State presence in the credit market: state-owned banks and earmarked credit in the 2008 crisis
DOI:
https://doi.org/10.1590/1808-057x202108930Keywords:
earmarked credit, bank credit, state-owned banks, financial crisisAbstract
The objective of this study was to document the relationship between the two mechanisms of state action (credit earmarking and corporate control of banks) and the granting of bank credit in Brazil during the 2008 global financial crisis. There is an intense debate in the literature about the effectiveness of the State’s role in the financial system and its effects on the economy. One aspect of this issue is identifying whether the state presence contributes to stabilizing the granting of credit and softening financial crises’ economic impact. The studies carried out to date have not considered the differences between free and earmarked credits at the bank level, nor their possible interaction with the type of bank property. The study’s subject is relevant because it can help guide counter-cyclical public policies to face crises, including the use of changes in credit earmarking or state-owned banks’ performance. The analyses carried out can inform the debate about the pros and cons of the state’s presence in the credit market. The study analyses data from 2005 to 2012 from financial institutions that capture deposits from the public. Inferences are based on linear regression models, including a wide range of control variables. This study documents a significant reduction in credit granted by private banks in Brazil and state-owned banks’ expansion during the 2008 crisis. This evidence is not only due to differences in the funding rate during the period or to economic fundamentals, suggesting that the effect of corporate control is possibly related to the counter-cyclical performance of state-owned banks. The results show that the credit earmarking mechanisms were not particularly relevant in smoothing the contraction resulting from the financial crisis.
Downloads
References
Allen, F., Jackowicz, K., Kowalewski, O., & Kozłowski, Ł. (2017). Bank lending, crises, and changing ownership structure in Central and Eastern European countries. Journal of Corporate
Finance, 42, 494-515.
Annibal, C., Lundberg, E., & Koyama, S. M. (2009). Crise de 2008 e as mudanças no mercado de crédito. Relatório de Economia Bancária e Crédito, 37-52. Banco Central do Brasil (BCB) (2014).
Recolhimentos compulsórios, encaixe e direcionamentos obrigatórios. Recuperado de
http://www.bcb.gov.br/?COMPULSORIOS Banco Nacional de Desenvolvimento Econômico e Social (BNDES) (2014).
Instituições Financeiras Credenciadas. Recuperado de https://www.bndes.gov.br/wps/portal/site/home/instituicoes-financeiras-credenciadas/
Behr, P., Foos, D., & Norden, L. (2017). Cyclicality of SME lending and government involvement in banks. Journal of Banking & Finance, 77, 64-77.
Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115-143.
Bonomo, M., Brito, R., & Martins, B. (2014). Macroeconomic and financial consequences of the after crisis government-driven credit expansion in Brazil. Banco Central do Brasil Working
Paper Series, (378).
Brei, M., & Schclarek, A. (2015). A theoretical model of bank lending: Does ownership matter in times of crisis? Journal of Banking & Finance, 50, 298-307.
Brei, M., & Schclarek, A. (2013). Public bank lending in times of crisis. Journal of Financial Stability, 9(4), 820-830.
Carvalho, D. (2014). The real effects of government‐owned banks: Evidence from an emerging market. Journal of Finance, 69(2), 577-609.
Chen, Y. S., Chen, Y., Lin, C. Y., & Sharma, Z. (2016). Is there a bright side to government banks? Evidence from the global financial crisis. Journal of Financial Stability, 26, 128-143.
Coleman, N., & Feler, L. (2015). Bank ownership, lending, and local economic performance during the 2008-2009 financial crisis. Journal of Monetary Economics, 71, 50-66.
Cull, R., & Martinez Pería, M. S. (2013). Bank ownership and lending patterns during the 2008-2009 financial crisis: evidence from Latin America and Eastern Europe. Journal of
Banking & Finance, 37(12), 4861-4878.
De Paula, L. F., & Lima, G. T. (1999). Teoria da firma bancária. In G. T. Lima et al. Macroeconomia moderna: Keynes e a economia contemporânea. Rio de Janeiro: Campus.
Dinç, I. S. (2005). Politicians and banks: Political influences on government-owned banks in emerging markets. Journal of Financial Economics, 77(2), 453-479.
Fucidji, J. R., & Prince, D. D. (2009). Determinantes do crédito bancário: uma análise com dados em painel para as maiores instituições. Análise Econômica, 27(52), 233-251.
Fungáčová, Z., Herrala, R., & Weill, L. (2013). The influence of bank ownership on credit supply: evidence from the recent financial crisis. Emerging Markets Review, 15, 136-147.
Gatev, E., & Strahan, P. E. (2006). Banks’ advantage in hedging liquidity risk: Theory and evidence from the commercial paper market. Journal of Finance, 61(2), 867-892.
Kashyap, A. K., Rajan, R., & Stein, J. C. (2002). Banks as liquidity providers: An explanation for the coexistence of lending and deposit‐taking. Journal of Finance, 57(1), 33-73.
Kishan, R. P., & Opiela, T. P. (2000). Bank size, bank capital, and the bank lending channel.
Journal of Money, Credit and Banking, 32(1), 121-141.
La Porta, R., Lopez‐de‐Silanes, F., & Shleifer, A. (2002). Government ownership of banks.
The Journal of Finance, 57(1), 265-301.
Llanto, G. M., Geron, P., & Tang, C. (1999). Directed credit programs: issues and framework for reform. Manila: Credit Policy Improvement Program.
Lundberg, E. L. (2011). Bancos oficiais e crédito direcionado – o que diferencia o mercado de crédito brasileiro? Banco Central do Brasil Working Paper Series, (258).
Megginson, W. L. (2005). The economics of bank privatization. Journal of Banking & Finance,
(8-9), 1931-1980.
Micco, A., & Panizza, U. (2006). Bank ownership and lending behavior. Economics Letters,
(2), 248-254.
Oliveira, R. F., Schiozer, R., & Barros, L. A. B. C. (2015). Depositors’ perception of “too-big-to-fail”. Review of Finance, 19(1), 191-227.
Pissetti, J. A. W. (2012). The 2008 financial crisis and its effects on credit supply in the Brazilian banking system: The stabilizing role of public banks. Competence Centre on Money, Trade,
Finance and Development Working Papers, (1209).
Sapienza, P. (2004). The effects of government ownership on bank lending. Journal of Financial Economics, 72(2), 357-384.
Schiozer, R., & Oliveira, R. F. (2016). Asymmetric transmission of a bank liquidity shock.
Journal of Financial Stability, 25, 234-246.
Stiglitz, J. E. (1993). The role of the state in financial markets. The World Bank Economic Review,
(1), 19-52.
Torres Filho, E. T. (2009). Mecanismos de direcionamento do crédito, bancos de desenvolvimento e a experiência recente do BNDES. In F. M. R. Ferreira e B. B. Meirelles (Orgs.), Ensaios sobre economia financeira (pp. 11-56). Rio de Janeiro, RJ: BNDES.
Downloads
Published
Issue
Section
License
Copyright (c) 2021 Revista Contabilidade & Finanças
This work is licensed under a Creative Commons Attribution 4.0 International License.
The content of the article(s) published in the RC&F are of the entire liability of the authors, including with regard to the truth, updating and accuracy of data and information. The authors shall assign the rights in advance to the Department of Accounts and Actuarial Sciences of the FEA/USP, which shall permit the publication of extracts or of the whole, with prior permission, provided that the source is cited (Creative Commons – CCBY).
RC&F shall not charge a fee for the submission of articles. The submission of articles to RC&F shall imply that the author(s) authorizes/authorize its publication without the payment of author’s rights.
The submission of articles shall authorize the RC&F to adjust the text of the article(s) to their publication formats and if necessary, to make spelling, grammar and regulatory changes.
