The Serbian Banking System: Recent Development and Major Players

The paper analyzes the banking system of Serbia. First, we briefly overview the institutional and legal framework of the banking system and describe the main structural features of the sector. Then we discuss the evolution in traditional banking intermediation, and outline the main features of the banking competitive environment, focusing on the transformations in ownership structure of banks, especially on the increasing importance of foreign ownership, and summarising the key characteristics of major players.     

From Boom to Bust: How Different Has Microfinance Been from Traditional Banking?

This article presents in‐depth analysis of developments in the microfinance sector before and after the collapse of Lehman Brothers in 2008, by comparing them with developments in the traditional banking sectors of emerging markets and developing countries. Its findings indicate that microfinance has been part of the same credit boom observed in the traditional banking sector, and that the boom was also fostered by substantial inflows of foreign capital. Further, that risks associated with credit booms in the traditional sector also evolved in the microfinance sector. The article comes to the conclusion that, by becoming part of the global financial system, microfinance has lost one of the characteristics distinguishing it from traditional banking, namely, its greater resilience to crises in domestic and global financial markets.     

Performance appraisal for Chinese state-owned banking industry

Abstract

Performance appraisals, which are used to assist individual development and organisational planning, are considered an important part of effective human resource management. Studies of performance appraisal are invariably based on western theories, which can create issues when they are applied in different cultures, with China being identified as one such area. With China's WTO accession and the entry of foreign banks, the Chinese banking sector has become an extremely sensitive area of development for the nation's economy. It is important, therefore, to understand the factors surrounding performance appraisal and what does the process add to the efficiencies in the Chinese state-owned banking industry. This article is based on the data collected from the employees of Chinese state-owned banks from 2005 to 2007. The findings suggest that the employees' perception of justice has a positive relationship to their overall satisfaction with both the performance appraisal process and its outcomes. However, statistically significant differences were found in relation to whether employees had received training in performance appraisal or not.     

Financial Intermediation Modernization in Countries with Transition Economy

During the modern phase of economic reforms directed at the establishment of market economy, many countries with transition economies face the challenge of solving the issue of formation and rational usage of internal sources of financing the real sector of the economy, as well as attracting considerable volume of direct foreign investment. In general, financial market imperfections hold back innovation and growth, and that public policy can complement financial markets. Therefore, the most relevant issue at the present time is the formation of attendant and complex supervision institutions, as well as an exigency of innovative economy governance as mainframe principles for further banking system elaboration and financial sector development in general. We have taken Armenia as a case study for transition economy as far as Armenia is currently in the stage of capital market development through integration into international financial markets.      

Determinants of Profitability of Banking Sector in India

India currently is one of the fastest growing economies in the world. One sector of Indian economy that has played a critical role in transforming the Indian economy has been its banking sector. But this sector of Indian economy has also gone through a major transition that is still in progress. Many events and policies have contributed in this transition. One pivotal variable has been the growing profitability of this sector in the recent years. But profitability in banking sector is affected by numerous factors. These factors can be internal or external. In this research we shall try to examine the most important factors that may stem from both internal and external factors, which affect profitability of Indian banking sector. For this study a balanced panel data set is used that is drawn from Indian banking industry. The data is compiled for the purpose of investigating the nature of the relationship between the profitability and the factors that determine profitability of banks in India. The results of the study clearly demonstrate a close correlation between both internal and external factors and the level of profitability of banks in India.     

Does foreign bank entry contribute to financial development? Examining the role of income thresholds

This article examines the relationship between foreign bank entry and financial development in a panel framework covering 57 emerging market and developing economies (EMDEs) between 1995 and 2009. Using various measures of financial sector deepening, the article also explores the degree to which the relationship between foreign bank entry and financial sector depth varies by different income thresholds of the EMDEs. The empirical findings suggest that while foreign banks have a direct positive impact in furthering financial depth, the marginal effects of foreign bank entry diminish over time with greater levels of economic development. In other words, the impact of foreign bank entry tends to diminish as the per capita income of the country rises.     

BETWEEN SCYLLA AND CHARYBDIS: INCOME DISTRIBUTION,CONSUMER CREDIT,AND BUSINESS CYCLES

We introduce a macroeconomic model with heterogeneous households and an aggregate banking sector in order to analyze the impact of rising income inequality under different credit scenarios. Growing inequality produces debt‐led consumption boom dynamics when the banking sector is characterized by a lower capital requirement and a higher willingness to lend. Instead, when inequality rises but the banking sector is highly regulated, aggregate demand and output fall. Our results also yield new insights on the appropriate fiscal policy reaction to stabilize the economy: acting on the progressivity of the tax system seems more effective than a proactive countercyclical fiscal policy. (JEL C63, D31, E62, G01)     

Unionization and productivity in commercial banking

This paper examines the net effect of unions on productivity in the commercial banking industry. The focus of the study is on three methodological issues. First, an attempt is made to determine whether individual unions have a differential impact on banking productivity. The influence of unions on output per man-hour was initially estimated by including a union dummy variable in a Cobb-Douglas formulation of bank production. Separate binary variables were then entered into alternative specifications of the model to test the heterogeneity hypothesis. This hypothesis postulates differential productivity effects among the individual unions operating in the commercial banking sector. Second, the sample banks were paired on a case-by-case basis to assure the homogeneity of the two groupings: i.e., union and nonunion. Sample homogeneity is necessary because of the assumptions of identical production functions and output prices between the groups. Third, a complete covariance model was specified in order to estimate the impact of unionization on each parameter of the production function. In general, the unionized banks were less productive than their nonunion peers. It should be noted, however, that the standard errors were large in all the specifications. Moreover, the labor relations problems associated with one union had a large impact on the sector results.     

Political Influence and the Performance of Nonprofit Spanish Banks

This article presents empirical evidence about factors that influence the solvency of Spanish savings banks. It also studies whether the presence of politicians in their governance has led to lower solvency ratios and, consequently, to the current economic situation in the Spanish banking sector. We use multivariate regressions, taking the solvency ratio as the dependent variable; and efficiency, the coverage ratio, political influence, CEOs’ political influence, size, growth, and age as independent variables. Our results confirm that banking entities controlled by politicians resulted in poor performance, and political influence on the boards of savings banks led them to insolvency. The findings show that the non‐ownership structure of savings banks, the lack of best practice corporate governance mechanisms, and political presence have weakened them.     

Regulatory Problems of Commercial Banks in the Context of the European Sovereign Crisis

This study aims to find whether regulatory measurement of banking risks proposed by the Basel Committee provide a framework that allows an adequate reflection of these risks in banks’ capital requirements. The analysis is carried through the prism of financial crisis that started in 2007 and current sovereign crisis in some European countries. In the study we investigated the problems attached to Standardized Approach and risk measurement of a financial instrument based on the rating of issuer. As a result we revealed contradiction in the current regulation, according to which risk free assets provide a better return than riskier assets. We found evidences of the gaps attached to Standardized Approach, which in current sovereign crisis can become problematic not only for commercial banks, but also for the issuers of financial instruments in which commercial banks have investments. Finally, we offered a different method of risk measurement that, we argue, provides a better measurement of banking risks as such.     

The role of corporate social responsibility in online identity construction: An analysis of Turkey's banking sector

This study focuses on Turkey's banking sector and investigates the role of public relations and corporate social responsibility practices in constructing organizational identities through a thematic content analysis of banks’ corporate websites. Based on social identity theory, the research reveals that regardless of its core business function, an organization must communicate non-economic social concerns to construct a public identity and gain legitimacy.     

CHANGING BUSINESS MODELS IN INTERNATIONAL BANK FUNDING

This paper investigates the foreign funding mix of globally active banks. Using BIS international banking statistics for a panel of 12 advanced economies, we detect a structural break in international bank funding at the onset of the great financial crisis. In their postbreak business model, banks rely less on cross‐border liabilities and, instead, tap funds from outside their jurisdictions by making more active use of their subsidiaries and branches, as well as interoffice accounts within the same banking group. (JEL C32, F65, G21)     

Banks That Don't Lend? Unlocking Credit to Spur Growth in Developing Countries

This article explores the level of liquidity within the banking systems of developing countries and the potential impact on rates of economic growth from prudently redirecting a portion of liquid assets into credit to the private sector. It finds that banks in developing countries are extremely liquid and growth rates per capita might increase substantially in response to heightened lending to the private sector. It then summarises the primary obstacles to this and presents several policy reforms that can augment the level of credit to the private sector in developing countries.     

The Impacts of the Basel II Accord on the Concentration of the Entrepreneurial and Banking System

From the econometric analysis model, even though based on the US economy, one deduces the existence of an important correlation between the intervened changes in the role of banks’ prudential capital and in merger and acquisition dealings: the latter have increased, at least in number, after the reviewing of prudential capital requirements in favour of better structured banking organizations. The analysis of the Italian entrepreneurial and banking system shows a country characterised by small-scale enterprises with meagre growth capability (even though the Accord, paradoxically, is meant to facilitate the granting of loans to the development of small-scale enterprises), but also by the great expanding potential of banking enterprises that, contrarily to the other productive entities, can count of high re-investible margins and, consequently, of wide capabilities of investing in private equity.      

OLIGARCHIES AND DEVELOPMENT IN A GLOBAL ECONOMY: A TALE OF TWO ELITES

This paper studies how comparative advantage and the political elites' endowments shape long‐run performance in economies with imperfect political institutions. The trade regime interacts with industrial policy and regulations on capital mobility in governing capital accumulation. In a capital‐scarce economy, capitalist oligarchs striving for import substitution industrialization (ISI) initially shelter the economy from trade, while promoting industrial policies that promote total factor productivity growth in the manufacturing sector. This gradually shifts the comparative advantage toward manufacturing and renders the economy attractive to foreign investors. Allowing for trade and foreign capital inflows are thus complementary policies that spur growth in the capital oligarchy. By contrast, landed oligarchs in a capital‐scarce economy favor openness to trade at an early stage of development, neglect industrial policies, and block foreign capital to maximize extractable rents. The policy mix causes the economy to stagnate. Consistent with the experiences of South Korea and Argentina in the postwar era, the model predicts that the success of ISI policies depends crucially on the conditions governing the incentives for capital accumulation. (JEL F10, F20, P40, P50, O10, O24)     

Community banking and economic development: Lessons from Los Angeles

Among the changes in the field of community development is thegrowing importance of microfinance, both to provide access tocredit and as a vehicle for empowerment. Community banks arerecognized for their role in meeting these goals, although theyremain controversial, as the goals of microfinance are not alwaysagreed upon, with government officials and community membersemphasizing different interests. We examine the Los AngelesCommunity Development Bank to glean further lessons regardingthe role community banks can play in community development.Among the lessons from this experience are that politics areinescapable in the design of community banks; the economicsof banking tends to undervalue community needs; and culturalfactors include both professional and community-level challenges.Accounting for these factors can help community banks empowercommunities to meet the challenges of eliminating poverty.     

The Rapid Rise of Supermarkets in Central and Eastern Europe: Implications for the Agrifood Sector and Rural Development

During the 1990s transition period in Central and Eastern Europe, the retail sector was privatised and some domestic‐capital supermarket chains gradually emerged. Massive inflows of foreign direct investment followed and competitive domestic investments drove a rapid take‐off of large‐format modern retail sector development from a tiny ‘luxury’ niche of around 5% of food retail in the mid‐1990s to 40–50% by 2003 in ‘firstwave’ and 20–40% in ‘second‐wave’ countries. In ‘third‐wave’ countries like Russia, it is still only 10% but growing very fast. In most countries there is rapid multi‐nationalisation and consolidation of the supermarket sector, with profound changes in procurement systems affecting the conditions facing farmers, and creating important opportunities and challenges.     

Banking Sector Development and Economic Growth in Central and Southeastern Europe Countries

The aim of this paper is to empirically examine the relationship between banking sector development and economic growth in 16 transition countries in Central and Southeastern Europe in the period from 1995 to 2010. We apply fixed-effects panel model and control for other relevant determinants of economic growth and endogeneity. We measure the level of banking sector development using the amount of bank credit allocated to the private sector as a share of GDP. The second variable for the level of financial sector development is the margin between lending and deposit interest rates. According to our results the amount of bank credit allocated to the private sector, apparently does not speed up economic growth in transition countries. The second variable, interest rate margin is negatively but not significantly associated with economic growth.     

The Banking Network as a Transmission Channel of Migrant Remittances: The Case of Greek and Italian Banks in Albania

The paper examines the role of the banking network of foreign banks, namely Greek and Italian banks, on the transfer of remittances of Albanian immigrants. Remittances through the official network that is formed mainly by the banking network, grew much higher in comparison to non-official network during the period 1994–2006. The paper finds that the growth of the amount of remittances conveyed through the official network as part of the total amount of remittances is related to the evolution of branches of Greek and Italian banks in Albania.

Financing low-income housing in South Africa: Borrower experiences and perceptions of banks

South Africa is facing a low-income housing crisis, with the current backlog estimated at over three million units. An obstacle in the provision of low-income housing is the difficulty encountered by commercial banks to extend loans in this market despite supporting initiatives by Government. A lack of knowledge on the borrowing behaviour, preferences and experiences of low-income households in accessing housing finance from the commercial banking sector in South Africa hampers an understanding of the reasons for these problems. This paper's contribution is to provide information on the experiences and perceptions of low-income borrowers in the housing market of South Africa, specifically in their dealings with commercial banks. Results from a survey of 653 households across five provinces of the country are provided. In the survey, a structured questionnaire was used to obtain information on the experiences and perceptions of low-income households about their access to credit and housing finance, their experience of banks, the successes in credit approval, their judgements on the suitability of banks’ home-loan products, as well as preferences with regard to prices and interest rates.