New Economics Papers
on Banking
Issue of 2008‒04‒04
four papers chosen by
Roberto J. Santillán–Salgado, EGADE-ITESM

  1. Analyzing the interest rate risk of banks using time series of accounting-based data: evidence from Germany By Entrop, Oliver; Memmel, Christoph; Wilkens, Marco; Zeisler, Alexander
  2. Transparency of Regulation and Cross-Border Bank Mergers By Köhler, Matthias
  3. Liquidity and Ambiguity: Banks or Asset Markets? By Eichberger, Jürgen; Spanjers, Willy
  4. The measurement of financial intermediation in Japan By Gunther Capelle-Blancard; Jézabel Couppey-Soubeyran; Laurent Soulat

  1. By: Entrop, Oliver; Memmel, Christoph; Wilkens, Marco; Zeisler, Alexander
    Abstract: This paper describes the first thorough analysis of the interest risk of German banks on an individual bank level. We develop a new method that is based on time series of accountingbased data to quantify the interest risk of banks and apply it to analyze the German banking system. We find evidence that our model yields a significantly better fit of banks' internally quantified interest rate risk than a standard approach that relies on one-point-in-time data, and that the interest rate risk differs between banks of different size and banking group. Additionally, we find structural differences between trading book and non-trading book institutions.
    Keywords: German financial institutions, interest rate risk, accounting-based approach, maturity transformation, banking supervision, model evaluation
    JEL: G18 G21
    Date: 2008
  2. By: Köhler, Matthias
    Abstract: Although there is anecdotal evidence that merger control may constitute a barrier to the integration of European retail banking markets, systematic empirical evidence is missing until now. This paper aims to fill this gap. Based on a unique dataset on the transparency on merger control in the EU banking sector, we estimate the probability that a bank is taken over as a function of its characteristics, country characteristics and the transparency of merger control in the banking sector. The results indicate that a bank is systematically more likely to be taken over by foreign credit institutions if the regulatory process is transparent. Particularly large banks are less likely to be taken over by foreign credit institutions if merger control lacks transparency. This is in line with the hypothesis that governments may block crossborder bank merger because they want the largest institution in the country to be domestically owned. Domestic mergers are not affected. This suggests that merger control may therefore constitute an important barrier to cross-border consolidation and that further integration of EU banking markets requires a higher degree of transparency of the regulatory process.
    Date: 2008
  3. By: Eichberger, Jürgen (Sonderforschungsbereich 504); Spanjers, Willy (Department of Economics, Kingston University)
    Abstract: We study the impact of ambiguity on two alternative institutions of financial intermediation in an economy where consumers face uncertain liquidity needs. The ambiguity the consumers experience is modeled by the degree of confidence in their additive beliefs. We analyze the optimal liquidity allocation and two institutional settings for implementing this allocation: a secondary asset market and a bank deposit contract. For full confidence we obtain the well-known result that consumers prefer the bank deposit contract over the asset market, since the former can provide the optimal cross subsidy for consumers with high liquidity needs. With increasing ambiguity this preference will be reversed: the asset market is preferred, since it avoids inecient liquidation if the bank reserve holdings turn out to be suboptimal.
    Date: 2007–06–22
  4. By: Gunther Capelle-Blancard (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Jézabel Couppey-Soubeyran (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Laurent Soulat (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: In this paper, we examine the evolution of the Japanese financial structure, in order to challenge the expected incidences of the financial liberalization. We compute financial intermediation ratios for Japan (1979-2004) on a book value basis. According to our results, the intermediation ratio has remained quite stable, at around 85%. This stability is the result of two opposite trends: a decrease in credits and an increase in financial securities owned by financial (mostly, non-banking) institutions. These two trends are partly the consequence of the heavier weight of the Government in domestic external financing, which is traditionally less financed by credits than companies are. Besides, these two trends would not have appeared if we had used intermediation ratios in market value or other traditional indicators (Deposits/GDP, Loans to private sector/GDP, stock market capitalization/GDP, etc.). Our results provide evidence for a very close relationship between intermediate financings and market financings and tend to reject the hypothesis of the Japanese financial system’s convergence toward a capital market-based system.
    Keywords: Disintermediation, financial system, intermediaries, capital markets
    Date: 2008–01

This issue is ©2008 by Roberto J. Santillán–Salgado. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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