Cross-border lending, government capital injection, and bank performance

Artikel

In this paper, we develop a contingent claim model to examine the optimal bank interest margin, i.e., the spread between the domestic loan rate and the deposit market rate of an international bank in distress. The framework is used to evaluate the cross-border lending efficiency for a bank that participates in a government capital injection program, a government intervention used in response to the 2008 financial crisis. This paper suggests that government capital injection is an appropriate way to recapitalize the distressed bank, enhancing the bank interest margin and survival probability. Nevertheless, the government capital injection lacks efficiency when the bank's cross-border lending is high. Stringent capital regulation, suggested to prevent future crises by literature, leads to superior lending efficiency when the government capital injection is low.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: International Journal of Financial Studies ; ISSN: 2227-7072 ; Volume: 7 ; Year: 2019 ; Issue: 2 ; Pages: 1-20 ; Basel: MDPI

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: cross-border lending ; bank interest margin ; government capital injection ; barrier option

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Lin, Jyh-horng ; Lii, Pei-Chi ; Huang, Fu-Wei ; Chen, Shi
• Event: Veröffentlichung
• (who): MDPI
• (where): Basel
• (when): 2019

Further information

• DOI: doi:10.3390/ijfs7020021
• Handle: http://hdl.handle.net/10419/257619
• Last update: 10.03.2025, 11:43 AM CET