Table 1 - uploaded by Adam Banai
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Source publication
Housing market is important from a macroprudential perspective because it has a strong effect on the banking sector. Changes in real estate prices may affect the level of bank risk through household mortgage lending, however, the literature has no clear conclusion on this impact mechanism. Using a bank-level database containing quarterly data from...
Contexts in source publication
Context 1
... dependent variable is a bank risk indicator which is compiled closely following the approach used by the EBA (EBA 2015) for deposit guarantee purposes. 2 The risk indicator contains six bank characteristics ( Table 1) where is the mean, while is the standard deviation of the return on assets, both calculated over the full sample; and is the ratio of equity capital to total assets. ...
Context 2
... addition to the size, the sign of the partial effect of the mortgage loan ratio, presented in 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100 Size of the partial effect Mortgage loan ratio (%) Model (2) Model (3) Model (5) ...
Context 3
... chosen risk indicator tries to provide a complex understanding of the level of risk at a credit institution, as it contains information on the solvency position, portfolio quality, profitability, and the liquidity position as well. We examined whether our results would change if we use equal weights to construct our composite risk indicator (instead of the weights shown in Table 1). Our results proved to be very robust to this change ( Table 7 in the Annex). ...
Context 4
... estimated our baseline model using different methods (Table 10). Figure 10 and Figure 11 in the Appendix show that all of the tested estimation methods lead to the same conclusions: (i) higher real house prices are accompanied by higher bank risk and this effect is stronger for banks with a higher mortgage loan ratio; (ii) a higher mortgage loan ratio basically lead to lower risk, but increasing the share of mortgage loans when house prices are relatively high (suggesting a potentially overheated housing market) tends to raise bank risk. ...
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Citations
... Koetter and Pohosyan (2010) find that, in the case of the German real estate market, changes in housing prices are negative to bank instability, but not related to changes in price levels. Banai and Vágó (2018) find that rising housing prices increase bank risk and that the higher the proportion of mortgage loan, the greater the impact. Kok and Ismail (2019) argue that the higher the housing price, the more stable the bank is, but if the housing price exceeds a certain level, the impact of the housing price on bank stability becomes negative. ...
This study analyzes the effect of housing prices on banking performance in Korea. The findings of the study reveal that the impact of housing price changes on banking performance was different in the commercial banks, regional banks and specialized banks. This seems to be due to the different characteristics of each bank. The three types of banks in Korea have different functions, and thus the impact of changes in housing prices on their respective banking performance is different. Therefore, it would be desirable for Korea’s financial regulatory authorities to draw up policies and perform its supervisory functions in consideration of these points.
