is imposed. Interest is charged on the unpaid balance after the payment is due. Cardholders may pay the entire amount due and save on the interest that would otherwise be charged. Alternatively, they have the option of paying any amount, as long as it is higher than the minimum amount due, and carrying forward the balance. Credit card schemes are operational at international level also.
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Credit Cycle, Credit Risk and Business Conditions

Credit Cycle, Credit Risk and Business Conditions

Secondly, we notice that variables carrying similar economic information tend to be close to each other. Economy health indicators dlGDP and dlPAYRL stay close to the same line; short interest rates TBM06 and GS01 are almost identical in both phase and amplitude; similarly are the long rates GS10 and GS30; and all the credit variables (DEFR,DRE, CRE, DCI,CCI) cluster together to represent the credit cycle. Therefore, we roughly classified all 17 variables into nine clusters: productivity variable dlGDP and the number of new jobs variable dlPAYRL make up the economy growth cluster; R6M and GS01 belong to short rate cluster; GS10, GS30 and MORG are included in the long rate cluster; the corporate credit health cluster contains DCI and CCI; the consumer credit health cluster on real estate includes DRE and CRE; CONS, DEFR and UNEMP are three single-variable clusters.
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SETTLEMENT PROCEDURES FOR EUROSYSTEM CREDIT OPERATIONS

SETTLEMENT PROCEDURES FOR EUROSYSTEM CREDIT OPERATIONS

Where a credit claim agreement is governed by the law of a euro area country other than Ireland it is deemed to be a cross-border credit claim. Counterparties must have entered into the framework agreement in respect of Eurosystem operations secured over collateral pool assets (a template version of which can be found on the Bank’s website) to use these credit claims as collateral. In addition, such credit claims must be mobilised via the CCBM in accordance with the procedures of the national central bank (NCB) whose law governs the credit claim agreement. This NCB will act as Correspondent Central Bank (CCB). Counterparties must, therefore, contact the CCB in order to obtain eligibility for these credit claims – the CCB in this case will have responsibility for assigning the credit claim identifier number. Counterparties will also be required to comply with the procedures of this NCB with regard to the information required in order to determine eligibility of the credit claim. See also Annex A of this document. Following confirmation of eligibility by the relevant NCB to the counterparty, cross-border credit claims are mobilised in the normal way via the CCBM procedures (see section below on Delivery/Release of Collateral).
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European development banks and the political cycle

European development banks and the political cycle

The sample is split based the level of Constraints on Chief Executive (XCONST), measured by the Polity IV Project on a zero-to-ten scale, with seven indicating “full constraints” and lower levels indicating “flawed constraints”. Countries are allowed to move from one group to another according to the annual value of XCONST. The regression is run within separate size classes: (i) the whole sample (columns 1 and 4); (ii) the smaller DB’s size class (columns 2 and 5), which includes banks in the percentiles 22-90 by total assets; (iii) the larger DBs’ size class (columns 3 and 6), which includes banks above the 90th percentile (see Section 3.1 for details). The dependent variable DLOANS measures the change in total loans in year t as a share of total assets in year t-1. LTA is the logarithm of lagged total assets in EUR thousands. NONINT is the lagged share of non-interest income over average total assets (i.e. the average of total assets at the beginning of the year and at the year’s end). CAP is the lagged share of total equity over total assets. DGDP is the GDP growth rate by country and year. ELECT is the share of the year t that falls within the twelve months prior to a national election in country c. DB is a dummy variable that takes the value of one for development banks. The reference period is 2002-2015. Robust standard errors in brackets.
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Benchmarking credit policies of international banks

Benchmarking credit policies of international banks

Large dams and associated infrastructure are among the most controversial and potentially destructive of all internationally-financed projects. According to the report of the World Commission on Dams (WCD) released in November 2000, large dams have displaced between 40 and 80 million people worldwide. Millions more have been ousted by the construction of canals, powerhouses and other associated infrastructure. Many of these people have not been satisfactorily resettled, nor have they received adequate compensation, and those who have been resettled have rarely had their livelihoods restored. In the natural world, dams have fragmented and stilled 60 per cent of the world’s rivers, leading to profound and often irreversible impacts on riverine and adjoining terrestrial environments. Meanwhile, the economic benefits of large dams have often been elusive. Large dams tend to under-perform their targets for power generation, and lengthy construction delays and large cost overruns are routine. 17
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BANKS, FREE BANKS, AND U.S. ECONOMIC GROWTH

BANKS, FREE BANKS, AND U.S. ECONOMIC GROWTH

Our findings cast new light on the National Banking Acts of 1863 and 1864. While Davis (1965), Sylla (1969), and James (1978) focus on the restrictiveness of their regulations late in the National Banking period, we find that these banks may have been initially growth promoting. This may have occurred because the new legislation retained the enabling aspects of free banks, but took steps to improve the quality of required collateral and create a uniform currency. 31 In response to the legislation, more charter banks that existed in 1860 (almost 60%) converted to a national charter than free banks (only 42%). Maybe more importantly, nearly half of free banks ended up closing, relative to less than a third of charter banks. Table 9 shows that the legislation closed only certain types of banks. Even across charter banks, banks that closed typically had small capital stocks, held few deposits, issued few loans, and were located in rural areas. In this way, the legislation seemed to have ended those banks that were unlikely to have a large effect on their communities regardless of whether they were free or charter banks.
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RAKBANK Credit Cards Terms & Conditions. RAKBANK Credit Cards Terms & Conditions

RAKBANK Credit Cards Terms & Conditions. RAKBANK Credit Cards Terms & Conditions

p) “Credit Limit” means the maximum debit balance permitted by RAKBANK for the Card Account for the Primary Card and the Supplementary Card(s), if any, and notified to the Primary Cardholder by means of the monthly Credit Card Statement or by such other means as may be appropriate at the discretion of RAKBANK in respect of which the total outstanding balance of your Card Account must not exceed at any time and if you have more than one Card Account such limit shall be the maximum permitted for the total outstanding balance of all your Card Accounts (excluding any business card and Amal card account each of which being governed by separate terms and conditions and any Card Account secured by a Deposit). q) “Credit Shield Terms & Conditions” means the credit shield
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