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Did regulatory reforms that lowered barriers to competition increase or decrease the quality of information that banks disclose to the public? By integrating the gravity model of investment with the state-specific process of bank deregulation that occurred in the United States from the 1980s through the 1990s, we develop a bank-specific, time-varying measure of deregulation-induced competition. We find that an intensification of competition reduced abnormal accruals of loan loss provisions and the frequency with which banks restate financial statements. The results suggest that competition reduces bank opacity, potentially enhancing the ability of markets to monitor banks.

This article investigates the effect of banks' lending capacity on firms' investment. To identify exogenous shocks to loan supply, we utilize the natural experiment provided by Japan's Great Hanshin-Awaji earthquake in 1995. Using a unique data set that allows us to identify firms and banks in the earthquake-affected areas, we find that the investment ratio of firms located outside the earthquake-affected areas but having a main bank inside the areas was significantly smaller than that of firms located outside the areas and having a main bank outside the areas. Our findings suggest that loan supply shocks affect firm investment.

In this study, we analyze why commercial banks failed during the recent financial crisis. We find that traditional proxies for the CAMELS components, as well as measures of commercial real estate investments, do an excellent job in explaining the failures of banks that were closed during 2009, just as they did in the previous banking crisis of 1985–1992. Surprisingly, we do not find that residential mortgage-backed securities played a significant role in determining which banks failed and which banks survived. Our results offer support for the CAMELS approach to judging the safety and soundness of commercial banks, but call, into serious question the current system of regulatory risk weights and concentration limits on commercial real estate loans.

We show that banks with high environmental, social, and governance (ESG) ratings issue fewer mortgages in poor localities—in number and dollar amount—than banks with low ESG ratings. This lending disparity happens at both the county and census tract level, worsens in disaster areas of severe hurricane strikes, is robust to alternative ESG ratings (including using only the social (S) component), and cannot be explained by banks’ differential deposit networks. We find no difference in mortgage default rates between high- and low-ESG banks, rejecting an alternative explanation based on differential credit screening quality. We report a complementary, not substitution, relation between high-ESG banks’ mortgage lending and their community development investments (like affordable housing projects) in poor localities. Loan-application-level analyses confirm that high-ESG banks are more likely than low-ESG banks to reject mortgage loans in poor neighborhoods. The evidence hints at social wash: banks deploy prosocial rhetoric and symbolic actions while not lending much in disadvantaged communities, the social function they arguably ought to perform. Community Reinvestment Act (CRA) examinations partially undo the social wash effect.

Purpose Banking industry peculiarly has become soft target for several pernicious deceptive and fraudulent activities. The purpose of this paper is to systematically review the literature published in past 20 years on bank frauds and present a holistic view on causes and consequences of bank frauds and measures to curtail this menace. Towards the end the paper provides avenues for future research. Design/methodology/approach A systematic literature review approach is used in this study and articles are selected via pre-set inclusion criteria. The literature is mapped on the basis of databases, year of publication, country of study and journal of publication. This paper is based on 70 selected articles published in four prominent databases between 2000 and 2021. Findings This study reveals that frauds in banking industry have become a matter of grave concern for almost all countries across the globe, causing significant financial and non-financial damages to banks, customers, other stakeholders and economy. Numerous factors such as pressure and opportunity are responsible for fraud occurrence. This study further evinced that banking institutions inevitably should have a robust fraud risk management in place to prevent, detect and respond to defalcation. Originality/value To the best of the authors’ knowledge, this is the only paper among 70 selected articles which systematically reviews the literature published in past 20 years and provides a comprehensive view on all aspects related to bank frauds.

The study analyzes the financial performance of the top five private banks in Afghanistan using CAMEL model approach and annual audited financial reports from 2018 to 2022. Quantitative method was used to assess the financial performance of banks across various widely known financial parameters. The results found that among five private banks, Azizi Bank was the frontrunner in capital assets in Afghanistan, consistently demonstrating a significant capital adequacy ratio over the years. Ghazanfar Bank stood out for its high asset quality ratio in the initial years. First Microfinance Bank and Afghan United Bank showed consistent management efficiency over the years. On the other hand, Ghazanfar Bank and Afghanistan International Bank maintained relatively stable earnings ratios, and in terms of liquidity, Afghanistan International Bank consistently maintained high liquidity ratios. The findings also revealed that the financial performance of private banks in Afghanistan varied across dimensions, with each bank facing unique challenges and opportunities. Overall, understanding the distinctions of financial performance across these dimensions is essential for stakeholders, policymakers and bank management to devise strategies for enhancing the stability and sustainability of Afghanistan's banking sector.

The preponderance and influence of the public sector in the financial system have long been a defining characteristic of Brazilian capitalism. While exerting control over the national credit system through targeted lending policies and other regulatory tools, the federal government also wields significant weight through its state-owned institutions. This article delves into the role of Banco do Brasil (BB), a prominent financial institution and policymaking instrument of the Brazilian government, during the zenith of the developmental state between 1964 and 1982. In contrast to the prevailing focus on financing public spending, this study investigates the international engagements of BB and unveils its participation in managing the country's external imbalances. BB's financing proved crucial in bypassing the IMF and reinforcing the government's commitment to industrialization and developmentalism. The article offers new insights into the forces of Brazil's state-led finance and the political economy shaping its current banking and regulatory landscape.

This article uses daily market value data on credit default swap spreads and intraday stock prices to measure systemic risk in the insurance sector. Using the systemic risk measure, we examine the interconnectedness between banks and insurers with Granger causality tests. Based on linear and nonlinear causality tests, we find evidence of significant bidirectional causality between insurers and banks. However, after correcting for conditional heteroskedasticity, the impact of banks on insurers is stronger and of longer duration than the impact of insurers on banks. Stress tests confirm that banks create significant systemic risk for insurers but not vice versa.

[...]items such as differences among regulatory agencies, examiner experience, and inconsistencies among examination districts arguably have an effect on the ratings received by banks. [...]these sorts of stores tend to be obtained by banks requiring financing for more beneficial speculations. [...]a positive connection is anticipated for center stores.

Using a large loan sample from 1990 to 2006, we examine why firms form new banking relationships. Small public firms that do not have existing relationships with large banks are more likely to form new banking relationships. On average, firms obtain higher loan amounts when they form new banking relationships, while small firms also experience an increase in sales growth, capital expenditure, leverage, analyst coverage, and public debt issuance subsequently. Our findings suggest that firms form new banking relationships to expand their access to credit and capital market services, and highlight an important cost of exclusive banking relationships.