Bank Risk Within And Across Equilibria

Author: Mr. Itai Agur
Publisher: International Monetary Fund
ISBN: 1498345131
Size: 72.89 MB
Format: PDF, ePub, Docs
View: 1908
Download Read Online

The global financial crisis highlighted that the financial system can be most vulnerable when it seems most stable. This paper models non-linear dynamics in banking. Small shocks can lead from an equilibrium with few bank defaults straight to a full freeze. The mechanism is based on amplification between adverse selection on banks' funding market and moral hazard in bank monitoring. Our results imply trade-offs between regulators' microprudential desire to shield individual weak banks and the macroprudential consequences of doing so. Moreover, limiting bank reliance on wholesale funding always reduces systemic risk, but limiting the correlation between bank portfolios does not.

Bank Credit Extension And Real Economic Activity In South Africa

Author: Nombulelo Gumata
Publisher: Springer
ISBN: 3319435515
Size: 18.44 MB
Format: PDF, Mobi
View: 5457
Download Read Online

This book presents empirical evidence that supports and facilitates a practical, integrated approach to how bank regulatory and selected macro-prudential tools interact with monetary policy to achieve price and financial stability. The empirical results contained in various chapters accompany in-depth historical analysis and counterfactual scenarios that enable proper policy evaluation and the interaction of bank regulatory, macro-prudential and monetary policy tools in South Africa. The presented evidence also identifies financial asset boom and bust episodes and the associated costly output losses. In addition, the authors explore the amplification of credit dynamics by commodity prices and sector credit re-allocation due to capital inflows shocks. The book’s empirical analysis uses a wide range of statistical and econometric approaches on granular data and economic variables to derive policy implications and recommendations. This in-depth quantitative analysis includes determining inverse transmission of global liquidity, as well as the effects of capital flows, lending-rate margins, financial regulatory uncertainty, the National Credit Act, bank capital-adequacy ratios, bank loan loss provisions, loan-to-value ratios and repayment-to-income ratios on the macro-economy.

Banking Competition And Capital Ratios

Author: Klaus Schaeck
Publisher: International Monetary Fund
ISBN:
Size: 55.79 MB
Format: PDF, ePub
View: 2251
Download Read Online

We use data for more than 2,600 European banks to test whether increased competition causes banks to hold higher capital ratios. Employing panel data techniques, and distinguishing between the competitive conduct of small and large banks, we show that banks tend to hold higher capital ratios when operating in a more competitive environment. This result holds when controlling for the degree of concentration in banking systems, inter-industry competition, characteristics of the wider financial system, and the regulatory and institutional environment.

Financial Opening Deposit Insurance And Risk In A Model Of Banking Competition

Author: Mr. Tito Cordella
Publisher: International Monetary Fund
ISBN: 1451897790
Size: 25.18 MB
Format: PDF, Mobi
View: 821
Download Read Online

This paper studies the impact of competition on the determination of interest rates and banks’ risk-taking behavior under different assumptions about deposit insurance and the dissemination of financial information. It finds that lower entry costs foster competition in deposit rate sand reduce banks’ incentives to limit risk exposure. Although higher insurance coverage amplifies this effect, two alternative arrangements (risk-based contributions to the insurance fund and public disclosure of financial information) help to reduce it. Moreover, uninsured but fully informed depositors and risk-based full deposit insurance yield the same equilibrium risk level, which is independent of entry costs. The welfare implications of the different arrangements are also explored.

Performance Risk And Competition In The Chinese Banking Industry

Author: Yong Tan
Publisher: Chandos Publishing
ISBN: 1780634463
Size: 66.52 MB
Format: PDF, Docs
View: 7193
Download Read Online

Due to the financial crisis around the world, stability of the banking sector is critical. Several rounds of banking reforms in China have aimed to improve performance and competition, and Performance, Risk and Competition in the Chinese Banking Industry provides a comprehensive analysis of performance, risk, competition and their relationships in Chinese banking industry. The book consists of seven chapters: the first chapter gives an introduction, followed by an overview of the Chinese banking sector in chapter two. Chapter three discusses corporate governance in the Chinese banking sector. The fourth and fifth chapters investigate risk, performance, competition, and their relationships. Chapter six outlines future development of the Chinese banking sector, and finally, chapter seven provides a conclusion. provides a comprehensive analysis of risk conditions in the Chinese banking sector a detailed investigation on the performance of the Chinese banking sector examines the state of competition

Competition And Stability In Banking

Author: Xavier Vives
Publisher: Princeton University Press
ISBN: 1400880904
Size: 64.92 MB
Format: PDF, Kindle
View: 6205
Download Read Online

Does too much competition in banking hurt society? What policies can best protect and stabilize banking without stifling it? Institutional responses to such questions have evolved over time, from interventionist regulatory control after the Great Depression to the liberalization policies that started in the United States in the 1970s. The global financial crisis of 2007–2009, which originated from an oversupply of credit, once again raised questions about excessive banking competition and what should be done about it. Competition and Stability in Banking addresses the critical relationships between competition, regulation, and stability, and the implications of coordinating banking regulations with competition policies. Xavier Vives argues that while competition is not responsible for fragility in banking, there are trade-offs between competition and stability. Well-designed regulations would alleviate these trade-offs but not eliminate them, and the specificity of competition in banking should be accounted for. Vives argues that regulation and competition policy should be coordinated, with tighter prudential requirements in more competitive situations, but he also shows that supervisory and competition authorities should stand separate from each other, each pursuing its own objective. Vives reviews the theory and empirics of banking competition, drawing on up-to-date analysis that incorporates the characteristics of modern market-based banking, and he looks at regulation, competition policies, and crisis interventions in Europe and the United States, as well as in emerging economies. Focusing on why banking competition policies are necessary, Competition and Stability in Banking examines regulation's impact on the industry's efficiency and effectiveness.

Capital Regulation And Banks Financial Decisions

Author: Haibin Zhu
Publisher:
ISBN:
Size: 51.40 MB
Format: PDF, ePub
View: 3076
Download Read Online

This paper develops a stochastic dynamic model to examine the impact of capital regulation on banks' financial decisions. In equilibrium, lending decisions, capital buffer and the probability of bank failure are endogenously determined. Compared to a flat-rate capital rule, a risk-sensitive capital standard causes the capital requirement to be much higher for small (and riskier) banks and much lower for large (and less risky) banks. Nevertheless, changes in actual capital holdings are less pronounced due to the offsetting effect of capital buffers. Moreover, the non-binding capital constraint in equilibrium implies that banks adopt an active portfolio strategy and hence the counter-cyclical movement of risk-based capital requirements does not necessarily lead to a reinforcement of the credit cycle. In fact, the results from the calibrated model show that the impact on cyclical lending behavior differs substantially across banks. Lastly, the analysis suggests that the adoption of a more risk-sensitive capital regime can be welfare-improving from a regulator's perspective, in that it causes less distortion in loan decisions and achieves a better balance between safety and efficiency.

Bank Funding Costs For International Banks

Author: Rita Babihuga
Publisher: International Monetary Fund
ISBN: 1475513550
Size: 70.72 MB
Format: PDF, Kindle
View: 7468
Download Read Online

This paper investigates the determinants of bank funding costs for a sample of internationally active banks from 2001–12. We find that changes in banks’ unsecured funding costs are associated with bank-specific characteristics such as an institution’s credit worthiness and the return on its market value, and importantly, on the level and quality of capital. Similarly, market factors such as the level of investor risk appetite, as well as shocks to financial markets—notably the US subprime crisis and the Euro Area sovereign debt crisis—have also been key drivers of the sharp rise in bank funding costs. We also find evidence that large systemically important institutions have enjoyed a funding advantage, and that this advantage has risen since the onset of the two crises. With the exception of Euro Area periphery banks, by end-2012 the rise in funding costs had generally been reversed for most major banks as a result of improvments in bank asset quality as well as steps taken to increase resilience, notably higher capitalization. Our results suggest increased capital buffers may potentially support bank lending to the real economy by reducing bank funding costs.

Advances In Network Analysis And Its Applications

Author: Evangelos Kranakis
Publisher: Springer Science & Business Media
ISBN: 3642309038
Size: 60.33 MB
Format: PDF
View: 6272
Download Read Online

As well as highlighting potentially useful applications for network analysis, this volume identifies new targets for mathematical research that promise to provide insights into network systems theory as well as facilitating the cross-fertilization of ideas between sectors. Focusing on financial, security and social aspects of networking, the volume adds to the growing body of evidence showing that network analysis has applications to transportation, communication, health, finance, and social policy more broadly. It provides powerful models for understanding the behavior of complex systems that, in turn, will impact numerous cutting-edge sectors in science and engineering, such as wireless communication, network security, distributed computing and social networking, financial analysis, and cyber warfare. The volume offers an insider’s view of cutting-edge research in network systems, including methodologies with immense potential for interdisciplinary application. The contributors have all presented material at a series of workshops organized on behalf of Canada’s MITACS initiative, which funds projects and study grants in ‘mathematics for information technology and complex systems’. These proceedings include papers from workshops on financial networks, network security and cryptography, and social networks. MITACS has shown that the partly ghettoized nature of network systems research has led to duplicated work in discrete fields, and thus this initiative has the potential to save time and accelerate the pace of research in a number of areas of network systems research.