New Economics Papers
on Banking
Issue of 2012‒06‒13
fourteen papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. Foreign banks, corporate strategy and financial stability: lessons from the river plate By Michael Brei; Carlos Winograd
  2. The Shadow Banking System - Survey and Typological Framework By Jenny Poschmann
  3. How do banks screen innovative firms? Evidence from start-up panel data By Brown, Martin; Degryse, Hans; Höwer, Daniel; Penas, María Fabiana
  4. Basel I, II, III – we want it all at once By Cousin, Violaine
  5. Stress test macroéconomique du système bancaire de l'UEMOA By Gammadigbé, Vigninou
  6. The Impact of New Financial Regulations on Emerging Markets: A Synthesis of a Global Survey By Vladislav Prokopov
  7. A mechanism for booms and busts in housing prices By Hillebrand, Marten; Kikuchi, Tomoo
  8. Home-mortgage lending trends in New England in 2010 By Ana Patricia Muñoz
  9. Irish Housing: A Role for Loan-to-Value Limits? By Duffy, David
  10. The Credit Crisis of Emerging Market Firms By Esteban Ferro
  11. Predatory Lending and the Subprime Crisis By Agarwal, Sumit; Ben-David, Itzhak; Amromin, Gene; Chomsisengphet, Souphala; Evanoff, Douglas D.
  12. Capital requirements on ordered topological vector spaces: finiteness, continuity and optimality By Walter Farkas; Pablo Koch-Medina; Cosimo-Andrea Munari
  13. Macroeconomics with Financial Frictions: A Survey By Markus K. Brunnermeier; Thomas M. Eisenbach; Yuliy Sannikov
  14. Does Microcredit Create Over-indebtedness? By Sk. Mahmudul Alam, Mahmud

  1. By: Michael Brei (EconomiX - CNRS : UMR7166 - Université Paris X - Paris Ouest Nanterre La Défense); Carlos Winograd (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, Université d'Evry - Val d'Essonne - Université d'Evry - Val d'Essonne, PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA)
    Abstract: This paper analyzes the risk taking of branches and subsidiaries of international bank holding institutions from the perspective of host country regulators in two Latin American financial systems: Argentina and Uruguay. Using both theory and empirics, we analyze differences in the risk attitudes of these institutions in the run up to the major financial crises of 2001-02. The empirical part of this paper is based on a rich bank-level dataset on corporate structures, balance sheets, and ownership of banks. We find that foreign banks branches have taken on fewer risks than subsidiaries and relate this to differences in the legal responsibility of parent banks. This research not only shows original results concerning banks corporate strategies in the face of country risk, but also contributes to the debate on appropriate banking regulation.
    Keywords: Financial Crises ; Argentina ; Uruguay ; Bank Corporate
    Date: 2012–06
  2. By: Jenny Poschmann (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: Even though the sector of Non-bank financial intermediaries (NBFI) or shadow banks represent a large part of the contemporary financial system, these institutions received almost no attention in macroeconomic studies so far. Their presence has significant influence on the conduct of monetary policy and systemic risk within the financial system. Therefore, it is important to understand the nexus within the shadow banking sector and connections with the traditional banking sector. This work will examine specific institutions involved in the shadow banking system and their development. A stylized banking sector including NBFI will be introduced and provides the starting point for subsequent research on monetary transmission.
    Keywords: shadow banking, financial intermediation, financial architecture, monetary policy
    JEL: G10 E44
    Date: 2012–05–28
  3. By: Brown, Martin; Degryse, Hans; Höwer, Daniel; Penas, María Fabiana
    Abstract: Start-up firms often face difficulties in raising external funds. Employing a unique panel dataset covering 9,715 start-up firms over the period 2007-2009, we find that high-tech startups are less likely to use bank finance and face more difficulties in raising bank finance than low-tech start-ups. We find that external credit scores do affect the availability of credit for start-up firms, but that banks rely less on external rating information in their decision making for high-tech start-ups than low-tech start-ups. Start-ups that have their main relation with a small bank use more bank finance and report less difficulties in getting credit. By contrast, a greater expertise of the bank in the firm's industry is not associated with fewer difficulties to get bank loans. There are no differences between high-tech and low-tech start-ups regarding the impact of bank size. --
    Keywords: Innovation,Start-up,Credit information sharing,Soft information
    JEL: G2 G18 O16 P34
    Date: 2012
  4. By: Cousin, Violaine
    Abstract: The complexity of Basel II and III has reached China as well. In a revolutionary turn within seven years, the Chinese bank regulator has introduced capital adequacy as the tool of choice for supervision and ensured that banks in the process remain focused on implementing all the bits of the internationally developed Basel Accords. Will it make Chinese banks really more resilient?
    Keywords: bank; regulation; Basel II and III; China
    JEL: G38 G28
    Date: 2012–05–19
  5. By: Gammadigbé, Vigninou
    Abstract: In this paper we evaluate the resilience of the banking system of WAEMU to macroeconomic shocks. From banks data, aggregated by country from 1990 to 2010, we identify the microeconomic and macroeconomic determinants of banks profitability of the Union using the generalized method of moments (GMM) in a dynamic panel data model. We then perform the exercises of stress by evaluating the sensitivity of the banks coefficient of profitability to various adverse scenarios.The results show that banks of the Union are more vulnerable to monetary shocks than real activity. They support especially soundness of the banking sector as a whole in respond to changes in its macroeconomic environment, so that the risk of degradation of profitability related to impact of the real economy are contained.
    Keywords: Stress testing; dynamic panel data models; Generalized method of moments; coefficient of profitability; WAEMU
    JEL: C23 G21
    Date: 2012–03
  6. By: Vladislav Prokopov (International Business School, Brandeis University)
    Abstract: The global financial crisis revealed the fragility of the global fnancial framework under the current Basel agreements and provided an impetus not only for curtailing the risky activity of banks but also for rethinking what affects the stability of the global fnancial system. The recent Basel III agreement was designed to provide additional levers that should make national fnancial systems, and by extension the global fnancial system, stronger. This paper discusses the key fndings of a global survey of fnancial, economic and political stakeholders conducted by students from Brandeis International Business School on whether the Basel III agreement will be able to construct and maintain a sound financial regulatory framework.
    Keywords: Debt, Basel III, global financial system, banks, regulatory framework, regulations, banking
    JEL: G32 L26
    Date: 2011
  7. By: Hillebrand, Marten; Kikuchi, Tomoo
    Abstract: We study an exchange economy with overlapping generations of consumers who derive utility from consuming a non-durable commodity and housing. A banking sector offers loans to finance housing. We provide a complete characterization of the equilibrium dynamics which alternates between an expansive regime where housing prices increase and banks expand loans and a contractive regime associated with decreasing housing values and shrinking credit volume. Regime switches occur even under small but persistent income changes giving rise to large and recurrent booms and busts in housing prices not reflecting changes in fundamentals. --
    Keywords: OLG,Housing prices,Credit volume,Boom-bust scenarios,Regime switching
    JEL: C62 E32 G21
    Date: 2012
  8. By: Ana Patricia Muñoz
    Abstract: This brief analysis of home-mortgage lending trends in New England is based on data collected under the Home Mortgage Disclosure Act (HMDA). HMDA provides information on mortgage lending trends and includes data by loan purpose, type of loan, income, and the race and ethnicity of borrowers. In this report we focus on home-purchase and refinance loans in New England.
    Keywords: Mortgage loans - New England
    Date: 2012
  9. By: Duffy, David
    Date: 2012–02
  10. By: Esteban Ferro (International Business School, Brandeis University)
    Abstract: Asks the question "Is access to credit an obstacle for firms in emerging markets?" and presents data demonstrating how lack of access to credit creates obstacles that affects a firm's bottom line. Further explains how firms with only access to weaker financial services are condemned to a slower growth path and diminished rate of return on profits per loan.
    Keywords: Credit, Credit Crisis, Emerging Markets, Access to credit
    JEL: G32 L26
    Date: 2011
  11. By: Agarwal, Sumit (National University of Singapore and Federal Reserve Bank of Chicago); Ben-David, Itzhak (OH State University); Amromin, Gene (Federal Reserve Bank of Chicago); Chomsisengphet, Souphala (US Office of the Comptroller of the Currency); Evanoff, Douglas D. (Federal Reserve Bank of Chicago)
    Abstract: It is typically argued that predatory lending generated significant social costs and played a central role in creating the subprime crisis. However, there are few estimates of its true effect. We estimate the effect of predatory lending on the residential mortgage default rate using an anti-predatory program implemented in Chicago in 2006. Under the legislation, risky borrowers and risky mortgages triggered mandatory counseling. Following the legislation, market activity decreased by about 35%, where risky borrowers, risky products, and lenders who typically made riskier loans were most affected. Despite the sharp decline in market activity, 18- and 36-month default rates in the treated group exhibited a relative improvement of 12% and 7%, respectively. We estimate that predatory loans have a 6-7% higher default rate than nonpredatory loans. Our results suggest that predatory lending may have not been instrumental in precipitating the financial crisis as often believed.
    Date: 2012–05
  12. By: Walter Farkas; Pablo Koch-Medina; Cosimo-Andrea Munari
    Abstract: We discuss finiteness (effectiveness), continuity (robustness) and optimality (efficiency) results for capital requirements, or risk measures, defined for financial positions belonging to an ordered topological vector space. Given a set of acceptable financial positions and a pre-specified traded asset (the eligible asset), the associated capital requirement for a financial position represents to the amount of capital that needs to be raised and invested in the eligible asset to make the position acceptable. Our abstract approach allows to provide results that are applicable to a whole range of spaces of financial positions commonly used in the literature. Moreover, it allows to unveil the key properties of acceptance sets and of eligible assets driving the effectiveness and the robustness of the associated capital requirements. In particular, if the underlying space is a Fr\'echet lattice, we provide new finiteness results for required capital, as well as a simplified proof of the Extended Namioka-Klee theorem for risk measures. As an application we present a comprehensive treatment of finiteness and continuity for capital requirements based on Value-at-Risk and Tail-Value-at-Risk acceptability.
    Date: 2012–06
  13. By: Markus K. Brunnermeier; Thomas M. Eisenbach; Yuliy Sannikov
    Abstract: This article surveys the macroeconomic implications of financial frictions. Financial frictions lead to persistence and when combined with illiquidity to non-linear amplification effects. Risk is endogenous and liquidity spirals cause financial instability. Increasing margins further restrict leverage and exacerbate downturns. A demand for liquid assets and a role for money emerges. The market outcome is generically not even constrained efficient and the issuance of government debt can lead to a Pareto improvement. While financial institutions can mitigate frictions, they introduce additional fragility and through their erratic money creation harm price stability.
    JEL: A23 E1 E3 E4 E5 G01 G1 G2
    Date: 2012–05
  14. By: Sk. Mahmudul Alam, Mahmud
    Abstract: In the context of the present crisis of microfinance, it is quite common to use the term over-indebtedness among the poor. Coming up with a precise definition of over-indebtedness for research or regulatory purposes is surprisingly a complex challenge. Few of researchers took attempt to define and measure over-indebtedness among microfinance borrowers. Among them Maurer and Pytkowska (2010); Spannuth & Pytkowska (2011) and Schicks (2011) are notable. But their definition and measurement process of over-indebtedness are not unique. Maurer and Pytkowska showed that by taking microcredit, 17% borrowers are over-indebted and 11% borrowers are at risk of becoming over-indebted in Bosnia and Herzegovina. Spannuth & Pytkowska demonstrated that 7% borrowers are insolvent, 4% borrowers are in critical position and 14% are at risk of becoming over-indebted in Kosovo. Schicks displayed that 30% borrowers are over-indebted in Ghana. The endeavor of this paper is to show the real fact whether microcredit creates over-indebtedness among its borrowers or not.
    Keywords: Microcredit; Borrowers; Over-indebtedness
    JEL: H63 G21
    Date: 2012–05–30

This issue is ©2012 by Christian Calmès. 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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