The views expressed in this presentation are the views of the author and do not necessarily reflect the

views or policies of the Asian

Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI
does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology
used may not necessarily be consistent with ADB official terms.

Asset Price Bubbles and Indicators

Naoyuki Yoshino
Dean, Asian Development Bank Institute, Tokyo,
Professor Emeritus, Keio University, Japan
nyoshino@adbi.org
Farhad Taghizadeh-Hesary
Associate Professor, Tokai University, Japan
 Causes of Bubble
1, Political desire to continue good business
condition
2, Everybody feels happy during bubble
period
stock prices go up
sales are doing well
3, External Pressure
4, How to deal with after the bubble burst ?
Bubble Indicators
Bank based financial Market of Asia
(i) the ratio of banks’ real estate-related loans to
the loans of banks overall, In Japan,
this ratio rose from 16% to 32.6%,
Lr > Ltotal
(ii) Comparison of the pace of growth in banks’
real estate lending with the real economic
growth rate,
ΔLr/Lr > ΔY/Y
(iii) The rise in the housing prices compared with
the average income of workers
Ph > αY
4
5
Growth rate of Real estate loans/GDP Growth

7
8
Housing Price / Income (USA)

9
Determination of Housing Price in Hong Kong
18/02/2020 Yoshino - Taghizadeh 17
 Ｒｅｖｉｅｗ of Blanket Guarantee
(Financial Assistance:FY1992-2003)
（Unit：\billion）
Fiscal Number of An amount of financial assistance Remarks
Year Cases
Grants Asset Purchases Others Name of BK Grants

1992 2 20.0 - 8.0 - -

1993 2 45.9 - - - -

1994 2 42.5 - - - -

1995 3 600.8 - - Hyogo BK 473.0

1996 6 1,316.0 90.0 - Kizu c.c. 1,004.4

1997 7 152.4 239.1 4.0 -

1998 30 2,684.3 2,681.5 - Hokutaku BK 1,773.2

1999 20 4,637.1 1,304.4 - LTCB 3,235.0
Midori BK
7,714

2000 20 5,156.4 850.1 - NCB 31,414

Namihaya BK 6,295
Koufuku BK 4,857

2001 37 1,642.2 406.4 - Tokyo-sowa 684.8

2002 51 2,318.1 794.9 - Kansai Kogin C.C. 658.1

2003 0 - - - - -
18
Total 180 18,615.8 6,366.3 12.0
Factors to failures by size and sector
Deterioration of Loan Assets
Failure in
Average Concentration Concentration Other factors Investment Criminal
cases
Asset Size of Real (ex. on Conducts
Estate of Lending on Recession of Securities
related Local
Lending other sector Economy)

100 billion
Credit Unions 134 91.8 44.0 28.4 28.4 29.9 5.2
yen

230 billion
Credit Associations 27 85.2 37.0 18.5 37.0 37.0 7.4
yen

3.5 trillion
Banks 19 100.0 73.7 21.1 5.3 0.0 0.0
yen
19
 Factors to Failures
(180 Failure Cases in Total)
Factors to Failurs (X) Management Problem
(117 cases、65.0%)
Number of Number of
Failed Share Failed Share
Financial Financial
(1) Deterioration of Loan Assets 165 91.7% 109 93.2%
A. Concentration of Real Estate Related
83 46.1% 54 46.2%
Lending
B. Concentration of Lending on an Industry
47 26.1% 40 34.2%
other than Real Estate
　　(A. and B.） (14) (7.8%) (13) (11.1%)
C. Other Factors (ex. Recession of Local Economy) 49 27.2% 28 23.9%
(2) Failure in Investment on Securities 50 27.8% 23 19.7%
(3) Criminal Conduct 9 5.0% 4 3.4%
20
 Fig 2. Bank’s Balance Sheet

Assets Liabilities

Deposits(D)
Bank Loans D1
Good (D1+FA = Fully
Covered
Assets(LG)
Loans(L)

Deposits)
Financial assistances (FA)
of Deposit Insurance
Corporation
Non-Covered Deposits (D-LG-
FA)

Capital (A)

Source: Authors

18/02/2020 Yoshino - Taghizadeh 21

 Income and Expenditure of DIC in the Case of Dual
Premium Rates

1/30/2019 22
 Dual premium rates model

  D0A  D1A  D2A  DnA  E0 E1 E2 En 

 A
+ A
+ A
+ ... + A
= + + + ... + n 
+
( + ) 0
(1 + r1 )1 (1 + r2 )2 (1 + rn )n  (1 + r0 ) (1 + r1 ) (1 + r2 )
0 1 2
(1 + rn ) 
Group “A”

 1 r0

 F0
A
F1 A F2A FnA  RESn 
Banks

+ + + ... + + n 
 (1 + r )0 (1 + r1 )1 (1 + r2 )2 (1 + rn )n ( + )
 0  1 rn 


  D B
 D1B  D2B  DnB  E0 E1 E2 En 
+ + + ... + = (1 −  )  + + + ... + +
0
n 
B B B B

 (1 + r0 )0 (1 + r1 )1 (1 + r2 )2 (1 + rn )n ( + )0
( + )1
( + )2
( + )
 1 r 1 r 1 r 1 r 
Group “B”

 0 1 2 n

 F0B F1B F2B FnB  RESn 

Banks

 + + + ... + + (1 −  )  n 
 (1 + r0 ) (1 + r1 )1 (1 + r2 )2 (1 + rn )n ( + )
0
 1 rn 

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Fair Deposit Insurance Premium Rate for Each Group of
Banks
Financial Assistance of the Deposit Insurance Corporation/Agency
in a Failed Bank’s Balance Sheet

Source: Yoshino, Taghizadeh-Hesary, Nili (2015)

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Calculation of the fair premium rate for each group of
banks in Cambodia

Table 7: The Assumptions of the dual premium rate model

1. The membership fee of banks into the deposit insurance system is used to pay for the operational costs and only
the membership fee is used for the purpose. That is, the premium revenue of the DIC is only used for the financial
assistance and the reserves.

2. The insurance coverage: 80% for longterm deposits, and 100% for the deposits, including savings deposits, short-
term deposits, current account…etc.

3. The default ratio of NPLs is 100%.

4. The liquidity percentage is 90% for all assets except loans.

5. The growth rates of assets and liabilities are equivalent to the inflation rate.

6. The amount of precautionary reserves of the DICs is 10% of the expected financial assistances of the banks.

A. For Group A, the calculated premium rate is 0.294%

B. for Group B, the rate is 0.358%

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