Credit conditions
Staff incentive schemes lead to bad deals for consumers – paper
Colombian paper examines the effect of bank incentive schemes on consumers; transparency index reveals staff often do not disclose information about the price of financial products
Kenya’s monetary policy framework under threat – IMF
New interest rate caps are “constraining” the central bank’s ability to conduct monetary policy while negatively affecting banks’ profitability, but action plan could see them eliminated
Central Bank of Kenya halts reference rate calculation
Rate made redundant by interest cap, Njoroge explains, as banks prepare for the new arrangement; central bank maintains interest rates at 10%
RBI paper unpacks India’s non-performing loan troubles
Authors find bank risk-taking is procyclical and the level of non-performing loans responds to the interest rate environment and the overall growth of the economy
Book notes: Shadow banking in China, by Andrew Sheng and Ng Chow Soon
The authors dispel many myths about shadow banking in China – but may underestimate future risks, writes Michael Taylor
IMF paper offers more granular stress testing framework
IMF applies new stress testing framework to Ecuador’s banking sector; framework offers more efficient surveillance, authors argue
BIS paper identifies spillovers from targeted macro-prudential policies
Applying tools narrowly to a sector may nevertheless affect other sections of the financial system, authors find
BoE unveils database of macro-prudential policies
Researchers attempt to classify the myriad forms of macro-prudential policy, compiling panel data on when policies were tightened and loosened in different countries
BIS paper adds evidence on macro-prudential spillovers
Tighter macro-prudential measures in one country tend to increase international lending, authors find
RBI’s Mundra hopes to boost credit to small businesses
Deputy governor outlines “ABCD” of issues affecting small businesses’ ability to access credit, including better access to information and new forms of collateral
Korea needs right kind of banking competition – quarterly bulletin
Competition can harm welfare if it is focused on gaining market share through a price war, authors say; Korean system may benefit from greater diversity
RBA cuts as housing risks posed by lower rates ‘diminish’
Reserve Bank of Australia cuts by a further 25bp to 1.5%, after annual CPI inflation drops to 1% in June; growth in lending for housing has "slowed a little"
Kenyan central bank concerned by proposed interest rate caps
The central bank warns of “adverse consequences” from a proposed cap on bank rates, including problems for monetary policy transmission; the measure is part of a bill awaiting presidential assent
Bank of Israel aims to boost construction credit with new regulation
Banking supervision department proposes reclassifying credit risk in wake of financial institution’s efforts to insure against it; suggests it would free up $2.6bn of finance
Atlanta Fed paper demonstrates signalling mechanism in mortgage market
Lenders in mortgage market able to reveal quality of loans by delaying trade, authors find; loans sold five months after origination less likely to default
Beyond banking: ESRB wants wider macro-prudential toolkit
European Systemic Risk Board argues for providing policy-makers with macro-prudential instruments extending to all forms of credit; lays out specific short- and long-term actions
Tighter mortgage lending rules proposed in New Zealand
Central bank looks to crack down on investor lending with high loan-to-value ratios, while tightening the rules for most loans to owner-occupiers; new tools also on the table
Bangladesh has more FX reserves than it needs, chief economist says
Biru Paksha Paul says Bangladesh only needs enough reserve to cover six months’ worth of imports, and it has now exceeded that; sees benefits from low fuel prices in recent years
NPLs down overall but progress is uneven – Kuwaiti report
Kuwaiti banks’ non-performing loans fell in aggregate in 2015 though they are on the rise in the household sector; banks well capitalised but asset growth slowing, financial stability report finds
EBA survey: Most European banks did not see Brexit as risk
European banks anticipated increasing most kinds of loan activity, results of an EBA questionnaire show; few bankers saw ‘Brexit’ as a major source of risk
Rajan urges completion of bank cleanup
Outgoing governor argues actions taken to address public sector bank balance sheets must be taken to their “logical conclusion”; encourages government to provide capital injection
Colombia to treat new credit line as ‘insurance’ against extreme shocks
IMF expands agreement with Colombia to $11.5 billion; deputy technical governor highlights role it has to play as economy goes through period of adjustment
Philippines creates financial inclusion steering committee
Central bank will chair the committee, which comprises 12 other government agencies; will follow up on their work creating a national strategy for financial inclusion
RBI approves new method for restructuring stressed loans
Indian banks will be able to split some of their largest stressed loans in two; rules introduced as RBI looks to help banks achieve “clean and fully provisioned bank balance sheets” by March 2017