credit Cap effects

1. Lending Activity
This could lead to a reduction in the availability of
loans to businesses and individuals, potentially
affecting economic activity and growth.
1.
Profitability
4.
Limitation to generate interest income from loans

2. Competitiveness
Banks with high loan growth in previous years might find it challenging to maintain their
momentum.
This could lead to a more level playing field among banks, while maintaining gap
between small and big banks.
3.
Risk Management
4.
• Can serve as a risk management tool, preventing banks from engaging in overly aggressive
lending practices that might lead to excessive risk-taking.
• Enhance the stability of the banking sector and reduce the likelihood of financial crises.

3. 5. Impact on the financial and banking industry
Risk Management
4.
Innovation & Financial Products
• To cope with the credit ceiling, commercial banks might innovate.
• This can boost their long term competitive edge and creates good innovation culture.
5.
• Can serve as a risk management tool, preventing banks from engaging in overly aggressive lending
practices that might lead to excessive risk-taking.
• Enhance the stability of the banking sector and reduce the likelihood of financial crises.

4. 5.1. Possible impacts on Bigger Banks
• Can provide them more flexibility to adapt to regulatory changes.
• They may, previously, have established relationships with larger businesses and
access to international banking trade sources.
• Smaller and new entrant banks might face a more significant impact from the credit ceiling.
• These banks often rely heavily on lending activities as their primary source of income.
• .
5.2.Possible impacts on Smaller and New Banks