SlideShare a Scribd company logo
1 of 20
Welcome
International Islamic University, Islamabad
Faculty of Management Science
Direct State Intervention
Chapter Four
Ziarmal
Ahmed Bilal
Hameedullah
 Mohammad Yousuf
Farmanullah
Ghowsodin Haidari
 Introduction
 Ownership Structure around the World
 Role of Government Bank Lending in Mitigating Economic
Cycle and Crisis.
 Long Run Impact of Government Bank Ownership.
 Government Intervention in Credit Market beyond Bank
Ownership.
 State own banks were created for two purposes
 Filling the market gaps
 Giving access to finance for SMEs
• Different strategies were followed by different countries
 China , Germany , brazil used their state own banks to
step up financing to private sector
 Korea , Malaysia ,Netherlands ,Canada ,Chile relied
heavily on credit guaranty programs
 UK and USA followed unconventional monitory and
fiscal policy
 Debate was started whether there is a need for
direct government intervention or not
 One group was in the favor of direct government
intervention
 One group was against direct government intervention
• the main summary of this chapter is
• Lending by state owned banks are less procyclical
• Focusing in the governance of these banks may help that what are
inefficiencies with these banks
• The credit guarantee schemes were also a popular intervention tool
 State owned banks have the whole banking asset
before crisis :
 Developed economies 6.7% of GDP
 Developing economies 20.5%
After crisis
 Developed economies 8% (bailouts ,recapitalization ,
nationalization )
 Developing economies 17.3% (massive privatization )
• In Europe and central Asian countries decreased from88% in
1985 to 20% 2009 due to privatization
• African banks have highest share of foreign banks
• Eastern Europe has less than 5%
 To stable aggregate credit.
 According to Bigg , mayor credit recovery may result in economic
recovery 2010.
 In 2008 and 2009 more than 80% of countries felt recessionary
situation in real output in also decrease in credit.
 Credit stabilization by state banks is due to several reasons:
1: maybe part of their mandate to fill market gaps
2: maybe perceive saver during recession and crisis and their
strong base allow them lending during the crisis.
 In Canada, Chile Korea government injected capital in their state
own banks in order to give access to finance to SMEs and
exporting farms.
 In India and Tunisia government established credit facilities for
banks
 The government use its state own banks to play countercyclical
in financial crisis.
 Liquidity assistance line was created to in order to enable state
commercial banks like BB and CEF to take interest ownership of
some public and private institutions.
 BB CEF and state own banks were used to play countercyclical.
 Lending by state own banks increased from 13.4% of GDP to
18.1% of GDP in 2009 and in 2011 it was 20.1% from 49.1% of all
lending.
 BNDES extended special credit facilities like credit was given at
subsidize less than 6% which was 7.5% less than market price
resource were channel from treasury bonds instead of WAT
 BNDS credit distribution
Before Crisis After Crisis
 According to research Lending by BNDS is according
to political view of public lending
 Mexican development banks expanded credit to private
farms and non-bank financial institutions with the
conditions to refinance the debt into declaration in their
lending
 Despite their strong lending expansion their relative share
remand lower than 2006 level of private banks.
 Mexican DBs were credited for restoring operation in key
markets with CGS which was increase by 6.1 billion dollars
 NPLs remand at 1.1% relative to 3% of private banks.
 So overall Mexican DBS played countercyclical role during
financial crisis.
 Poland was the only country in which avoid recession
due to timely safety measures
 NBP and PKOPOLCKY expanded credits during
financial crisis
 PKOBP give credit it faster pace then foreign banks
 PKO lending increase from 15.6% of GDP in 2008 to
17.2% in 2010
 Four reasons of PKO credit expansion compared to
foreign bank
 To create attractive business opportunities .
 PKO lending was supported by government .
 PKOs conservative structure reduced its dependents on
domestic and abroad financing .
 Its adequacy ratio was more than 8% of regulatory ratio.
 PKO played of sitting credit decline by foreign banks.
 Two views about the role of government owned banks
 Franklin Allen professor in university of Pennsylvania who
give the first view about the role state own banks in
promoting financial stability he was in the favor of direct
government intervention which is also know development
view this view is associated with according to him
government banks can play important role in countries
where economic institutions are not very developed where is
capital scares and public distrust
 They think that government is in a better position to control
the aggregate credit and they can provide some special crisis
management tools to overcome financial crisis
 Charles calomiris professor at Colombia university give
the second view about the role of state own banks which is
also called Political view
 argued that government do not have enough incentive to
take socially desirable investment ,provide subsidize and
employment they were thinking that it may create agencies
problems and also the gov banks are not good trained in
credit analysis like private banks they may also create
corruption and misallocation of resources
 Macroeconomic Evidence on the Impact of
Government Bank on Credit and Output Cycle
 Caldern (2012) aggregate credit cycles are deeper in
financial system of countries with high participation of
government state owned banks.
 Credit contraction are twice as deep in country with
GOBs as compare to low GOBs.
 Credit recoveries in countries with high GOBs has faster
and stronger rebound effect as compared low GOBs.
 In countries with high GOBs the credit per capita
fluctuates more in recoveries that follow crisis in
recession.
 Canada, Chile, Malaysia, Netherland, Finland, France,
Germany, Greece, UK, Japan and others introduced
CGS to give access to finance for SMEs.
 They refueled new credit and extended new schemes
to remove the credit crunch on SMEs.
 CGS serves as mechanism of diversification and
transfer of risk.
 Honohan (2010) CGS can emerge due to for three
reason.
 To less asymmetric information
 To diversify and spread risk
 To exploit the regulatory arbitrage
 CGS were used to achieve:
 Economic additionally
 Financial additionally
 CGS is not real countercyclical tool they have unlikely more
macroeconomic effects
 Philippine: credit were given to those who really don’t
needed it.
 Pakistan: subsidize credit were given to exporters who
really don’t needed fund.
 Back: 49% of 70% CGS is funded by government and 20% is
managed by government also 10% of risk assessment and
recovery.
 CGS is used in both developed and developing countries.
Financial Institutions and Market (Direct State Intervention)

More Related Content

What's hot

Universal basis of bank failure – the nigeria case
Universal basis of bank failure – the nigeria caseUniversal basis of bank failure – the nigeria case
Universal basis of bank failure – the nigeria caseAlexander Decker
 
FlexWage White Paper_Barth and Helm_November_28_2016
FlexWage White Paper_Barth and Helm_November_28_2016FlexWage White Paper_Barth and Helm_November_28_2016
FlexWage White Paper_Barth and Helm_November_28_2016Lauren Rich Granger
 
Credit demand and_rationing_in_uganda_okurut
Credit demand and_rationing_in_uganda_okurutCredit demand and_rationing_in_uganda_okurut
Credit demand and_rationing_in_uganda_okurutDr Lendy Spires
 
EFFECTS OF MORTGAGE FINANCING ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK...
EFFECTS OF MORTGAGE FINANCING ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK...EFFECTS OF MORTGAGE FINANCING ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK...
EFFECTS OF MORTGAGE FINANCING ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK...paperpublications3
 
767600 jrn0wbro00box374387b00public0
767600 jrn0wbro00box374387b00public0767600 jrn0wbro00box374387b00public0
767600 jrn0wbro00box374387b00public0Arvind Rathod
 
The Causes of the 2007-08 Financial Crisis: Investigative Study
The Causes of the 2007-08 Financial Crisis: Investigative StudyThe Causes of the 2007-08 Financial Crisis: Investigative Study
The Causes of the 2007-08 Financial Crisis: Investigative StudyPhil Goldney
 
Economic Outlook 2009 R
Economic Outlook 2009 REconomic Outlook 2009 R
Economic Outlook 2009 Rjohncaldwell
 
Research Poster-Shane-Sharath (1) (1) (1)
Research Poster-Shane-Sharath (1) (1) (1)Research Poster-Shane-Sharath (1) (1) (1)
Research Poster-Shane-Sharath (1) (1) (1)Sharath Kumar
 
The Impact of Microcredit on the Micro, Small and Medium Enterprises (MSMEs) ...
The Impact of Microcredit on the Micro, Small and Medium Enterprises (MSMEs) ...The Impact of Microcredit on the Micro, Small and Medium Enterprises (MSMEs) ...
The Impact of Microcredit on the Micro, Small and Medium Enterprises (MSMEs) ...Business, Management and Economics Research
 
Fed's 2020 quantitative easing debunked
Fed's 2020 quantitative easing debunkedFed's 2020 quantitative easing debunked
Fed's 2020 quantitative easing debunkedThe1 Uploader
 
Lat Am Housing Finance Feb 09
Lat Am Housing Finance Feb 09Lat Am Housing Finance Feb 09
Lat Am Housing Finance Feb 09Gwinner
 
MICROFINANCE BANKS’ LENDING RATE AND REPAYMENT CAPABILITY OF BORROWERS IN SOM...
MICROFINANCE BANKS’ LENDING RATE AND REPAYMENT CAPABILITY OF BORROWERS IN SOM...MICROFINANCE BANKS’ LENDING RATE AND REPAYMENT CAPABILITY OF BORROWERS IN SOM...
MICROFINANCE BANKS’ LENDING RATE AND REPAYMENT CAPABILITY OF BORROWERS IN SOM...CharlesUgwuegbu
 
pwc-future-of-student-lending
pwc-future-of-student-lendingpwc-future-of-student-lending
pwc-future-of-student-lendingNick Tilston
 

What's hot (20)

Universal basis of bank failure – the nigeria case
Universal basis of bank failure – the nigeria caseUniversal basis of bank failure – the nigeria case
Universal basis of bank failure – the nigeria case
 
FlexWage White Paper_Barth and Helm_November_28_2016
FlexWage White Paper_Barth and Helm_November_28_2016FlexWage White Paper_Barth and Helm_November_28_2016
FlexWage White Paper_Barth and Helm_November_28_2016
 
Credit demand and_rationing_in_uganda_okurut
Credit demand and_rationing_in_uganda_okurutCredit demand and_rationing_in_uganda_okurut
Credit demand and_rationing_in_uganda_okurut
 
The Effects of Public Debt on Economic Growth in Bangladesh: An Evidence from...
The Effects of Public Debt on Economic Growth in Bangladesh: An Evidence from...The Effects of Public Debt on Economic Growth in Bangladesh: An Evidence from...
The Effects of Public Debt on Economic Growth in Bangladesh: An Evidence from...
 
EFFECTS OF MORTGAGE FINANCING ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK...
EFFECTS OF MORTGAGE FINANCING ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK...EFFECTS OF MORTGAGE FINANCING ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK...
EFFECTS OF MORTGAGE FINANCING ON THE FINANCIAL PERFORMANCE OF COMMERCIAL BANK...
 
767600 jrn0wbro00box374387b00public0
767600 jrn0wbro00box374387b00public0767600 jrn0wbro00box374387b00public0
767600 jrn0wbro00box374387b00public0
 
The Causes of the 2007-08 Financial Crisis: Investigative Study
The Causes of the 2007-08 Financial Crisis: Investigative StudyThe Causes of the 2007-08 Financial Crisis: Investigative Study
The Causes of the 2007-08 Financial Crisis: Investigative Study
 
Economic Outlook 2009 R
Economic Outlook 2009 REconomic Outlook 2009 R
Economic Outlook 2009 R
 
Briefing Note DEBT #2edited
Briefing Note DEBT #2editedBriefing Note DEBT #2edited
Briefing Note DEBT #2edited
 
Research Poster-Shane-Sharath (1) (1) (1)
Research Poster-Shane-Sharath (1) (1) (1)Research Poster-Shane-Sharath (1) (1) (1)
Research Poster-Shane-Sharath (1) (1) (1)
 
The Economic Effects of a Borrower Bailout: Evidence from an Emerging Market
The Economic Effects of a Borrower Bailout: Evidence from an Emerging MarketThe Economic Effects of a Borrower Bailout: Evidence from an Emerging Market
The Economic Effects of a Borrower Bailout: Evidence from an Emerging Market
 
The Impact of Microcredit on the Micro, Small and Medium Enterprises (MSMEs) ...
The Impact of Microcredit on the Micro, Small and Medium Enterprises (MSMEs) ...The Impact of Microcredit on the Micro, Small and Medium Enterprises (MSMEs) ...
The Impact of Microcredit on the Micro, Small and Medium Enterprises (MSMEs) ...
 
JBFE (final)
JBFE (final)JBFE (final)
JBFE (final)
 
The Big Short Part 2
The Big Short Part 2The Big Short Part 2
The Big Short Part 2
 
Fed's 2020 quantitative easing debunked
Fed's 2020 quantitative easing debunkedFed's 2020 quantitative easing debunked
Fed's 2020 quantitative easing debunked
 
Return to prosperity - for Goshen
Return to prosperity  - for GoshenReturn to prosperity  - for Goshen
Return to prosperity - for Goshen
 
Lat Am Housing Finance Feb 09
Lat Am Housing Finance Feb 09Lat Am Housing Finance Feb 09
Lat Am Housing Finance Feb 09
 
MICROFINANCE BANKS’ LENDING RATE AND REPAYMENT CAPABILITY OF BORROWERS IN SOM...
MICROFINANCE BANKS’ LENDING RATE AND REPAYMENT CAPABILITY OF BORROWERS IN SOM...MICROFINANCE BANKS’ LENDING RATE AND REPAYMENT CAPABILITY OF BORROWERS IN SOM...
MICROFINANCE BANKS’ LENDING RATE AND REPAYMENT CAPABILITY OF BORROWERS IN SOM...
 
Oklahoma Economic Outlook
Oklahoma Economic OutlookOklahoma Economic Outlook
Oklahoma Economic Outlook
 
pwc-future-of-student-lending
pwc-future-of-student-lendingpwc-future-of-student-lending
pwc-future-of-student-lending
 

Viewers also liked

Financial statements and cash flow
Financial statements and cash flowFinancial statements and cash flow
Financial statements and cash flowOnline
 
Financial markets
Financial marketsFinancial markets
Financial marketsHj Habib
 
Business finance Chapter1 - Finance management
Business finance Chapter1 - Finance managementBusiness finance Chapter1 - Finance management
Business finance Chapter1 - Finance managementNur Dalila Zamri
 
Introdution To Finance
Introdution To FinanceIntrodution To Finance
Introdution To FinanceYousef Hani
 
1. chapter 1 introduction of Finance
1. chapter 1 introduction of Finance1. chapter 1 introduction of Finance
1. chapter 1 introduction of FinanceAfiqEfendy Zaen
 

Viewers also liked (7)

Financial statements and cash flow
Financial statements and cash flowFinancial statements and cash flow
Financial statements and cash flow
 
Financial markets
Financial marketsFinancial markets
Financial markets
 
Business finance Chapter1 - Finance management
Business finance Chapter1 - Finance managementBusiness finance Chapter1 - Finance management
Business finance Chapter1 - Finance management
 
Introdution To Finance
Introdution To FinanceIntrodution To Finance
Introdution To Finance
 
Financial market
Financial marketFinancial market
Financial market
 
Finance, meaning, concept and types
Finance, meaning, concept and typesFinance, meaning, concept and types
Finance, meaning, concept and types
 
1. chapter 1 introduction of Finance
1. chapter 1 introduction of Finance1. chapter 1 introduction of Finance
1. chapter 1 introduction of Finance
 

Similar to Financial Institutions and Market (Direct State Intervention)

Access to China's Consumer Markets for Financial Services
Access to China's Consumer Markets for Financial ServicesAccess to China's Consumer Markets for Financial Services
Access to China's Consumer Markets for Financial ServicesDr Dev Kambhampati
 
The real effects of debt bis
The real effects of debt bisThe real effects of debt bis
The real effects of debt bisneiracar
 
Non-performing Loans in China
Non-performing Loans in ChinaNon-performing Loans in China
Non-performing Loans in ChinaKarl Kerksiek
 
Is the System of Shadow Banking in China a risk for the Chinese Financial Sys...
Is the System of Shadow Banking in China a risk for the Chinese Financial Sys...Is the System of Shadow Banking in China a risk for the Chinese Financial Sys...
Is the System of Shadow Banking in China a risk for the Chinese Financial Sys...Oriol Caudevilla
 
Shadow Banking: Implications for Financial Stability and Economic Rebalancing...
Shadow Banking: Implications for Financial Stability and Economic Rebalancing...Shadow Banking: Implications for Financial Stability and Economic Rebalancing...
Shadow Banking: Implications for Financial Stability and Economic Rebalancing...pkconference
 
2008 Global CrisisStarting in 2005, the Federal Reserve perc.docx
2008 Global CrisisStarting in 2005, the Federal Reserve perc.docx2008 Global CrisisStarting in 2005, the Federal Reserve perc.docx
2008 Global CrisisStarting in 2005, the Federal Reserve perc.docxdomenicacullison
 
Reforming China’s Financial System
Reforming China’s Financial SystemReforming China’s Financial System
Reforming China’s Financial Systemwimalasr
 
An Analytical Study:Relevance of Financial Inclusion For Developing Nations
An Analytical Study:Relevance of Financial Inclusion For Developing NationsAn Analytical Study:Relevance of Financial Inclusion For Developing Nations
An Analytical Study:Relevance of Financial Inclusion For Developing NationsDr Lendy Spires
 
Small and Medium Enterprises
Small and Medium EnterprisesSmall and Medium Enterprises
Small and Medium EnterprisesDr Lendy Spires
 
Cgap small-and-medium-enterprises-jan-2011
Cgap small-and-medium-enterprises-jan-2011Cgap small-and-medium-enterprises-jan-2011
Cgap small-and-medium-enterprises-jan-2011Dr Lendy Spires
 
Financial Sector Performance and Conceptual Framework
Financial Sector Performance and Conceptual FrameworkFinancial Sector Performance and Conceptual Framework
Financial Sector Performance and Conceptual FrameworkAtif Ahmed
 
An analysis of the challenges faced by banks in managing credit in zimbabwe
An analysis of the challenges faced by banks in managing credit in zimbabweAn analysis of the challenges faced by banks in managing credit in zimbabwe
An analysis of the challenges faced by banks in managing credit in zimbabweAlexander Decker
 
2016/17 China Macroeconomic Outlook & Market Opportunities
2016/17 China Macroeconomic Outlook & Market Opportunities2016/17 China Macroeconomic Outlook & Market Opportunities
2016/17 China Macroeconomic Outlook & Market OpportunitiesNan BAI,CFA
 
How to pull Pakistan out of heavy debt?
How to pull Pakistan out of heavy debt?How to pull Pakistan out of heavy debt?
How to pull Pakistan out of heavy debt?Zulqarnayn Awan
 

Similar to Financial Institutions and Market (Direct State Intervention) (20)

Access to China's Consumer Markets for Financial Services
Access to China's Consumer Markets for Financial ServicesAccess to China's Consumer Markets for Financial Services
Access to China's Consumer Markets for Financial Services
 
The real effects of debt bis
The real effects of debt bisThe real effects of debt bis
The real effects of debt bis
 
Non-performing Loans in China
Non-performing Loans in ChinaNon-performing Loans in China
Non-performing Loans in China
 
Is the System of Shadow Banking in China a risk for the Chinese Financial Sys...
Is the System of Shadow Banking in China a risk for the Chinese Financial Sys...Is the System of Shadow Banking in China a risk for the Chinese Financial Sys...
Is the System of Shadow Banking in China a risk for the Chinese Financial Sys...
 
Shadow Banking: Implications for Financial Stability and Economic Rebalancing...
Shadow Banking: Implications for Financial Stability and Economic Rebalancing...Shadow Banking: Implications for Financial Stability and Economic Rebalancing...
Shadow Banking: Implications for Financial Stability and Economic Rebalancing...
 
2008 Global CrisisStarting in 2005, the Federal Reserve perc.docx
2008 Global CrisisStarting in 2005, the Federal Reserve perc.docx2008 Global CrisisStarting in 2005, the Federal Reserve perc.docx
2008 Global CrisisStarting in 2005, the Federal Reserve perc.docx
 
Challenges for rbi
Challenges for  rbiChallenges for  rbi
Challenges for rbi
 
Reforming China’s Financial System
Reforming China’s Financial SystemReforming China’s Financial System
Reforming China’s Financial System
 
Feeding the Dragon - GMO
Feeding the Dragon - GMO Feeding the Dragon - GMO
Feeding the Dragon - GMO
 
D033015020
D033015020D033015020
D033015020
 
An Analytical Study:Relevance of Financial Inclusion For Developing Nations
An Analytical Study:Relevance of Financial Inclusion For Developing NationsAn Analytical Study:Relevance of Financial Inclusion For Developing Nations
An Analytical Study:Relevance of Financial Inclusion For Developing Nations
 
Johannes linn mic
Johannes linn micJohannes linn mic
Johannes linn mic
 
Pep final ppt
Pep final pptPep final ppt
Pep final ppt
 
Small and Medium Enterprises
Small and Medium EnterprisesSmall and Medium Enterprises
Small and Medium Enterprises
 
Cgap small-and-medium-enterprises-jan-2011
Cgap small-and-medium-enterprises-jan-2011Cgap small-and-medium-enterprises-jan-2011
Cgap small-and-medium-enterprises-jan-2011
 
Financial Sector Performance and Conceptual Framework
Financial Sector Performance and Conceptual FrameworkFinancial Sector Performance and Conceptual Framework
Financial Sector Performance and Conceptual Framework
 
An analysis of the challenges faced by banks in managing credit in zimbabwe
An analysis of the challenges faced by banks in managing credit in zimbabweAn analysis of the challenges faced by banks in managing credit in zimbabwe
An analysis of the challenges faced by banks in managing credit in zimbabwe
 
2016/17 China Macroeconomic Outlook & Market Opportunities
2016/17 China Macroeconomic Outlook & Market Opportunities2016/17 China Macroeconomic Outlook & Market Opportunities
2016/17 China Macroeconomic Outlook & Market Opportunities
 
How to pull Pakistan out of heavy debt?
How to pull Pakistan out of heavy debt?How to pull Pakistan out of heavy debt?
How to pull Pakistan out of heavy debt?
 
Et in classroom
Et in classroomEt in classroom
Et in classroom
 

Recently uploaded

Memorándum de Entendimiento (MoU) entre Codelco y SQM
Memorándum de Entendimiento (MoU) entre Codelco y SQMMemorándum de Entendimiento (MoU) entre Codelco y SQM
Memorándum de Entendimiento (MoU) entre Codelco y SQMVoces Mineras
 
NewBase 19 April 2024 Energy News issue - 1717 by Khaled Al Awadi.pdf
NewBase  19 April  2024  Energy News issue - 1717 by Khaled Al Awadi.pdfNewBase  19 April  2024  Energy News issue - 1717 by Khaled Al Awadi.pdf
NewBase 19 April 2024 Energy News issue - 1717 by Khaled Al Awadi.pdfKhaled Al Awadi
 
Organizational Structure Running A Successful Business
Organizational Structure Running A Successful BusinessOrganizational Structure Running A Successful Business
Organizational Structure Running A Successful BusinessSeta Wicaksana
 
Financial-Statement-Analysis-of-Coca-cola-Company.pptx
Financial-Statement-Analysis-of-Coca-cola-Company.pptxFinancial-Statement-Analysis-of-Coca-cola-Company.pptx
Financial-Statement-Analysis-of-Coca-cola-Company.pptxsaniyaimamuddin
 
APRIL2024_UKRAINE_xml_0000000000000 .pdf
APRIL2024_UKRAINE_xml_0000000000000 .pdfAPRIL2024_UKRAINE_xml_0000000000000 .pdf
APRIL2024_UKRAINE_xml_0000000000000 .pdfRbc Rbcua
 
International Business Environments and Operations 16th Global Edition test b...
International Business Environments and Operations 16th Global Edition test b...International Business Environments and Operations 16th Global Edition test b...
International Business Environments and Operations 16th Global Edition test b...ssuserf63bd7
 
Call Us 📲8800102216📞 Call Girls In DLF City Gurgaon
Call Us 📲8800102216📞 Call Girls In DLF City GurgaonCall Us 📲8800102216📞 Call Girls In DLF City Gurgaon
Call Us 📲8800102216📞 Call Girls In DLF City Gurgaoncallgirls2057
 
Cyber Security Training in Office Environment
Cyber Security Training in Office EnvironmentCyber Security Training in Office Environment
Cyber Security Training in Office Environmentelijahj01012
 
Youth Involvement in an Innovative Coconut Value Chain by Mwalimu Menza
Youth Involvement in an Innovative Coconut Value Chain by Mwalimu MenzaYouth Involvement in an Innovative Coconut Value Chain by Mwalimu Menza
Youth Involvement in an Innovative Coconut Value Chain by Mwalimu Menzaictsugar
 
8447779800, Low rate Call girls in Kotla Mubarakpur Delhi NCR
8447779800, Low rate Call girls in Kotla Mubarakpur Delhi NCR8447779800, Low rate Call girls in Kotla Mubarakpur Delhi NCR
8447779800, Low rate Call girls in Kotla Mubarakpur Delhi NCRashishs7044
 
Cybersecurity Awareness Training Presentation v2024.03
Cybersecurity Awareness Training Presentation v2024.03Cybersecurity Awareness Training Presentation v2024.03
Cybersecurity Awareness Training Presentation v2024.03DallasHaselhorst
 
Digital Transformation in the PLM domain - distrib.pdf
Digital Transformation in the PLM domain - distrib.pdfDigital Transformation in the PLM domain - distrib.pdf
Digital Transformation in the PLM domain - distrib.pdfJos Voskuil
 
Kenya’s Coconut Value Chain by Gatsby Africa
Kenya’s Coconut Value Chain by Gatsby AfricaKenya’s Coconut Value Chain by Gatsby Africa
Kenya’s Coconut Value Chain by Gatsby Africaictsugar
 
Buy gmail accounts.pdf Buy Old Gmail Accounts
Buy gmail accounts.pdf Buy Old Gmail AccountsBuy gmail accounts.pdf Buy Old Gmail Accounts
Buy gmail accounts.pdf Buy Old Gmail AccountsBuy Verified Accounts
 
Traction part 2 - EOS Model JAX Bridges.
Traction part 2 - EOS Model JAX Bridges.Traction part 2 - EOS Model JAX Bridges.
Traction part 2 - EOS Model JAX Bridges.Anamaria Contreras
 
Investment in The Coconut Industry by Nancy Cheruiyot
Investment in The Coconut Industry by Nancy CheruiyotInvestment in The Coconut Industry by Nancy Cheruiyot
Investment in The Coconut Industry by Nancy Cheruiyotictsugar
 
8447779800, Low rate Call girls in Tughlakabad Delhi NCR
8447779800, Low rate Call girls in Tughlakabad Delhi NCR8447779800, Low rate Call girls in Tughlakabad Delhi NCR
8447779800, Low rate Call girls in Tughlakabad Delhi NCRashishs7044
 
8447779800, Low rate Call girls in New Ashok Nagar Delhi NCR
8447779800, Low rate Call girls in New Ashok Nagar Delhi NCR8447779800, Low rate Call girls in New Ashok Nagar Delhi NCR
8447779800, Low rate Call girls in New Ashok Nagar Delhi NCRashishs7044
 
FULL ENJOY Call girls in Paharganj Delhi | 8377087607
FULL ENJOY Call girls in Paharganj Delhi | 8377087607FULL ENJOY Call girls in Paharganj Delhi | 8377087607
FULL ENJOY Call girls in Paharganj Delhi | 8377087607dollysharma2066
 

Recently uploaded (20)

Memorándum de Entendimiento (MoU) entre Codelco y SQM
Memorándum de Entendimiento (MoU) entre Codelco y SQMMemorándum de Entendimiento (MoU) entre Codelco y SQM
Memorándum de Entendimiento (MoU) entre Codelco y SQM
 
NewBase 19 April 2024 Energy News issue - 1717 by Khaled Al Awadi.pdf
NewBase  19 April  2024  Energy News issue - 1717 by Khaled Al Awadi.pdfNewBase  19 April  2024  Energy News issue - 1717 by Khaled Al Awadi.pdf
NewBase 19 April 2024 Energy News issue - 1717 by Khaled Al Awadi.pdf
 
Organizational Structure Running A Successful Business
Organizational Structure Running A Successful BusinessOrganizational Structure Running A Successful Business
Organizational Structure Running A Successful Business
 
Financial-Statement-Analysis-of-Coca-cola-Company.pptx
Financial-Statement-Analysis-of-Coca-cola-Company.pptxFinancial-Statement-Analysis-of-Coca-cola-Company.pptx
Financial-Statement-Analysis-of-Coca-cola-Company.pptx
 
APRIL2024_UKRAINE_xml_0000000000000 .pdf
APRIL2024_UKRAINE_xml_0000000000000 .pdfAPRIL2024_UKRAINE_xml_0000000000000 .pdf
APRIL2024_UKRAINE_xml_0000000000000 .pdf
 
International Business Environments and Operations 16th Global Edition test b...
International Business Environments and Operations 16th Global Edition test b...International Business Environments and Operations 16th Global Edition test b...
International Business Environments and Operations 16th Global Edition test b...
 
Call Us 📲8800102216📞 Call Girls In DLF City Gurgaon
Call Us 📲8800102216📞 Call Girls In DLF City GurgaonCall Us 📲8800102216📞 Call Girls In DLF City Gurgaon
Call Us 📲8800102216📞 Call Girls In DLF City Gurgaon
 
Cyber Security Training in Office Environment
Cyber Security Training in Office EnvironmentCyber Security Training in Office Environment
Cyber Security Training in Office Environment
 
Youth Involvement in an Innovative Coconut Value Chain by Mwalimu Menza
Youth Involvement in an Innovative Coconut Value Chain by Mwalimu MenzaYouth Involvement in an Innovative Coconut Value Chain by Mwalimu Menza
Youth Involvement in an Innovative Coconut Value Chain by Mwalimu Menza
 
Japan IT Week 2024 Brochure by 47Billion (English)
Japan IT Week 2024 Brochure by 47Billion (English)Japan IT Week 2024 Brochure by 47Billion (English)
Japan IT Week 2024 Brochure by 47Billion (English)
 
8447779800, Low rate Call girls in Kotla Mubarakpur Delhi NCR
8447779800, Low rate Call girls in Kotla Mubarakpur Delhi NCR8447779800, Low rate Call girls in Kotla Mubarakpur Delhi NCR
8447779800, Low rate Call girls in Kotla Mubarakpur Delhi NCR
 
Cybersecurity Awareness Training Presentation v2024.03
Cybersecurity Awareness Training Presentation v2024.03Cybersecurity Awareness Training Presentation v2024.03
Cybersecurity Awareness Training Presentation v2024.03
 
Digital Transformation in the PLM domain - distrib.pdf
Digital Transformation in the PLM domain - distrib.pdfDigital Transformation in the PLM domain - distrib.pdf
Digital Transformation in the PLM domain - distrib.pdf
 
Kenya’s Coconut Value Chain by Gatsby Africa
Kenya’s Coconut Value Chain by Gatsby AfricaKenya’s Coconut Value Chain by Gatsby Africa
Kenya’s Coconut Value Chain by Gatsby Africa
 
Buy gmail accounts.pdf Buy Old Gmail Accounts
Buy gmail accounts.pdf Buy Old Gmail AccountsBuy gmail accounts.pdf Buy Old Gmail Accounts
Buy gmail accounts.pdf Buy Old Gmail Accounts
 
Traction part 2 - EOS Model JAX Bridges.
Traction part 2 - EOS Model JAX Bridges.Traction part 2 - EOS Model JAX Bridges.
Traction part 2 - EOS Model JAX Bridges.
 
Investment in The Coconut Industry by Nancy Cheruiyot
Investment in The Coconut Industry by Nancy CheruiyotInvestment in The Coconut Industry by Nancy Cheruiyot
Investment in The Coconut Industry by Nancy Cheruiyot
 
8447779800, Low rate Call girls in Tughlakabad Delhi NCR
8447779800, Low rate Call girls in Tughlakabad Delhi NCR8447779800, Low rate Call girls in Tughlakabad Delhi NCR
8447779800, Low rate Call girls in Tughlakabad Delhi NCR
 
8447779800, Low rate Call girls in New Ashok Nagar Delhi NCR
8447779800, Low rate Call girls in New Ashok Nagar Delhi NCR8447779800, Low rate Call girls in New Ashok Nagar Delhi NCR
8447779800, Low rate Call girls in New Ashok Nagar Delhi NCR
 
FULL ENJOY Call girls in Paharganj Delhi | 8377087607
FULL ENJOY Call girls in Paharganj Delhi | 8377087607FULL ENJOY Call girls in Paharganj Delhi | 8377087607
FULL ENJOY Call girls in Paharganj Delhi | 8377087607
 

Financial Institutions and Market (Direct State Intervention)

  • 1.
  • 3. International Islamic University, Islamabad Faculty of Management Science Direct State Intervention Chapter Four
  • 4. Ziarmal Ahmed Bilal Hameedullah  Mohammad Yousuf Farmanullah Ghowsodin Haidari
  • 5.  Introduction  Ownership Structure around the World  Role of Government Bank Lending in Mitigating Economic Cycle and Crisis.  Long Run Impact of Government Bank Ownership.  Government Intervention in Credit Market beyond Bank Ownership.
  • 6.  State own banks were created for two purposes  Filling the market gaps  Giving access to finance for SMEs • Different strategies were followed by different countries  China , Germany , brazil used their state own banks to step up financing to private sector  Korea , Malaysia ,Netherlands ,Canada ,Chile relied heavily on credit guaranty programs  UK and USA followed unconventional monitory and fiscal policy
  • 7.  Debate was started whether there is a need for direct government intervention or not  One group was in the favor of direct government intervention  One group was against direct government intervention • the main summary of this chapter is • Lending by state owned banks are less procyclical • Focusing in the governance of these banks may help that what are inefficiencies with these banks • The credit guarantee schemes were also a popular intervention tool
  • 8.  State owned banks have the whole banking asset before crisis :  Developed economies 6.7% of GDP  Developing economies 20.5% After crisis  Developed economies 8% (bailouts ,recapitalization , nationalization )  Developing economies 17.3% (massive privatization ) • In Europe and central Asian countries decreased from88% in 1985 to 20% 2009 due to privatization • African banks have highest share of foreign banks • Eastern Europe has less than 5%
  • 9.  To stable aggregate credit.  According to Bigg , mayor credit recovery may result in economic recovery 2010.  In 2008 and 2009 more than 80% of countries felt recessionary situation in real output in also decrease in credit.  Credit stabilization by state banks is due to several reasons: 1: maybe part of their mandate to fill market gaps 2: maybe perceive saver during recession and crisis and their strong base allow them lending during the crisis.  In Canada, Chile Korea government injected capital in their state own banks in order to give access to finance to SMEs and exporting farms.  In India and Tunisia government established credit facilities for banks
  • 10.  The government use its state own banks to play countercyclical in financial crisis.  Liquidity assistance line was created to in order to enable state commercial banks like BB and CEF to take interest ownership of some public and private institutions.  BB CEF and state own banks were used to play countercyclical.  Lending by state own banks increased from 13.4% of GDP to 18.1% of GDP in 2009 and in 2011 it was 20.1% from 49.1% of all lending.  BNDES extended special credit facilities like credit was given at subsidize less than 6% which was 7.5% less than market price resource were channel from treasury bonds instead of WAT  BNDS credit distribution
  • 11. Before Crisis After Crisis  According to research Lending by BNDS is according to political view of public lending
  • 12.  Mexican development banks expanded credit to private farms and non-bank financial institutions with the conditions to refinance the debt into declaration in their lending  Despite their strong lending expansion their relative share remand lower than 2006 level of private banks.  Mexican DBs were credited for restoring operation in key markets with CGS which was increase by 6.1 billion dollars  NPLs remand at 1.1% relative to 3% of private banks.  So overall Mexican DBS played countercyclical role during financial crisis.
  • 13.  Poland was the only country in which avoid recession due to timely safety measures  NBP and PKOPOLCKY expanded credits during financial crisis  PKOBP give credit it faster pace then foreign banks  PKO lending increase from 15.6% of GDP in 2008 to 17.2% in 2010  Four reasons of PKO credit expansion compared to foreign bank
  • 14.  To create attractive business opportunities .  PKO lending was supported by government .  PKOs conservative structure reduced its dependents on domestic and abroad financing .  Its adequacy ratio was more than 8% of regulatory ratio.  PKO played of sitting credit decline by foreign banks.
  • 15.  Two views about the role of government owned banks  Franklin Allen professor in university of Pennsylvania who give the first view about the role state own banks in promoting financial stability he was in the favor of direct government intervention which is also know development view this view is associated with according to him government banks can play important role in countries where economic institutions are not very developed where is capital scares and public distrust  They think that government is in a better position to control the aggregate credit and they can provide some special crisis management tools to overcome financial crisis
  • 16.  Charles calomiris professor at Colombia university give the second view about the role of state own banks which is also called Political view  argued that government do not have enough incentive to take socially desirable investment ,provide subsidize and employment they were thinking that it may create agencies problems and also the gov banks are not good trained in credit analysis like private banks they may also create corruption and misallocation of resources
  • 17.  Macroeconomic Evidence on the Impact of Government Bank on Credit and Output Cycle  Caldern (2012) aggregate credit cycles are deeper in financial system of countries with high participation of government state owned banks.  Credit contraction are twice as deep in country with GOBs as compare to low GOBs.  Credit recoveries in countries with high GOBs has faster and stronger rebound effect as compared low GOBs.  In countries with high GOBs the credit per capita fluctuates more in recoveries that follow crisis in recession.
  • 18.  Canada, Chile, Malaysia, Netherland, Finland, France, Germany, Greece, UK, Japan and others introduced CGS to give access to finance for SMEs.  They refueled new credit and extended new schemes to remove the credit crunch on SMEs.  CGS serves as mechanism of diversification and transfer of risk.  Honohan (2010) CGS can emerge due to for three reason.  To less asymmetric information  To diversify and spread risk  To exploit the regulatory arbitrage
  • 19.  CGS were used to achieve:  Economic additionally  Financial additionally  CGS is not real countercyclical tool they have unlikely more macroeconomic effects  Philippine: credit were given to those who really don’t needed it.  Pakistan: subsidize credit were given to exporters who really don’t needed fund.  Back: 49% of 70% CGS is funded by government and 20% is managed by government also 10% of risk assessment and recovery.  CGS is used in both developed and developing countries.