Appended Note 1-5 Estimation of the lending supply function of financial institutions

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The level of impact the non-performing loans ratio and capital adequacy ratio of banks as well as the rate of return on loans have on the growth rate of loans was studied by using the estimation method provided in the "Structural Reform Evaluation Report 4" of the Cabinet Office (2005).



(Data) Nikkei NEEDS and reference materials on the results of each bank.

NL (Growth rate of outstanding loans): (Current term's outstanding loans/Previous term's outstanding loans) -1

NPL (Non-performing loans ratio): Risk management exposure/Loans amount SCR (Capital adequacy ratio): Total amount of capital/(Debt + Minority stockholders' equity + Total amount of capital)

INKINRI (Lending yield): Data taken from the reference materials on the results of each bank.

(Estimation results)

  • Estimated from panel data of 96 banks during the period between the end of March in 2001 to the end of March in 2004. (fixed-effect model)
  • The figure inside parenthesis is the t-value. ***: Significance level of 1% and indicates that the coefficient holds a significant meaning.


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