Suchergebnisse

Political connection is an expensive resource that can be a source of competitive advantage for a bank. Banks that have political connections will be able to get funding at a lower cost because depositors feel that their funds are safe. The existence of low funding costs will have an impact on better bank performance. This study aims to examine the effect of political connections on bank funding costs and bank performance. The research sample uses 28 foreign exchange banks in Indonesia in the 2014-2017 period which are divided into politically connected and politically unconnected banks. The results show that politically connected banks have cheaper funding costs and better performance than banks that are not politically connected. The implication of this research for banking institutions is that political connections are an advantage that can be used to obtain funds from the public at a lower cost and will be able to improve bank performance.

This study examines the impact of short- term interest rates on bank funding costs in South Africa. Literature suggests that rising short- term interest rates may cause similar financial crises experienced in 2007/08 (Bonner & Eijffinger, 2013; Turner, 2013; Saraç & Karagoz, 2016). It is vital to study short- term interest rates and bank funding costs in order to achieve financial stability. The study uses quarterly time series data for the period 2000 to 2014. To estimate the regression, the study uses the Vector Autoregressive model (VAR) and the data is found stationary at first difference. The 3 months Johannesburg Interbank Agreed Rate (JIBAR) is used as a proxy for bank funding costs whilst the prime overdraft rate, 10 -year government bonds and capital ratio are used as proxies for short- term, long- term interest rates and bank capital, respectively. The results show a positive and significant long- term relationship between the variables. The results for prime overdraft rate, 10 -year government bonds and capital ratio conform to the apriori expectations. For GDP growth the results show a positive relationship which does not conform to apriori expectations. Using the variance decomposition, the study illustrates fluctuations in JIBAR was due to changes in its value and fluctuations in the prime rate are also due to JIBAR. The study presents policy options whereby regulatory efforts need to strengthen the capital buffers of banks to reduce bank funding costs and therefore reduce short- term interest rates imposed on borrowers.