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The Maturity Lengthening Role of National Development Banks

Author

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  • Alfredo Schclarek
  • Jiajun Xu
  • Jianye Yan

Abstract

This paper theoretically discusses why state-owned national develop- ment banks (NDBs) may be better able to provide longer-term lending to firms (investors), in comparison to private commercial banks (CBs). NDBs can grant longer-term lending to firms (investors) because NDB bonds have more value than the bonds issued by CBs, thus allowing banks to better cope with maturity mismatch risks and liquidity problems in case of needing to make interbank payments. The reason that NDB bonds have more value than the bonds issued by CBs is that NDBs are owned by the government, hence there is a higher recapitalization willingness and capac- ity compared to private bank owners. Regarding the maturity lengthening role of NDBs, it is positively related to the amount of liquid asset holdings by NDBs, the collateral value of the investment projects that receive NDB financing, and the recapitalization willingness (or perceived willingness) and financial strength, and net worth, of the government.

Suggested Citation

  • Alfredo Schclarek & Jiajun Xu & Jianye Yan, 2019. "The Maturity Lengthening Role of National Development Banks," Asociación Argentina de Economía Política: Working Papers 4197, Asociación Argentina de Economía Política.
    • Handle: RePEc:aep:anales:4197
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    Cited by:

    1. Xu, Jiajun & Ru, Xinshun & Song, Pengcheng, 2021. "Can a new model of infrastructure financing mitigate credit rationing in poorly governed countries?," Economic Modelling, Elsevier, vol. 95(C), pages 111-120.
    2. Alfredo SCHCLAREK & Jiajun XU, 2020. "Risques de change et risque lié à la balance des paiements dans l’architecture mondiale du financement du développement," Working Paper 15b03057-1f7f-44dc-93fa-5, Agence française de développement.
    3. Alfredo Schclarek & Jiajun Xu, 2021. "Panda Bond Financing of the Belt & Road Initiative: An Analysis of Monetary Mechanisms and Financial Risks," Asociación Argentina de Economía Política: Working Papers 4519, Asociación Argentina de Economía Política.
    4. Hu, Bo & Schclarek, Alfredo & Xu, Jiajun & Yan, Jianye, 2022. "Long-term finance provision: National development banks vs commercial banks," World Development, Elsevier, vol. 158(C).
    5. Alfredo SCHCLAREK & Jiajun XU, 2020. "Exchange rate and balance of payment risks in the global development finance architecture," Working Paper 15b03057-1f7f-44dc-93fa-5, Agence française de développement.
    6. Schclarek, Alfredo & Xu, Jiajun, 2022. "Exchange rate and balance of payment crisis risks in the global development finance architecture," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 79(C).

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    More about this item

    Keywords

    Bank lending; Maturity lengthening; Debt or collateral capacity; Asset-based leverage; Interbank markets; Recapitalization; National development banks;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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