nep-ban New Economics Papers
on Banking
Issue of 2016‒04‒04
fourteen papers chosen by
Christian Calmès, Université du Québec en Outaouais

  1. The Measurement of the Long-Term and Short-Term Risks of Chinese Listed Banks By Song, Wenjuan; Sun, Lixin
  2. The Effect of Real Estate Prices on Banks' Lending Channel By Hazama, Makoto; Hosono, Kaoru; Uesugi, Iichiro
  3. Too-Big-To-Fail Before the Fed By Gary Gorton; Ellis W. Tallman
  4. The impact of supervision on bank performance By Hirtle, Beverly; Kovner, Anna; Plosser, Matthew
  5. Conditional Determinants of Mobile Phones Penetration and Mobile Banking in Sub-Saharan Africa By Asongu, Simplice
  6. Liquidity Requirements, Liquidity Choice and Financial Stability By Douglas W. Diamond; Anil K Kashyap
  7. Regulatory competition in capital standards with selection effects among banks By Haufler, Andreas; Maier, Ulf
  8. Unconventional US Monetary Policy: New Tools, Same Channels? By Martin Feldkircher; Florian Huber
  9. My Credit but Your Problem: The Real Effects of Credit Risk Trading By Stefano Colonnello; M. Eng; F. Zucchi
  10. Did saving Wall Street really save Main Street : the real effects of TARP on local economic conditions By Berger, Allen N.; Roman, Raluca
  11. Long-term interest rates and bank loan supply: Evidence from firm-bank loan-level data By Ono, Arito; Aoki, Kosuke; Nishioka, Shinichi; Shintani, Kohei; Yasui, Yosuke
  12. Bank Solvency and Funding Cost By Christoph Aymanns; Carlos Caceres; Christina Daniel; Liliana Schumacher
  13. Endogenous Debt Crises By Daniel Cohen; Sébastien Villemot
  14. What Did We Learn from the Financial Crisis, the Great Recession, and the Pathetic Recovery? By Alan S. Blinder

  1. By: Song, Wenjuan; Sun, Lixin
    Abstract: In this paper, we employ Semi-APARCH model to measure and analyze the long-term and the short-term risk of Chinese 16 listed commercial banks between January 2007 and December 2013, and provide an early warning method for financial regulation by developing a scale function. We find that, first, during the financial crisis of 2008-2009, the long-term risk levels of Chinese banking industry as a whole and the individual commercial banks are very higher, they gradually declined to the normal level only after 2010. Secondly, the current risk of Chinese banks and banking industry is at lower level. Thirdly, the surging of overnight rate in 2013 increased the risk level of commercial banks, which could increase more, of which the regulator should be more cautious. Fourthly, the leverage-effects in the short-term risk of Chinese commercial banks are lower; t-distribution shows a fat-tail. Fifthly, the scale functions of commercial banks are highly correlated, the correlation coefficients are close to 1, which indicates a significantly systematically correlations between the long-term risk of Chinese commercial banks.
    Keywords: Commercial Banks; Long-term Risk; Short-term Risk; Semi-APPARCH Model; Chinese Financial Market
    JEL: G21
    Date: 2014–03
  2. By: Hazama, Makoto; Hosono, Kaoru; Uesugi, Iichiro
    Abstract: The shocks to real estate prices potentially have effects on banks' balance sheets, their lending behavior, and eventually economic activities. We examine the existence of the bank lending channel in Japan during the 2007–2013 global financial crisis. We identify the heterogeneous shocks to real estate prices that affect banks by summarizing the land prices of their borrowing firms. We use a comprehensive database on firm-bank relationships as well as information on land prices for more than 20,000 locational points in Japan. We find that after controlling for fixed effects, a bank that faces a rise in land prices increases its capital, total loans, real estate loans, and loans backed by real estate collateral. We also find that the increased land prices do not significantly change the amount of non-real estate loans or loans without real estate collateral. Further, after controlling for time-varying firm fixed effects, increased land prices cause banks to reduce their transactional relationships with firms both in terms of extensive and intensive margins. We provide several possible explanations for the difference in the results between bank-level estimations and matched bank-firm estimations.
    Keywords: Bank Lending Channel, Real Estate Prices, Portfolio Reallocation
    JEL: E44 E51 G21
    Date: 2016–03
  3. By: Gary Gorton; Ellis W. Tallman
    Abstract: “Too-big-to-fail” is consistent with policies followed by private bank clearing houses during financial crises in the U.S. National Banking Era prior to the existence of the Federal Reserve System. Private bank clearing houses provided emergency lending to member banks during financial crises. This behavior strongly suggests that “too-big-to-fail” is not the problem causing modern crises. Rather it is a reasonable response to the threat posed to large banks by the vulnerability of short-term debt to runs.
    JEL: E02 E32 E42 E52 E58
    Date: 2016–03
  4. By: Hirtle, Beverly (Federal Reserve Bank of New York); Kovner, Anna (Federal Reserve Bank of New York); Plosser, Matthew (Federal Reserve Bank of New York)
    Abstract: Does the intensity of supervision affect quantifiable outcomes at supervised firms? We develop a novel proxy to identify plausibly exogenous variation in the intensity of supervision across large U.S. bank holding companies (BHCs), based on the size rank of a BHC within its Federal Reserve district. We begin by demonstrating that the largest five BHCs in a district receive discontinuously more supervisory time than smaller BHCs in the district, even after controlling for size and a variety of other BHC characteristics. Using a matched sample approach, we find that these “top five” BHCs have lower volatility of accounting earnings and market returns than otherwise similar BHCs. These firms also appear to hold less risky loan portfolios and to engage in more conservative loan loss reserving practices. While their risk is lower, top five BHCs do not experience lower accounting returns or slower asset growth. Given that these firms are subject to similar rules, our results support the idea that supervision has a distinct role as a complement to regulation.
    Keywords: bank supervision; bank regulation; bank performance
    JEL: G21 G28
    Date: 2016–03–01
  5. By: Asongu, Simplice
    Abstract: Using twenty-five policy variables, we investigate determinants of mobile phone/banking in 49 Sub-Saharan African countries with data for the year 2011. The determinants are classified into six policy categories, notably: macroeconomic, business/bank, market-related, knowledge economy, external flows and human development. The empirical evidence is based on contemporary and non-contemporary Quantile regressions. The following implications are relevant to the findings. First, mobile phone penetration is positively correlated with: (i) education, domestic savings, regulation quality and patent applications, especially at low initial levels of mobile penetration; (ii) bank density; (iii) urban population density and (iv) internet penetration. Second, the use of the mobile to pay bills is positively linked with: (i) trade and internet penetration, especially in contemporary specifications and (ii) remittances and patent applications, especially at low initial levels of the dependent variable. Third, using the mobile to send/receive money is positively correlated with: internet penetration and human development, especially in the contemporary specifications. Fourth, mobile banking is positively linked with: (i) trade in contemporary specifications; (ii) remittances and patent applications at low initial levels of the dependent variable and (iii) internet penetration and human development, with contemporary threshold evidence. The policy implications are articulated with incremental policy syndromes.
    Keywords: Mobile phones; Mobile banking; Development; Africa
    JEL: G20 L96 O11 O33 O55
    Date: 2015–06
  6. By: Douglas W. Diamond; Anil K Kashyap
    Abstract: We study a modification of the Diamond and Dybvig (1983) model in which the bank may hold a liquid asset, some depositors see sunspots that could lead them to run, and all depositors have incomplete information about the bank’s ability to survive a run. The incomplete information means that the bank is not automatically incentivized to always hold enough liquid assets to survive runs. Regulation similar to the liquidity coverage ratio and the net stable funding ratio (that are soon be implemented) can change the bank’s incentives so that runs are less likely. Optimal regulation would not mimic these rules.
    JEL: E44 G01 G18 G21
    Date: 2016–03
  7. By: Haufler, Andreas; Maier, Ulf
    Abstract: Several countries have recently introduced national capital standards exceeding the internationally coordinated Basel III rules, thus suggesting a `race to the top' in capital standards. We study regulatory competition when banks are heterogeneous and give loans to firms that produce output in an integrated market. In this setting capital requirements change the pool quality of banks in each country and inflict negative externalities on neighboring jurisdictions by shifting risks to foreign taxpayers and by reducing total credit supply and output. Non-cooperatively set capital standards are higher than coordinated ones when governments care equally about bank profits, taxpayers, and consumers.
    Keywords: regulatory competition; capital requirements; bank heterogeneity
    JEL: G28 F36 H73
    Date: 2016–03
  8. By: Martin Feldkircher (Oesterreichische Nationalbank (OeNB)); Florian Huber (Department of Economics, Vienna University of Economics and Business)
    Abstract: In this paper we compare the transmission of a conventional monetary policy shock with that of an unexpected decrease in the term spread, which mirrors quantitative easing. Employing a time-varying vector autoregression with stochastic volatility, our results are two-fold: First, the spread shock works mainly through a boost to consumer wealth growth, while a conventional monetary policy shock affects real output growth via a broad credit / bank lending channel. Second, both shocks exhibit a distinct pattern over our sample period. More specifically, we find small output effects of a conventional monetary policy shock during the period of the global financial crisis and stronger effects in its aftermath. This might imply that when the central bank has left the policy rate unaltered for an extended period of time, a policy surprise might boost output particularly strongly. By contrast, the spread shock has affected output growth most strongly during the period of the global financial crisis and less so thereafter. This might point to diminishing effects of large scale asset purchase programs.
    Keywords: Unconventional monetary policy, transmission channel, Bayesian TVP-SV-VAR
    JEL: C32 E52 E32
    Date: 2016–03
  9. By: Stefano Colonnello; M. Eng; F. Zucchi
    Abstract: Creditors are increasingly transferring debt cash flow rights to other market participants while retaining control rights. We use the market for credit default swaps (CDSs) as a laboratory to show that such debt decoupling causes large adverse effects on firms whose shareholders have high bargaining power. After the start of CDS trading, the distance-to-default, investment, and market value of firms with powerful shareholders drop by 7.9%, 7%, and 8.8% compared to other firms. These findings are consistent with an “empty creditor problem“ where creditors overinsure to strengthen their position in negotiations with powerful shareholders.
    Keywords: debt decoupling, empty creditors, credit default swaps, shareholder bargaining power, real effects
    JEL: G32 G33 G34
    Date: 2016–03
  10. By: Berger, Allen N.; Roman, Raluca (Federal Reserve Bank of Kansas City)
    Abstract: We investigate whether saving Wall Street through the Troubled Assets Relief Program (TARP) really saved Main Street during the recent financial crisis. Our difference-in-difference analysis suggests that TARP statistically and economically significantly increased net job creation and net hiring establishments and decreased business and personal bankruptcies. The results are robust, including accounting for endogeneity. The main mechanisms driving the results appear to be increases in commercial real estate lending and off-balance sheet real estate guarantees. These results suggest that saving Wall Street via TARP may have helped save Main Street, complementing the TARP literature and contributing to the cost-benefit debate.
    Keywords: Banks; Economic conditions; Financial crisis; TARP
    JEL: G18 G21 G28
    Date: 2015–10–01
  11. By: Ono, Arito; Aoki, Kosuke; Nishioka, Shinichi; Shintani, Kohei; Yasui, Yosuke
    Abstract: This paper examines the effects of long-term interest rates on bank loan supply. Using a simple mean-variance model of bank portfolio selection subject to the value-at-risk (VaR) constraint, we make theoretical predictions on two transmission channels through which lower long-term interest rates increase loan supply: (i) the portfolio balance channel and (ii) the bank balance sheet channel. We construct a unique and massive firm-bank loan-level panel dataset for Japan spanning the period 2002–2014 and test our theoretical predictions to find the following. First, an unanticipated reduction in long-term interest rates increased bank loan supply, which lends support to the existence of the portfolio balance channel. Second, banks that enjoyed larger capital gains on their bond holdings due to a decline in interest rates significantly increased their loan supply, which lends support to the existence of the bank balance sheet channel. Further, the bank balance sheet channel was stronger in the case of loans to smaller, more leveraged, and less creditworthy firms, which suggests that a stronger balance sheet leads banks to increase their loan supply to credit-constrained and riskier firms.
    Keywords: portfolio balance channel, bank balance sheet channel, value-at-risk constraint
    JEL: E44 E52 G11 G21
    Date: 2016–03
  12. By: Christoph Aymanns; Carlos Caceres; Christina Daniel; Liliana Schumacher
    Abstract: Understanding the interaction between bank solvency and funding cost is a crucial pre-requisite for stress-testing. In this paper we study the sensitivity of bank funding cost to solvency measures while controlling for various other measures of bank fundamentals. The analysis includes two measures of bank funding cost: (a) average funding cost and (b) interbank funding cost as a proxy of wholesale funding cost. The main findings are: (1) Solvency is negatively and significantly related to measures of funding cost, but the effect is small in magnitude. (2) On average, the relationship is stronger for interbank funding cost than for average funding cost. (3) During periods of stress interbank funding cost is more sensitive to solvency than in normal times. Finally, (4) the relationship between funding cost and solvency appears to be non-linear, with higher sensitivity of funding cost at lower levels of solvency.
    Date: 2016–03–15
  13. By: Daniel Cohen (Ecole d'Économie de Paris - Paris School of Economics); Sébastien Villemot (OFCE)
    Abstract: We distinguish two types of debt crises: those that are the outcome of exogenous shocks (to productivity growth for instance) and those that are endogenously created, either by self-fulfilling panic in financial markets or by the reckless behavior of “Panglossian” borrowers. After Krugman, we characterize as “Panglossian” those borrowers who only focus on their best growth prospects, anticipating to default on their debt if hit by an adverse shock, rationally ignoring the risk of default. We apply these categories empirically to the data. We show that, taken together, endogenous crises are powerful explanations of debt crises, more important for instance than the sheer effect of growth on a country's solvency.
    Keywords: Sovereign debt; Self-fulfilling crises
    JEL: F34
    Date: 2015–03
  14. By: Alan S. Blinder (Princeton University)
    Abstract: This paper comes in three parts. Part 1 reviews a few pertinent facts about the stunning economic events that have occurred in the United States (and elsewhere) since 2007. I choose these particular facts from among many for their relevance to the rest of the paper. The next two parts take up, first, some of the key lessons that we professional economists should have learned from the crisis and its aftermath and, second, some important lessons for teaching economics--especially but not exclusively macroeconomics. The two categories of lessons overlap a bit. But is it perhaps surprising how different they are.
    Date: 2014–11

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