The surprising truths about a little-known guaranteed lending program that can strengthen your community AND your bank's bottom line. "Capital costs are up, regulations continue to be more burdensome, loan growth is flat and fees are down." This book is not a solution for every bank, but it is a way for some banks to do a few larger deals per year, have less risk and substantially increase non-interest income or loan yield without a major increase to overhead. This book will help completely change the overall perception of guaranteed lending. Optimize existing bank resources, introduce increased lending opportunities, provide a unique marketing strategy to give the bank a competitive edge.

We analyze how bank profitability impacts financial stability from both theoretical and empirical perspectives. We first develop a theoretical model of the relationship between bank profitability and financial stability by exploring the role of non-interest income and retail-oriented business models. We then conduct panel regression analysis to examine the empirical determinants of bank risks and profitability, and how the level and the source of bank profitability affect risks for 431 publicly traded banks (U.S., advanced Europe, and GSIBs) from 2004 to 2017. Results reveal that profitability is negatively associated with both a bank’s contribution to systemic risk and its idiosyncratic risk, and an over-reliance on non-interest income, wholesale funding and leverage is associated with higher risks. Low competition is associated with low idiosyncratic risk but a high contribution to systemic risk. Lastly, the problem loans ratio and the cost-to-income ratio are found to be key factors that influence bank profitability. The paper’s findings suggest that policy makers should strive to better understand the source of bank profitability, especially where there is an over-reliance on market-based non-interest income, leverage, and wholesale funding.

Countries differ in the extent to which their financial systems are bank-based or market-based. The financial systems of Germany and Japan, for example, are considered bank-based because banks play a leading role in mobilizing savings, allocating capital, overseeing investment decisions of corporate managers, and providing risk management vehicles. The systems of the United States, and the United Kingdom are considered more market-based. Using bank-level data for a large number of industrial and developing countries, the authors present evidence about the impact of financial development, and structure on bank performance. They measure the relative importance of bank or market finance by the relative size of stock aggregates, by relative trading or transaction volumes, and by indicators of relative efficiency. They show that in developing countries, both banks and stock markets are less developed, but financial systems tend to be more bank-based. The richer the country, the more active are all financial intermediaries. The greater the development of a country's banks, the tougher is the competition, the greater is the efficiency, and the lower are the bank margins, and profits. The more under-developed the stock market, the greater are the bank profits. But financial structure per se does not have a significant, independent influence on bank margins, and profits.

This book is suitable for any banker/lender that wants to increase the volume of government-guaranteed loans. The surprising truths about a little-known guaranteed lending program that can strengthen your community and your bank's bottom line. This book is not a solution for every bank, but it is a way for some banks to do a few larger deals per year, have less risk, and substantially increase non-interest income or loan yield without a major increase to overhead. This book will help completely change the overall perception of guaranteed lending. Optimize existing bank resources, introduce increased lending opportunities, provide a unique marketing strategy to give the bank a competitive edge.