nep-ban New Economics Papers
on Banking
Issue of 2015‒12‒20
eleven papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. The Determinants of Systemic Banking Crises A Regulatory Perspective By Michael Wosser
  2. Enhancing Bank Supervision in Asia: Lessons Learned from the Financial Crisis By Zamorski, Michael; Lee, Minsoo
  3. The dynamic relationship between bank asset diversification and efficiency: Evidence from the Chinese banking sector By Kai Du; Andrew C. Worthington; Valentin Zelenyuk
  4. Arbitraging the Basel securitization framework: Evidence from German ABS investment By Efing, Matthias
  5. Innovation and competition in Internet and mobile banking: an industrial organization perspective By Mariotto, Carlotta; Verdier, Marianne
  6. Announcement Effects of Contingent Convertible Securities: Evidence from the Global Banking Industry By Ammann, Manuel; Blickle, Kristian; Ehmann, Christian
  7. The Liquidity Crisis, Investor Sentiment, and REIT Returns and Volatility By Huerta, Daniel; Egly, Peter V.; Escobari, Diego
  9. Optimal Control of Conditional Value-at-Risk in Continuous Time By Christopher W. Miller; Insoon Yang
  10. Accounting Information Quality and Government Guaranteed Loans: Evidence from Japanese SMEs By Hyonok KIM; YASUDA Yukihiro
  11. Measuring Interconnectedness between Financial Institutions with Bayesian Time-Varying VARs By Marco Valerio Geraci; Jean-Yves Gnabo

  1. By: Michael Wosser (Department of Economics, Finance and Accounting, Maynooth University.)
    Abstract: Using a sample of 75 developed and emerging economies covering the period 1998-2011 we show that the enhanced Basel III Accord variables Tier-1 capital and the new liquidity measure known as the Net Stable Funding Ratio (NSFR), when measured in levels, do not feature as systemic banking crisis determinants. Neither does distance from the minimum standard, in either direction, matter. However the compound annual growth rate of Tier-1 capital is shown to be significantly associated with overall financial-services stability. Certain aspects of the regulatory environment are shown to contribute positively towards systemic risk mitigation whereas others do not. For example by restricting the breadth of trading activities permitted to banks, banking sectors are made stable. However regimes where capital adequacy standards are rigorously enforced are no more robust than their less strictly-enforced counterparts.
    Keywords: Systemic Banking Crises; Determinants; Basel III Accord; Regulations; Regulatory Framework; Stability; Early Warning System
    JEL: G21 G28
    Date: 2015
  2. By: Zamorski, Michael (South East Asian Central Banks); Lee, Minsoo (Asian Development Bank)
    Abstract: The global financial crisis underlined that sound and effective bank regulation is vital to financial stability. Assessments of the global financial crisis invariably point to ineffective finance regulation and supervision as the main reasons for the onset of the crisis and its severity. In particular, lapses in banking regulation contributed significantly to the outbreak. The crisis reflected the failure of regulatory authorities to keep pace with financial innovation. Bank supervision had been weak by any measure. Supervisors did not conduct regular onsite bank inspections or examinations of sufficient depth. They did not properly implement risk-based supervision, and they failed to identify shortcomings in banks’ risk-management methods, governance structures, and risk cultures. Meanwhile, offsite surveillance systems rely too heavily on banks’ self-reported data to effectively monitor risk. Banking regulation is the primary safeguard against financial instability, but it should be supplemented by macroprudential policies and other new policy instruments now available to regulatory authorities.
    Keywords: Basel Committee’s core principles; finance regulation and supervision; global financial crisis; macroprudential policy
    JEL: G01 G18 G21 G28
    Date: 2015–08–12
  3. By: Kai Du (Entrepreneurship, Commercialization & Innovation Centre, University of Adelaide); Andrew C. Worthington (Department of Accounting, Finance and Economics, Griffith University); Valentin Zelenyuk (School of Economics, The University of Queensland)
    Abstract: In this paper, we investigate the impact of earning asset diversification on Chinese bank efficiency from 2006 to 2011. To do so, we adapt the Simar and Wilson (2007) Journal of Econometrics approach to allow for technology change over time. Regression results reveal that increasing the asset share of other earning assets (including securities and derivatives) is positively associated with bank efficiency. Decreasing the share of nonearning assets in total assets or increasing total equity has a similar impact. Our results also suggest that financial reforms currently being undertaken in China, including removing the regulatory requirement concerning the ratio of loans to deposits (a new draft amendment to the existing commercial banking law) and interest rate liberalization (a proposed draft amendment), are likely to induce a significant positive effect on bank efficiency.
    Keywords: Asset diversification; Data envelopment analysis; Truncated regression; Bootstrapping; Chinese banks
    JEL: D21 C13 G21 C44
    Date: 2015–12
  4. By: Efing, Matthias
    Abstract: This paper provides evidence for regulatory arbitrage within the class of assetbacked securities (ABS) based on individual asset holding data of German banks. I find that those banks operating with tight regulatory constraints pick the securities with the highest yield and lowest collateral quality among ABS with the same regulatory risk weight. This ABS selection allows banks to increase the return on the capital required for an ABS investment by a factor of four.
    Keywords: regulatory arbitrage,asset-backed securities,risk-taking,credit ratings
    JEL: G01 G21 G24 G28
    Date: 2015
  5. By: Mariotto, Carlotta (MINES ParisTech, PSL - Research University); Verdier, Marianne (Université Paris 2 Panthéon Assas, CRED (TEPP) and MINES ParisTech, PSL - Research University)
    Abstract: Over the recent years, the development of Internet banking and mobile banking has had a considerable impact on competition in the retail banking industry. In some countries, the regulatory framework has been adapted to allow non-banks to operate in retail payments and compete with banks for deposits. Several platforms or large retailers have started to offer innovative financial products to their customers. In this paper, we survey the issues related to innovation and competition in Internet banking and mobile banking and discuss some perspectives for future research.
    Keywords: bank competition; bank regulation; non-banks; payment systems; Internet banking; mobile banking; platform markets
    JEL: E42 G21 L96
    Date: 2015–11–25
  6. By: Ammann, Manuel; Blickle, Kristian; Ehmann, Christian
    Abstract: This paper investigates the announcement effects of contingent convertible securities (CoCo bonds) issued by global banks between January 2009 and June 2014. Using a sample of 34 financial institutions and 87 CoCo bond issues, we examine abnormal stock price reactions and CDS spread changes before and after the announcement dates. We find that the announcement of CoCo bonds correlates with positive abnormal stock returns and negative CDS spread changes in the immediate post-announcement period. The effects are most pronounced for first-time issues. We explain the CDS spread changes by the lower probability of costly bankruptcy proceedings and the abnormal stock returns by a signaling framework that is based on pecking order theory and the cost advantage over equity (tax shield). We also examine the factors that are associated with the post-announcement abnormal stock returns and find that the existence of issuer call provisions reduces the positive abnormal returns.
    Keywords: Contingent Convertible Securities, CoCo Bonds, Announcement Effects, Event Study
    JEL: G01 G14 G21
    Date: 2015–12
  7. By: Huerta, Daniel; Egly, Peter V.; Escobari, Diego
    Abstract: The real estate investment trust (REIT) industry experienced a liquidity crisis resulting from reduced access to credit commitments as banks were restoring their balance sheets during the 2007-2009 financial crisis. Employing generalized autoregressive conditional heteroscedasticity (GARCH) models we examine the impact of the liquidity crisis and investor sentiment on REIT returns and volatility over the sample period from December 2001 to February 2013. We find that the liquidity crisis negatively impacts REIT returns and helps explain increases in volatility; this finding is robust to multiple specifications. We show that investor sentiment is a significant factor in explaining the REIT return generating process with institutional sentiment playing a dominating role over individual sentiment; furthermore, institutional sentiment was the only relevant sentiment variable during liquidity crisis.
    Keywords: Investor Sentiment,Liquidity Crisis,REIT returns,REIT volatility,GARCH-M
    JEL: G11 G14 G23
    Date: 2015–11–21
  8. By: Yaya KOLOMA (École Supérieure d’Agro-développement International : ISTOM); Zaka RATSIMALAHELO (Université de Bourgogne Franche-Comté, CRESE)
    Abstract: This paper focuses on the link between young people's access to microcredit and performance of their business by asking whether the performance of their microenterprise can be explained by access or lack of access to microcredit. Using the survey data conducted by INSTAT and ODHD Mali among the recipients of microfinance services in 2007-2008, we, firstly, give a descriptive approach to analyze micro financing conditions and performance indicators. The propensity score matching is then used to estimate both the determinants of access to credit and the effects of access on the performance of micro-enterprises.
    Keywords: Young people, Microcredit, Microenterprises, Efficiency, Mali
    JEL: I3 J16 C2 G21
    Date: 2015–12
  9. By: Christopher W. Miller; Insoon Yang
    Abstract: We consider continuous-time stochastic optimal control problems featuring Conditional Value-at-Risk (CVaR) in the objective. The major difficulty in these problems arises from time-inconsistency, which prevents us from directly using dynamic programming. To resolve this challenge, we convert to an equivalent bilevel optimization problem in which the inner optimization problem is standard stochastic control. Furthermore, we provide conditions under which the outer objective function is convex and differentiable. We compute the outer objective's value via a Hamilton-Jacobi-Bellman equation and its gradient via the viscosity solution of a linear parabolic equation, which allows us to perform gradient descent. The significance of this result is that we provide an efficient dynamic programming-based algorithm for optimal control of CVaR without lifting the state-space. To broaden the applicability of the proposed algorithm, we provide convergent approximation schemes in cases where our key assumptions do not hold and characterize relevant suboptimality bounds. In addition, we extend our method to a more general class of risk metrics, which includes mean-variance and median-deviation. We also demonstrate a concrete application to portfolio optimization under CVaR constraints. Our results contribute an efficient framework for solving time-inconsistent CVaR-based dynamic optimization.
    Date: 2015–12
  10. By: Hyonok KIM; YASUDA Yukihiro
    Abstract: We empirically investigate the effects of accounting information quality, as measured by accruals quality, on the use of government guaranteed loans, which we regard as a form of transaction lending. We find that higher accruals quality is associated with higher use rates of government guaranteed loans, but not associated with use rates of nonguaranteed (i.e., regular) loans, which we consider to constitute relationship lending within the Japanese context. We also find that higher accruals quality is not related to the interest rate for guaranteed loans, but is associated with a lower interest rate for nonguaranteed loans. These results indicate that the relevant accounting information is effectively used in the screening processes for small and medium-sized enterprises (SMEs), but that the effectiveness varies depending on the particular lending technology employed.
    Date: 2015–12
  11. By: Marco Valerio Geraci; Jean-Yves Gnabo
    Keywords: financial interconnectedness; time-varying parameter; granger casuality
    JEL: G10 G18 C32 G32 C51 C63
    Date: 2015–12

This nep-ban issue is ©2015 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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.