The Credit Card and Cash Card Crisis：Herding Effects & Rationality of Banks’ Behavior

• Main Authors: Tzu-Hsin Chen, 陳慈昕
• Other Authors: 陳業寧
• Format: Others
• Language: zh-TW
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/53640600899760700345

碩士 === 國立臺灣大學 === 財務金融學研究所 === 97 === The credit card and cash card debt crisis in the end of 2005 has given rise to a number of questions about the loans given by commercial banks to card holders. One question concerns the appropriateness of the method by which banks assessed the risks of the card business and measure their endurable exposures. This paper wants to investigate, under extremely intense competition, how banks made their decisions when they faced a new business characterized by uncertainty and profit. This paper examines banks’ behavior from three aspects. First of all, the research inspects whether banks of issue behaved rationally or not. Secondly, this paper gives empirical content to the term “herding” and tests if other banks would replicate the card issuing decisions of the banks which had developed much experience or theory in setting optimal level of debts for credit card or cash card business. In addition, this paper also observes how those banks with more professional advantages reacted to other banks’ mimics. Thirdly, this paper intends to figure out what kind of characteristics make the banks perform better. The empirical results are summarized as following： 1. Banks of issue did not blindly expand their card business. They adjusted their issuance policy of cards when they suspected their non-performing loan ratio of card debts increased seriously. 2. Herding effects did not exist among banks which issued credit cards, since the credit card business had developed for a long time in Taiwan. By contrast, banks which issued cash cards had not had enough experience and skill for risk management, so, obviously, there was a mimicking phenomenon among them. 3. Banks which issued credit cards and had lower generalized non-performing loan ratio, higher capital adequacy ratio, or more professional advantages had performed better than other banks did. However, there was no significant difference among banks which issue cash cards.