A reappraisal of State-Owned Banks

Economia 01/2007; DOI: 10.1353/eco.2007.0015
Source: RePEc

ABSTRACT We revisit the public banks debate, survey the theoretical arguments and test the robustness (and expand) the existing empirical evidence. While we find some support for the view that public banks do not allocate credit optimally, we also report indicative evidence that they exert a positive influence on private bank efficiency, and may contribute to reduce credit procyclicality. Ultimately, we find that the recent criticism to public banks has generally been based on inconclusive cross-country evidence. More specific bank-level research is still needed to substantiate a case for or against public banks in developing economies.

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    ABSTRACT: After the crisis and recent State interventions, the private nature of banks and their role in terms of public interest has been strongly questioned. In the new scenario, is there a scope for public banks? And what should be the regulatory framework to ensure that their strategy and management is in line with their mission?
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    ABSTRACT: Although state-owned banks are expected to promote the growth of less-developed regions, especially in developing economies, several cross-country studies report that lending by state banks is associated with the inefficient allocation of credit and low levels of development. Further, state banks have been found to lend to their cronies, especially around elections. In this paper, we study the lending activities of state-owned and private banks during the period 1992–2010 and analyze the relationship between the credit these banks provide and local economic growth in Turkey during crisis periods and in election years. We find that the share of state-owned banks in the credit market in crisis periods and local election years is significantly higher than their share in non-crisis and non-election periods. The per capita real credit that state-owned banks provide during crisis years is found to be positively associated with local growth in all provinces. Our results suggest that although state-owned banks might issue loans for political reasons in election periods, they also seem to play an important role in offsetting the adverse effects of economic shocks, especially in developed provinces.
    Journal of Financial Stability 04/2013; 9(1):13–25. DOI:10.1016/j.jfs.2012.12.002 · 2.93 Impact Factor
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    ABSTRACT: Whether state-owned banks are growth promoting or not is highly contested given the assumed disincentives associated with public ownership. Bank efficiency, however, does not only depend on distinct ownership regimes, but also on the bank’s main functions, lending strategies and market competition. This paper provides a first comparative analysis of different types of publicly owned banks operating in China between the year 1997 and 2008. Using principal component analysis and Granger-causality tests, this study shows that China’s state-owned commercial banks, and rural credit cooperatives did not promote GDP-growth during the observation period. State-owned commercial banks even had a negative growth effect on the manufacturing sector. By contrast, state policy banks and joint stock commercial bank did in fact promote domestic growth. China’s experience suggests a more nuanced account of state-banking looking beyond the role of ownership, to incorporate functional and institutional differences.

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May 16, 2014