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on Banking |
| By: | Alexander Chudik (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Marcel Fratzscher (European Central Bank, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.) |
| Abstract: | The paper analyses and compares the role that the tightening in liquidity conditions and the collapse in risk appetite played for the global transmission of the financial crisis. Dealing with identification and the large dimensionality of the empirical exercise with a Global VAR approach, the findings highlight the diversity of the transmission process. While liquidity shocks have had a more severe impact on advanced economies, it was mainly the decline in risk appetite that affected emerging market economies. The tightening of financial conditions was a key transmission channel for advanced economies, whereas for emerging markets it was mainly the real side of the economy that suffered. Moreover, there are some striking differences also within types of economies, with Europe being more adversely affected by the fall in risk appetite than other advanced economies. JEL Classification: E44, F3, C5. |
| Keywords: | Liquidity, risk, financial crisis, global transmission, global VAR (GVAR), shocks, modelling, US, advanced economies, emerging market economies. |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111285&r=ban |
| By: | G. de Cadenas-Santiago; L. de Mesa; A. Sanchís |
| Abstract: | We have developed a quantitative analysis to verify the extent to which the sources of systemic risk identified in the academic and regulatory literature actually contribute to it. This analysis shows that all institutions contribute to systemic risk albeit to a different degree depending on various risk factors such as size, interconnection, un-substitutability, balance sheet and risk quality. From the analysis we conclude that using a single variable or a limited series of variables as a proxy for systemic risk generates considerable errors when identifying and measuring the systemic risk of each institution. When designing systemic risk mitigation measures, all contributing factors should be taken into account. Likewise, classifying institutions as systemic/non-systemic would mean giving similar treatment to institutions that may bear very different degrees of systemic risk, while treating differently institutions that may have very similar charge of systemic risk inside. Therefore, we advocate that some continuous approach to systemic risk -in which all institutions are deemed systemic but to varying degrees- would be preferable. We acknowledge that this analysis may prove somehow limited in the way that it is not founded on a predefined conceptual approach, does not fully consider other very relevant qualitative factors1 and accounts only for some of the relevant sources of systemic risk in the banking system2. These limits are currently set due to data availability and state of the art in empirical research, but we believe that these should not hinder our work identifying the true sources of systemic risk and our aim to help avoiding any partial and thus limited prudential policy approach. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:fda:fdacee:17-2010&r=ban |
| By: | Chang, Soon-taek |
| Abstract: | Regulatory regimes are actively discussing macroprudential policy. Korea pursued a countercyclical macroprudential approach to prevent the overheating of mortgage lending and to minimize the risk of loan default. The Korean financial supervisory authority made adjustments in response to both the condition of the housing market and trends in mortgage loans. The lessons learned from the Korean experience are applicable to other situations. First, regulations regarding loan-to-value and debt-to-income ratios and other restrictions on mortgage lending can be employed as an important part of a countercyclical framework. Next, measures need to be applied in a timely manner and according to the specific conditions of each country. Finally, authorities should preemptively prepare macroprudential instruments before banks enter a period of rapid mortgage lending to avoid reckless mortgage lending operations and weaken any speculative motive in the housing market. |
| Keywords: | Access to Finance,Debt Markets,Bankruptcy and Resolution of Financial Distress,Banks&Banking Reform,Housing Finance |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5505&r=ban |
| By: | Meta Brown; Andrew Haughwout; Donghoon Lee; Wilbert van der Klaauw |
| Abstract: | The Federal Reserve Bank of New York (FRBNY) Consumer Credit Panel, created from a sample of U.S. consumer credit reports, is an ongoing panel of quarterly data on individual and household debt. The panel shows a substantial run-up in total consumer indebtedness between the first quarter of 1999 and the peak in the third quarter of 2008, followed by a steady decline through the third quarter of 2010. During the same period, delinquencies rose sharply: Delinquent balances peaked at the close of 2009 and then began to decline again. This paper documents these trends and discusses their sources. We focus particularly on the decline in debt outstanding since mid-2008, which has been the subject of considerable policy and media interest. While the magnitudes of balance declines and borrower defaults, represented as “charge-offs” on consumers’ credit reports, have been similar, we find that debt pay-down has been more pronounced than this simple comparison might indicate. |
| Keywords: | Consumer credit ; Households - Economic aspects ; Credit cards ; Debt ; Default (Finance) ; Mortgages |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:480&r=ban |
| By: | Ngo, Dang Thanh |
| Abstract: | Over the last twenty years in Vietnam, the financial system in general and the banking system in particular had been transferred from a monopoly system into a diversified system which allows all participants to compete fairly and effectively. Within these past years, the banking system in Vietnam did gradually developed in number of banking institutions, size of the banking sector in the economy, amount of credits for the economy, and amount of other banking services as well. Along with the development of the banking system in number, size, asset value, deposit, credit and debit account, ATM/POS, interest rates, etc. which attracted more and more customers using the banking’ services; the efficiency of the banking system also has been increasing. So far, there is still a lack of research on the efficiency of the banking sector in Vietnam over the decades. Several researches were conducted, however, due to the data limitation, these researches were just small steps at the big front gate. This paper, which focuses on evaluating the efficiency of bigger sample size of Vietnamese commercial banks in the year of 2008, tends to make a contribution to this progress. The DEA approach allows this paper to evaluate the efficiency of 22 Vietnamese commercial banks in using their inputs in 2008 (these banks were ranked top in the banking industry in Vietnam – VNR500 in 2009). After analyzing, the research comes to a conclusion that although the efficiency of these banks is averagely high, however, there is still an opportunity to improve this indicator. |
| Keywords: | Data envelopment analysis; Vietnam; bank; efficiency |
| JEL: | C14 G21 |
| Date: | 2010–05–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27882&r=ban |
| By: | de la Torre, Augusto; Ize, Alain |
| Abstract: | Financial crises can happen for a variety of reasons: (a) nobody really understands what is going on (the collective cognition paradigm); (b) some understand better than others and take advantage of their knowledge (the asymmetric information paradigm); (c) everybody understands, but crises are a natural part of the financial landscape (the costly enforcement paradigm); or (d) everybody understands, yet no one acts because private and social interests do not coincide (the collective action paradigm). The four paradigms have different and often conflicting prudential policy implications. This paper proposes and discusses three sets of reforms that would give due weight to the insights from the collective action and collective cognition paradigms by redrawing the regulatory perimeter to internalize systemic risk without promoting dynamic regulatory arbitrage; introducing a truly systemic liquidity regulation that moves away from a purely idiosyncratic focus on maturity mismatches; and building up the supervisory function while avoiding the pitfalls of expanded official oversight. |
| Keywords: | Debt Markets,Emerging Markets,Financial Intermediation,Banks&Banking Reform,Labor Policies |
| Date: | 2011–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5523&r=ban |
| By: | NUCU, Anca Elena |
| Abstract: | In the context of macroeconomic uncertainty and liquidity problems existing on international markets, expanding the banking system leads to amplification interferences of a broad spectrum of risks. This article delineates the recent area of researchers’ interest in the domain of credit risk management in banking and highlights the issues of relevant studies, both theoretical and empirical, in the area of credit-scoring, models for credit risk assessment and regulatory framework, on the background mutations caused by the international financial crisis. |
| Keywords: | credit risk; model evaluation; credit scoring; retail banking; financial crisis |
| JEL: | D81 C53 E51 |
| Date: | 2011–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27932&r=ban |
| By: | Zhou, Richard |
| Abstract: | Rating trigger ATE (Additional Termination Event) is a counterparty risk mitigant that allows banks to terminate and close out bilateral derivative contracts if the credit rating of the counterparty falls below the trigger level. Since credit default is often preceded by rating downgrades, ATE clause effectively reduces the counterparty credit risk by early termination of exposure. However, there is still the risk that counterparty may default without going through severe downgrade. This article presents a practical model for valuating CVA in the presence of ATE. |
| Keywords: | Counterparty Risk; Credit Valuation Adjustment; Rating Transition; Rating Trigger; Additional Termination Event |
| JEL: | C00 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:27782&r=ban |
| By: | Paravisini, Daniel (Columbia GSB); Rappoport, Veronica (Columbia GSB); Schnabl, Philipp (NYU Stern); Wolfenzon, Daniel (Columbia GSB) |
| Abstract: | This paper presents evidence on the effect of credit supply shocks on exports. Capital flow reversals in Peru during the 2008 financial crisis induced a decline in the supply of credit by domestic banks with high share of foreign-currency denominated liabilities. We use this variation to estimate the elasticity of exports to bank credit. We use matched customs and firm-level bank credit data to control for non-credit related factors that may also affect the level of exports: we compare changes in exports of the same product and to the same destination by firms borrowing from different banks. Exports react strongly to changes in the supply of credit in the intensive margin, irrespectively of the firms' export volume. In the extensive margin, the negative credit supply shock increases the probability of exiting a product-destination export market, but does not significantly affect the number of firms entering an export market. The magnitude of the respective elasticities, as well as their heterogeneity across firm and export flow observable characteristics, are estimated. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:rbp:wpaper:2010-022&r=ban |
| By: | Demirguc-Kunt, Asli; Peria, Maria Soledad Martinez |
| Abstract: | This paper proposes a framework to analyze competition in the banking sector using Jordan as an example. In particular, the paper pursues a multi-pronged approach to analyze competition including (i) an examination of the extent to which the market is contestable (that is, has low barriers to bank entry and exit), (b) an evaluation of the behavior of bank spreads, and (iii) an assessment of non-structural and direct measures of bank competition such as the H-statistic and the Lerner Index. This approach provides a more comprehensive framework to examine competition in the banking sector, compared with the commonly used alternative of looking only at bank concentration figures. In the case of Jordan, the analysis indicates that although concentration has declined, competition in the country is low and has decreased over time. |
| Keywords: | Banks&Banking Reform,Emerging Markets,Access to Finance,Debt Markets,Markets and Market Access |
| Date: | 2010–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5499&r=ban |
| By: | Ramon Moreno |
| Abstract: | Recurrent capital inflows pose important challenges for authorities in emerging market economies seeking to preserve financial stability. Raising interest rates to dampen imbalances that could arise from capital flows can also attract more capital inflows and accentuate appreciation pressures. For this reason authorities have used a number of instruments to mitigate the effects of capital flows, all with financial stability implications. Many of these instruments (eg reserve requirements) may have been used for other purposes but the global financial crisis has raised interest in examining them from a financial stability, or "macroprudential" perspective. This paper reviews some of these instruments, drawing in part on material provided by central banks to the BIS. The instruments include foreign exchange market intervention and foreign reserve accumulation; measures to strengthen bank balance sheets and capital and measures to maintain the quality of credit or to ifnluence credit growth or allocation, and capital controls. Certain implementation issues are also discussed, including signals to respond to, timing of prudential measures and procyclicality and effectiveness and calibration. An unresolved question is how the instruments described are to be used in conjunction with interest rate policy. Over the medium term, these instruments raise concerns because they may impair the development of the financial system. |
| Keywords: | capital flows, monetary policy, macroprudential |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:336&r=ban |
| By: | Nataliya Barasinska; Dorothea Schäfer |
| Abstract: | Studies of peer-to-peer lending in the USA find that female borrowers have better chances of getting funds than males. Is differential treatment of borrowers of different sexes a common feature of peer-to-peer lendingmarkets or is it subject to specific businessmodels, ways of fixing loan contracts and even national financial systems? We aim at answering this question by providing evidence on loan procurement at the largest German peer-to-peer lending platform Smava.de. Our results show that gender does not affect individual borrower's chances of funding success on this platform, ceteris paribus. Hence, gender discrimination seems to be a platform-specific phenomenon rather than a common attribute of this innovative form of credit markets. |
| Keywords: | gender, access to credit, peer-to-peer lending |
| JEL: | G21 J16 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1094&r=ban |
| By: | Carrera, Cesar (Banco Central de Reserva del Perú) |
| Abstract: | In the past ten years the Peruvian economy has experienced important structural changes regarding monetary policy. This document focuses on the bank lending channel as part of the transmission process to macroeconomic activity in the Peruvian economy based on Bernanke, Gertler, and Gilchrist (1996) flight-to-quality argument. The purpose of this work is to identify the bank lending channel (using bank level data), and test its relevance for understanding the transmission to economic activity by comparing monetary policy effects under two scenarios; with and without a bank lending channel (using structural autoregressive vectors). As in Gambacorta (2005), I consider a sample period in which a policy variable can capture the monetary policy stance of the central bank. For the case of Peru, I conclude that the bank lending channel has operated but this channel is not important for identifying the transmission process from monetary policy to macroeconomic activity. |
| Keywords: | Monetary policy transmission, Bank lending channel, flight-to-quality, panel of banks |
| JEL: | C22 C23 E44 E51 E52 E58 |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:rbp:wpaper:2010-021&r=ban |