Identification of Cyclical Banks in Iranian Banking System (Focus on Leverage Ratio)

Mahshid Shahchera ()
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Mahshid Shahchera: Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran.

Iranian Economic Review (IER), 2020, vol. 24, issue 1, 247-266

Abstract: The cyclical banks have different behavior than other banks. The structure of the balance sheet in cyclical banks is different from anti-cyclical banks. The cyclical banks have a relationship between leverage growth and asset growth while the other banks have no relationship between asset growth and leverage growth in the banking system. This relationship depends on the structure of the balance sheet and explains how banks behave in the business environment. Banks decide based on economic conditions and their leverage introduces the structure of balance sheet and banking models. This research surveys the behavior of cyclical banks in the Iranian banking system during the period of 2005-2015. According to the results, the Positive relationship between asset growth and leverage growth approves cyclical behavior of leverage. The structure of the balance sheet and a variety of banks is more important to leverage behavior. This paper uses the type of banks and size as the main variable in the Iranian banking system. The bank should be adjusting its balance sheets based on economic conditions and business. Banks that influence cyclical leverage behavior have a higher share of credits in balance sheets. A higher share of credits explains tending banks for short-term credits.

Keywords: Banking System; Cyclicality; Banking Regulation; Leverage. (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eut:journl:v:24:y:2020:i:1:p:247

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