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on Banking |
| By: | Jaromir Baxa; Roman Horvath; Borek Vasicek |
| Abstract: | We examine whether and how selected central banks responded to episodes of financial stress over the last three decades. We employ a new monetary-policy rule estimation methodology which allows for time-varying response coefficients and corrects for endogeneity. This flexible framework applied to the USA, the UK, Australia, Canada, and Sweden, together with a new financial stress dataset developed by the International Monetary Fund, not only allows testing of whether central banks responded to financial stress, but also detects the periods and types of stress that were the most worrying for monetary authorities and quantifies the intensity of the policy response. Our findings suggest that central banks often change policy rates, mainly decreasing them in the face of high financial stress. However, the size of the policy response varies substantially over time as well as across countries, with the 2008–2009 financial crisis being the period of the most severe and generalized response. With regard to the specific components of financial stress, most central banks seemed to respond to stock-market stress and bank stress, while exchange-rate stress is found to drive the reaction of central banks only in more open economies. |
| Keywords: | Endogenous regressors, financial stress, monetary policy, Taylor rule, time-varying parameter model. |
| JEL: | E43 E52 E58 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cnb:wpaper:2011/03&r=ban |
| By: | Bert WILLEMS; Joris MORBEE |
| Abstract: | In this paper we show that free entry decisions may be socially inefficient, even in a perfectly competitive homogeneous goods market with non-lumpy investments. In our model, inefficient entry decisions are the result of risk-aversion of incumbent producers and consumers, combined with incomplete financial markets which limit risk-sharing between market actors. Investments in productive assets affect the distribution of equilibrium prices and quantities, and create risk spillovers. From a societal perspective, entrants underinvest in technologies that would reduce systemic sector risk, and may overinvest in risk-increasing technologies. The inefficiency is shown to disappear when a complete financial market of tradable risk-sharing instruments is available, although the introduction of any individual tradable instrument may actually decrease efficiency. We therefore believe that sectors without well-developed financial markets will benefit from sector-specific regulation of investment decisions. |
| Date: | 2011–05 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:ces11.17&r=ban |
| By: | Jie (Jack) He; Jun 'QJ' Qian; Philip E. Strahan |
| Abstract: | We examine whether rating agencies (Moody’s, S&P, and Fitch) reward large issuers of mortgage-backed securities, who bring substantial business, by granting them unduly favorable ratings. The initial yield on both AAA-rated and non-AAA rated tranches sold by large issuers is higher than that on similar tranches sold by small issuers during the market boom years of 2004-2006. Moreover, the prices of MBS sold by large issuers drop more than those sold by small issuers, and the differences are concentrated among tranches issued during 2004-2006. We conclude that large issuers receive more favorable ratings and that the market prices the risk of inflated ratings, especially during booming periods. |
| JEL: | G2 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17238&r=ban |
| By: | Beck, T.H.L.; De Jonghe, O.G.; Schepens, G. (Tilburg University, Center for Economic Research) |
| Abstract: | This paper documents a large cross-country variation in the relationship between bank competition and stability and explores market, regulatory and institutional features that can explain this heterogeneity. Combining insights from the competition-stability and regulation-stability literatures, we develop a unified framework to assess how regulation, supervision and other institutional factors may make it more likely that the data favor the charter-value paradigm or the risk-shifting paradigm. We show that an increase in competition will have a larger impact on banks’ risk taking incentives in countries with stricter activity restrictions, more homogenous market structures, more generous deposit insurance and more effective systems of credit information sharing. |
| Keywords: | Competition;Stability;Banking;Herding;Deposit Insurance;Information Sharing;Risk Shifting. |
| JEL: | G21 G28 L51 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011080&r=ban |
| By: | George M. von Furstenberg (Indiana University and Hong Kong Institute for Monetary Research) |
| Abstract: | Adding contingently convertible debt securities, cocos, in an amount equal to about 3% of tangible assets to the financing mix of financial institutions is a promising reform idea. It would also be inexpensive for these institutions to issue cocos and thus to be prepared to recapitalize and to avert failure by rebuilding common equity and reducing leverage and debt overhang in a crisis. For cocos to become readily marketable, much work is needed on their standardization and optimal design. That basic design should include a trigger couched in a regulatory capital ratio referenced in Basel III. It should also include conversion terms setting the rate of increase in the number of shares equal to the rate of growth of the book value of common equity through conversion. This would prevent redistribution from existing to new shareholders, guarantee their equality of treatment, and protect the subordination hierarchy with non-cocos debt. |
| Keywords: | Contingent Convertibles, Cocos Design, Capital Ratios, Financial Reform, Basel III |
| JEL: | G13 G18 G21 G33 G38 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:222011&r=ban |
| By: | Erel, Isil (OH State University); Nadauld, Taylor (Brigham Young University); Stulz, Rene M. (OH State University) |
| Abstract: | We estimate holdings of highly-rated tranches of mortgage securitizations of American deposit-taking banks ahead of the credit crisis and evaluate hypotheses that have been advanced to explain these holdings. We find that holdings of highly-rated tranches were economically trivial for the typical bank, but banks with greater holdings performed more poorly during the crisis. Though univariate comparisons show that banks with large trading books had greater holdings, the holdings of highly-rated tranches are not higher for banks with large trading books in regressions that control for bank size. The ratio of highly-rated tranches holdings to assets increases with bank assets, but not for banks with more than $50 billion of assets. This evidence is inconsistent with explanations for holdings of highly-rated tranches that emphasize the incentives of banks deemed "too-big-to-fail". Further, the evidence does not provide support for "bad incentives" theories of holdings of highly-rated tranches. We find, however, that banks active in securitization held more highly-rated tranches. Such a result can be consistent with regulatory arbitrage as well as with securitizing banks holding highly-rated tranches to convince investors of the quality of these securities. Our evidence supports the latter hypothesis. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2011-16&r=ban |
| By: | Alper Kara (Hull University Business School, United Kingdom.); David Marqués-Ibáñez (European Central Bank, Financial Research Division, Kaiserstrasse 29, D-60311 Frankfurt am Main, Germany.); Steven Ongena (Tilburg University, Department of Finance, Faculty of Economics and Business Administration, Netherlands.) |
| Abstract: | We investigate the effect of securitization activity on banks’ lending standards using evidence from pricing behavior on the syndicated loan market. We find that banks more active at originating asset-backed securities are also more aggressive on their loan pricing practices. This suggests that securitization activity lead to laxer credit standards. Macroeconomic factors also play a large role explaining the impact of securitization activity on bank lending standards: banks more active in the securitization markets loosened more aggressively their lending standards in the run up to the recent financial crisis but also tightened more strongly during the crisis period. As a continuum of this paper we are examining whether individual loans that are eventually securitized are priced more aggressively by using unique European data on individual loans from all major trustees. JEL Classification: G21, G28. |
| Keywords: | securitization, bank risk taking, syndicated loans, financial crisis. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20111362&r=ban |
| By: | Roberto Casarin; Chia-Lin Chang; Juan-Ángel Jiménez-Martín; Michael McAleer (University of Canterbury); Teodosio Pérez Amaral |
| Abstract: | It is well known that the Basel II Accord requires banks and other Authorized Deposit-taking Institutions (ADIs) to communicate their daily risk forecasts to the appropriate monetary authorities at the beginning of each trading day, using one or more risk models, whether individually or as combinations, to measure Value-at-Risk (VaR). The risk estimates of these models are used to determine capital requirements and associated capital costs of ADIs, depending in part on the number of previous violations, whereby realised losses exceed the estimated VaR. McAleer et al. (2009) proposed a new approach to model selection for predicting VaR, consisting of combining alternative risk models, and comparing conservative and aggressive strategies for choosing between VaR models. This paper addresses the question of risk management of risk, namely VaR of VIX futures prices, and extends the approaches given in McAleer et al. (2009) and Chang et al. (2011) to examine how different risk management strategies performed during the 2008-09 global financial crisis (GFC). The empirical results suggest that an aggressive strategy of choosing the Supremum of single model forecasts, as compared with Bayesian and non-Bayesian combinations of models, is preferred to other alternatives, and is robust during the GFC. However, this strategy implies relatively high numbers of violations and accumulated losses, which are admissible under the Basel II Accord. |
| Keywords: | Median strategy; Value-at-Risk; daily capital charges; violation penalties; aggressive risk management; conservative risk management; Basel Accord; VIX futures; Bayesian strategy; quantiles; forecast densities |
| JEL: | G32 C53 C22 C11 |
| Date: | 2011–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:11/26&r=ban |
| By: | Anne-Sophie Bergerès; Philippe d'Astous; Georges Dionne |
| Abstract: | Recent studies of credit lines suggest a positive relationship between exposure at default and default probability on the line. In this paper, we consider another important dependence between two consumers’ financial instruments by investigating the relationship between credit line utilization and default probability on a term loan. We model the variation of both financial instruments endogenously in a simultaneous equations system. We find strong evidence for a positive relationship between the two variables: individuals in the default state use their credit line about 59% more often, while credit line utilization has a positive marginal effect of 46% on loan default probability. Our results suggest that banks should monitor both financial instruments simultaneously. |
| Keywords: | Consumer finance, consumer risk management, credit line, term loan, default probability, ability to pay, endogeneity, simultaneous equations |
| JEL: | D12 D14 G21 G33 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:1119&r=ban |
| By: | Giovanni Melina (Department of Economics, Mathematics & Statistics, Birkbeck; University of Surrey); Stefania Villa (Department of Economics, Mathematics & Statistics, Birkbeck; University of Foggia) |
| Abstract: | This paper studies how fiscal policy affects credit market conditions. First, it conducts a FAVAR analysis showing that the credit spread responds negatively to an expansionary government spending shock, while consumption, investment, and lending increase. Second, it illustrates that these results are not mimicked by a DSGE model where the credit spread is endogenized via the inclusion of a banking sector exploiting lending relationships. Third, it demonstrates that introducing deep habits in private and government consumption makes the model able to replicate empirics. Sensitivity checks and extensions show that core results hold for a number of model calibrations and specifications. The presence of banks exploiting lending relationships generates a financial accelerator effect in the transmission of fiscal shocks. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:bbk:bbkefp:1103&r=ban |
| By: | Paulo Araújo Santos; Juan-Ángel Jiménez-Martín; Michael McAleer (University of Canterbury); Teodosio Pérez Amaral |
| Abstract: | In McAleer et al. (2010b), a robust risk management strategy to the Global Financial Crisis (GFC) was proposed under the Basel II Accord by selecting a Value-at-Risk (VaR) forecast that combines the forecasts of different VaR models. The robust forecast was based on the median of the point VaR forecasts of a set of conditional volatility models. In this paper we provide further evidence on the suitability of the median as a GFC-robust strategy by using an additional set of new extreme value forecasting models and by extending the sample period for comparison. These extreme value models include DPOT and Conditional EVT. Such models might be expected to be useful in explaining financial data, especially in the presence of extreme shocks that arise during a GFC. Our empirical results confirm that the median remains GFC-robust even in the presence of these new extreme value models. This is illustrated by using the S&P500 index before, during and after the 2008-09 GFC. We investigate the performance of a variety of single and combined VaR forecasts in terms of daily capital requirements and violation penalties under the Basel II Accord, as well as other criteria, including several tests for independence of the violations. The strategy based on the median, or more generally, on combined forecasts of single models, is straightforward to incorporate into existing computer software packages that are used by banks and other financial institutions. |
| Keywords: | Value-at-Risk (VaR); DPOT; daily capital charges; robust forecasts; violation penalties; optimizing strategy; aggressive risk management; conservative risk management; Basel; global financial crisis |
| JEL: | G32 G11 C53 C22 |
| Date: | 2011–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:11/28&r=ban |
| By: | Stefano Puddu (Institute of economic research IRENE, Faculty of Economics, University of Neuchâtel, Switzerland; Department of Econometrics and Political Economy DEEP, Faculty of Economics, University of Lausanne, Switzerland); Andreas Waelchli (Studienzentrum Gerzensee (Study Center Gerzensee), Schweizerische Nationalbank (SNB) (Swiss National Bank); Department of Econometrics and Political Economy DEEP, Faculty of Economics, University of Lausanne, Switzerland) |
| Abstract: | During the last financial crisis the Federal Reserve launched several extraordinary actions, including the creation of a number of new facilities for auctioning short-term credit, with the general aim of sustaining the financial sector and of ensuring adequate access to liquidity to financial institutions. One of these programs has been the Term Auction Facility (TAF). The goal of this paper is twofold. First, we want to study banks' liquidity and liability features depending on whether banks received credit from the TAF program. Second, we want to measure the impact of program facilities on banks liquidity risk. In order to achieve these goals we fit a treatment effects model. In the first step the probability of obtaining TAF program facilities has been instrumented by a set of variables measured before the beginning of the TAF program. In the second step, once controlled for potential selection bias and endogeneity, the impact of TAF facilities on banks liquidity risk, posterior to the end of the program, has been measured. The results suggest that, on average, banks that obtained program facilities show higher short term net liabilities, higher volume of short term liabilities and higher short term liabilities over total liabilities. These banks exhibit as well a smaller ratio of short term liabilities over total assets and risk-free assets over short term liabilities. Moreover, it has been found that banks that obtained at some point TAF facilities exhibit smaller ex post liquidity risk as well as that ex ante liquidity risk positively affects the probability of receiving program facilities. Several robustness checks confirm the main results. Our findings support the view point that the Federal Reserve correctly identified the program target banks and it also achieved the goal of decreasing liquidity risk. |
| Keywords: | TAF, Liquidity Risk, Financial Crisis |
| JEL: | G21 G28 G32 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:irn:wpaper:11-01&r=ban |
| By: | Martins-da-Rocha, Victor Filipe; Vailakis, Y. |
| Abstract: | In infinite horizon financial markets economies, competitive equilibria fail to exist if one does not impose restrictions on agents' trades that rule out Ponzi schemes. When there is limited commitment and collateral repossession is the unique default punishment, Araujo, Páscoa and Torres-Martínez (2002) proved that Ponzi schemes are ruled out without imposing any exogenous/endogenous debt constraints on agents' trades. Recently Páscoa and Seghir (2009) have shown that this positive result is not robust to the presence of additional default punishments. They provide several examples showing that, in the absence of debt constraints, harsh default penalties may induce agents to run Ponzi schemes that jeopardize equilibrium existence.The objective of this paper is to close a theoretical gap in the literature by identifying endogenous borrowing constraints that rule out Ponzi schemes and ensure existence of equilibria in a model with limitedcommitment and (possible) default. We appropriately modify the definition of finitely effective debt constraints, introduced by Levine and Zame (1996) (see also Levine and Zame (2002)), to encompass models with limited commitment, default penalties and collateral. Along this line, we introduce in the setting of Araujo, Páscoa and Torres-Martínez (2002), Kubler and Schmedders (2003) and Páscoa and Seghir (2009) the concept of actions with finite equivalent payoffs. We show that, independently of the level of default penalties, restricting plans to have finite equivalent payoffs rules out Ponzi schemes and guarantees the existence of an equilibrium that is compatible with the minimal ability to borrow and lend that we expect in our model.An interesting feature of our debt constraints is that they give rise to budget sets that coincide with the standard budget sets of economies having a collateral structure but no penalties (as defined in Araujo,Páscoa and Torres-Martínez (2002)). This illustrates the hidden relation between finitely effective debt constraints and collateral requirements. |
| Date: | 2011–06–30 |
| URL: | http://d.repec.org/n?u=RePEc:fgv:epgewp:719&r=ban |
| By: | Raven Molloy; Hui Shan |
| Abstract: | Despite the recent flood of foreclosures on residential mortgages, little is known about what happens to borrowers and their households after their mortgage has been foreclosed. We study the post-foreclosure experience of U.S. households using a unique dataset based on the credit reports of a large panel of individuals to from 1999 to 2010. Although foreclosure considerably raises the probability of moving, the majority of post-foreclosure migrants do not end up in substantially less desirable neighborhoods or more crowded living conditions. These results suggest that, on average, foreclosure does not impose an economic burden large enough to severely reduce housing consumption. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2011-32&r=ban |
| By: | Paula Antão; Miguel A. Ferreira; Ana Lacerda |
| Abstract: | Universal banks can have control over borrowers by holding equity stakes in the borrower firm. Banks’ corporate control is likely to increase the likelihood of providing a future loan as they mitigate information asymmetry and agency costs of debt. Using panel data on Portuguese companies, we find that a bank corporate control enhances the probability of providing a future loan by 10 percentage points relative to a relationship lender with no control. This finding is robust to the inclusion of many firm-level controls, including firm fixed effects, and to instrumental variable methods to correct for the potential endogeneity of banks’ equity stakes in borrower firms. Consistent with our hypotheses, the effect is significantly higher for borrowers with greater information asymmetry, while the effect is lower when the borrower has multiple lending relationships or multiple banks as shareholders. Our results suggest banks’ corporate control affect the choice of the lender in the corporate loan market. |
| JEL: | G21 G34 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201117&r=ban |
| By: | Krenar Avdulaj (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic) |
| Abstract: | Assessing the extreme events is crucial in financial risk management. All risk managers and financial institutions want to know the risk of their portfolio under rare events scenarios. We illustrate a multivariate market risk estimating method which employs Monte Carlo simulations to estimate Value-at-Risk (VaR) for a portfolio of 4 stock exchange indexes from Central Europe. The method uses the non-parametric empirical distribution to capture small risks and the parametric Extreme Value theory to capture large and rare risks. We compare estimates of this method with historical simulation and variance-covariance method under low and high volatility samples of data. In general historical simulation method overestimates the VaR for extreme events, while variance-covariance underestimates it. The method that we illustrate gives a result in between because it considers historical performance of the stocks and also corrects for the heavy tails of the distribution. We conclude that the estimate method that we illustrate here is useful in estimating VaR for extreme events, especially for high volatility times. |
| Keywords: | Value-at-Risk, Extreme Value Theory, copula. |
| JEL: | C22 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:fau:wpaper:wp2011_26&r=ban |
| By: | Tatom, John |
| Abstract: | The United States economy has suffered over the past four years from crises in mortgage foreclosures and in financial markets, as well as a long recession that some have referred to as the Great Recession. The links between these events, or more broadly the causes, extent and effects of these developments, are sources of continuing controversy and uncertainty. This paper attempts to disentangle the links between the mortgage foreclosure crisis, the financial crisis, a possible banking crisis and the Great Recession, at least in terms of timing, and also to provide an alternative view to the conventional wisdom, especially for the link of crises to the recession. |
| Keywords: | Foreclosure crisis; banking crisis; financial crisis; recession |
| JEL: | E32 E44 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:31914&r=ban |
| By: | Delis, Manthos D; Kouretas, Georgios; Tsoumas, Chris |
| Abstract: | Using a number of theoretical considerations, we define distinct periods of anxiety for key economic agents that are involved in lending decisions; namely, consumers, CEOs, and banks. The main characteristic of anxious periods is that the perceptions and expectations about economic conditions worsen for these agents even though the economy is not in a recession. Subsequently, we study the lending behavior of US banks during the three distinct pools of anxious quarters from 1985-2010, using bank-level data. We find that banks’ lending falls when consumers and banks are anxious, and this effect is more pronounced when banks hold a high level of credit risk. Yet, in those anxious periods that were followed by recessions, the negative impact of anxiety on loan growth is significantly weaker for banks with high-credit risk that points to the existence of a moral-hazard mechanism. We also find significant differentiation in banks’ lending within anxious periods across different loan categories. We contend that these findings point to the identification of an ‘expectations channel’ in banks’ lending that exists throughout the business cycle. |
| Keywords: | Banks’ lending; Anxious periods; Consumers; CEOs; Banks; Bank characteristics |
| JEL: | D2 E32 E44 G21 |
| Date: | 2011–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32422&r=ban |
| By: | Ozgur E. Ergungor; Leonardo Madureira; Nandkumar Nayar; Ajai K. Singh |
| Abstract: | This paper examines disclosures by sell-side analysts when their institution has a lending relationship with the firms being covered. Lending-affiliated analysts’ earnings forecasts are found to be more accurate relative to forecasts by other analysts but this differential accuracy manifests itself only after the advent of the loan. Despite this increased earnings forecast accuracy, lending-affiliated analysts exhibit undue optimism in their brokerage recommendations and forecasts of long term growth. The optimism exists both before and after the lending commences. The evidence suggests that any insights into the covered firm via thelending relationship are employed by bank analysts in a selective manner. They appear unwilling to compromise on disclosures where expost accuracy is clearly revealed, possibly to preserve their own personal reputation. However, they are overly optimistic on other disclosures where resolution is less readily verifiable, possibly to promote their lending client’s financial standing. |
| Keywords: | Forecasting ; Investment banking |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedcwp:1114&r=ban |
| By: | Henry Dannenberg |
| Abstract: | This article seeks to make an assessment of estimation uncertainty in a multi-rating class loan portfolio. Relationships are established between estimation uncertainty and parameters such as probability of default, intra- and inter-rating class correlation, degree of inhomogeneity, number of rating classes used, number of debtors and number of historical periods used for parameter estimations. In addition, by using an exemplary portfolio based on Moody’s ratings, it becomes clear that estimation uncertainty does indeed have an effect on interest rates. |
| Keywords: | credit portfolio risk, estimation uncertainty, bootstrapping, economic equity |
| JEL: | C15 D81 G11 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:iwh:dispap:11-11&r=ban |
| By: | Scott Schuh; Oz Shy; Joanna Stavins; Robert Triest |
| Abstract: | In 2010, the Department of Justice (DOJ) filed a lawsuit against the credit card networks American Express, MasterCard, and Visa for alleged antitrust violations. We evaluate the extent to which the recently proposed settlement between the DOJ and Visa and MasterCard (henceforth, "Proposed Settlement") is likely to achieve its central objective: "…to allow Merchants to attempt to influence the General Purpose [Credit] Card or Form of Payment Customers select by providing choices and information in a competitive market." In word and spirit, the Proposed Settlement represents a significant step toward promoting competition in the credit card market. However, we find that merchants are unlikely to be able to take full advantage of the Proposed Settlement's new freedoms because they currently lack comprehensible and complete information on the full and exact merchant discount fees for their customers' credit cards. We analyze the likely consequences of this information problem, and consider ways in which it could be remedied. We also evaluate the probable welfare consequences of allowing merchants to impose surcharges to reflect the fees associated with the use of payment cards. |
| Keywords: | Credit cards |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbpp:11-4&r=ban |
| By: | Katrin Forster (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main); Melina Vasardani (Bank of Greece, 21 E. Venizelos Ave., Athens 10250, Greece.); Michele Ca’ Zorzi (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main) |
| Abstract: | This paper analyses the impact of the global financial crisis on euro area cross-border financial flows by comparing recent developments with the main pre-crisis trends. Two prominent features of the period of turmoil were (i) the sizeable deleveraging of external financial exposures by the private sector and, in particular, the banking sector from 2008 and (ii) the significant changes in the composition of euro area cross-border portfolio flows, as investors shifted from equity to debt instruments, from long-term to short-term debt instruments and from private to public sector securities. Since 2009 such trends have started reversing. However, as balance sheet restructuring by financial and non-financial corporations continues, cross-border financial flows have remained well below pre-crisis levels. The degree of resumption and volatility of cross-border financial activity may have a major bearing on growth prospects for the euro area and may also matter from a financial stability perspective. We argue that the recent experience, first of extraordinary growth and then of scaling down of international financial activity, calls for enhanced monitoring of developments in cross-border financial flows so that the underlying risks to the domestic economy stemming from the financial sector can be better assessed. Looking forward, successful implementation of policy actions to promote macroeconomic discipline and enhance financial regulation and supervision could influence, inter alia, the composition and volume of cross-border capital flows, contributing to a more efficient and sustainable allocation of resources. JEL Classification: E44, E58, F33, F42 |
| Keywords: | Global financial crisis, euro area, capital flows. |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:20110126&r=ban |
| By: | Ahmad, Nor Hayati Bt; Noor, Mohamad Akbar Noor Mohamad; Sufian, Fadzlan |
| Abstract: | The paper investigates the efficiency of the Islamic banking sectors in the world covering 25 countries during the period of 2003-2009. The efficiency estimates of individual banks are evaluated using the non-parametric Data Envelopment Analysis (DEA) method. The empirical findings suggest that during the period of study, pure technical efficiency outweighs scale efficiency in World Islamic banking countries. We find that banks from the high income countries were the leaders by dominating the most efficiency frontier during the period of study. |
| Keywords: | Islamic Banks: Data Envelopment Analysis (DEA): Performance Evaluation. |
| JEL: | G28 G21 |
| Date: | 2010–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:29497&r=ban |
| By: | David Hulme; Thankom Arun |
| Abstract: | Microfinance as the best way of tackling poverty is under attack. It has been accused of failing to help the poor, of treating its clients badly, of charging high interest rates and of encouraging poor people to take on excessive debt burdens. The authors examine these issues, and find that microfinance institutions (MFIs) can have significant positive impacts, including democratisation of banking services, provision of secure savings facilities for poor people, and social benefits, particularly for women. The paper looks at the way forward for microfinance, suggesting some changes that need to be implemented by MFIs, banking authorities and governments. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:bwp:bwppap:15511&r=ban |