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on Banking |
| By: | Ari, Anil; Darracq Pariès, Matthieu; Kok, Christoffer; Żochowski, Dawid |
| Abstract: | Why did the shadow banking sectors in the US and the euro area expand in the decade before the financial crisis and what are the implications for systemic risk and macro-prudential policy? This paper examines these issues with a model of the financial sector where the size of the shadow banking sector is endogenous. In the model, shadow banking is an alternative banking strategy which involves greater risk-taking at the expense of being exposed to "fundamental runs" on the funding side. When such runs occur, shadow banks liquidate their assets in a secondary market. Entry into shadow banking is profitable when traditional banks provide sufficient secondary market demand to prevent these liquidations from causing a fire-sale. During periods of stability, the shadow banking sector expands to an excessively large size that ferments systemic risk. Its collapse then triggers a fire-sale that renders traditional banks vulnerable to "liquidity runs". The prospect of liquidity runs undermines market discipline and increases the risk-taking incentives of traditional banks. Policy interventions aimed at alleviating the fire-sale fuel further expansion of the shadow banking sector. Financial stability is achieved with a Pigouvian tax on shadow bank profits. JEL Classification: E44, G01, G11, G21, G28 |
| Keywords: | financial crises, fire-sales, macro-prudential regulation, shadow banking |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20161943&r=ban |
| By: | Berrospide, Jose M. (Board of Governors of the Federal Reserve System); Correa, Ricardo (Board of Governors of the Federal Reserve System); Goldberg, Linda S. (Federal Reserve Bank of New York); Niepmann, Friederike (Board of Governors of the Federal Reserve System) |
| Abstract: | Domestic prudential regulation can have unintended effects across borders and may be less effective in an environment where banks operate globally. Using U.S. micro-banking data for the first quarter of 2000 through the third quarter of 2013, this study shows that some regulatory changes indeed spill over. First, a foreign country’s tightening of limits on loan-to-value ratios and local currency reserve requirements increase lending growth in the United States through the U.S. branches and subsidiaries of foreign banks. Second, a foreign tightening of capital requirements shifts lending by U.S. global banks away from the country where the tightening occurs to the United States and to other countries. Third, tighter U.S. capital regulation reduces lending by large U.S. global banks to foreign residents. |
| Keywords: | macroprudential policies; international banking; bank credit; spillovers |
| JEL: | F42 F44 G15 G21 |
| Date: | 2016–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:793&r=ban |
| By: | Anthony Birchwood; Michael Brei; Dorian Noel |
| Abstract: | This paper examines empirically the determinants of bank interest margins in Central America and the Caribbean over the period 1998-2014. A particular focus is set on the impact of differences in the regulatory environment and market structure across countries in explaining the interest margins of individual banks. Our results suggest that bank market power, cost inefficiency, credit risk, liquid asset holdings, and interest rate risk increase the margin between loan and deposit rates, while increased income diversification and GDP growth are associated with lower loan-deposit spreads. When considering information on banking regulation, we find strong evidence to support our main hypothesis that improvements in market quality and liberalization have a significant effect on interest margins. More specifically, reductions in entry requirements to banking, higher involvement of foreign banks, and increased financial statement transparency are associated with significant reductions in interest margins. |
| Keywords: | Bank margin; bank spread; Central America; Caribbean. |
| JEL: | G21 L11 E43 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2016-33&r=ban |
| By: | Nadia Saghi-Zedek (CREM - Centre de Recherche en Economie et Management - UR1 - Université de Rennes 1 - Université de Caen Basse-Normandie - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | Using detailed data on control chains of 710 European commercial banks, we test whether the presence of some categories of controlling shareholders affects product diversification performance. We find that when banks have no controlling shareholder or have only family and state shareholders activity diversification yields diseconomies. However, as long as the control chain involves banking institutions, institutional investors, industrial companies or any other combination of these shareholder categories, banks benefit from diversification economies: they display higher profitability, lower earnings volatility and lower default risk. This is potentially because such categories of shareholders bring additional skills to manage diverse activities. A further exploration shows that such mitigating roles are greater for domestic and diversified shareholders. Our findings provide insights on why banks suffer from greater activity diversification and have several policy implications. |
| Keywords: | performance,European banking,ownership structure,product diversification |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01342528&r=ban |
| By: | Köhler-Ulbrich, Petra; Hempell, Hannah S.; Scopel, Silvia |
| Abstract: | The euro area bank lending survey (BLS) serves as an important tool in the analysis of bank lending conditions in the euro area and across euro area countries, providing otherwise unobservable qualitative information on bank loan demand and supply from/to euro area enterprises and households. Since its introduction in 2003, the BLS has received growing attention and has become of key importance for the analysis and assessment of bank lending conditions in the euro area and at the national level. In particular in the context of the financial crisis, the BLS was used to gather additional information on the impact of the crisis and of the ECB’s monetary policy measures on banks’ funding situation and bank lending conditions. Following a description of the design and development of the BLS, this paper focuses on the analysis of bank lending supply and demand in the euro area and on their contributing factors. The results of the BLS are put into a wider economic perspective by relating them to other macroeconomic and financial variables. Analyses based on individual bank replies complement the picture further by providing more granular evidence on loan developments. In addition, an overview of the use of the euro area BLS as an analytical tool for investigating bank lending conditions in the euro area is presented. JEL Classification: E44, E5, G21 |
| Keywords: | bank lending conditions, euro area, loan demand, loan supply, monetary policy, monetary policy transmission |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbops:2016179&r=ban |
| By: | Gandhi, Priyank (University of Notre Dame); Lustig, Hanno (Stanford University); Plazzi, Alberto (University of Lugano and Swiss Finance Institute) |
| Abstract: | Equity is a cheap source of funding for a country's largest financial institutions. In a large panel of 31 countries, we find that the stocks of a country's largest financial companies earn returns that are significantly lower than stocks of non-financials with the same risk exposures. In developed countries, only the largest banks' stock earns negative risk-adjusted returns, but, in emerging market countries, other large non-bank financial firms do. Even though large banks have high betas, these risk-adjusted return spreads cannot be attributed to the risk anomaly. Instead, we find that the large-minus-small, financial-minus-nonfinancial, risk-adjusted spread varies across countries and over time in ways that are consistent with stock investors pricing in the implicit government guarantees that protect shareholders of the largest banks. The spread is significantly larger for the largest banks in countries with deposit insurance, backed by fiscally strong governments, and in common law countries that offer shareholders better protection from expropriation. Finally, the spread also predicts large crashes in that country's stock market and output. |
| JEL: | G01 G12 G21 |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3454&r=ban |
| By: | Viral Acharya; Hanh Le; Hyun Song Shin |
| Abstract: | Dividend payouts affect the relative value of claims within a firm. When firms have contingent claims on each other, as in the banking sector, dividend payouts can shift the relative value of stakeholders' claims across firms. Through this channel, one bank's capital policy affects the equity value and risk of default of other banks. In a model where such externalities are strong, bank capital takes on the attribute of a public good, where the private equilibrium features excessive dividends and inefficient recapitalization relative to the efficient policy that maximizes banking sector equity. We compare the implications of the model with observed bank behavior during the crisis of 2007-09. |
| Keywords: | bank dividends, capital erosion, systemic risk |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:580&r=ban |
| By: | Céline Meslier-Crouzille (LAPE - Laboratoire d'Analyse et de Prospective Economique - UNILIM - Université de Limoges - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société); Donald P. Morgan (Federal Reserve Bank of New-York - Federal Reserve Bank of New-York); Katherine Samolyk (Consumer Financial Protection Bureau - Consumer Financial Protection Bureau); Amine Tarazi (LAPE - Laboratoire d'Analyse et de Prospective Economique - UNILIM - Université de Limoges - IR SHS UNILIM - Institut Sciences de l'Homme et de la Société) |
| Abstract: | We estimate the benefits of geographic diversification within states and across states for bank risk and return for all U.S. bank holding companies over 1994 to 2008, and assess whether such benefits depend on bank size.For small banks, only intrastate diversification increases risk-adjusted returns and reduces default risk while for very large institutions only interstate expansions are beneficial but only in terms of default risk. In all cases the relationship ishump-shaped indicating that at some point, the possible agency costs associated with banks getting wider and more geographically diversified outweigh the benefits.Our results indicate that small banks and very large banks could still benefit from further geographic diversification. Email Addresses: celine.meslier@unilim.fr (Céline Meslier),Don.Morgan@ny.frb.org (Donald P. Morgan) katherine.Samolyk@cfpb.gov (Katherine Samolyk), tarazi@unilim.fr (Amine Tarazi). The views herein do not necessarily reflect those of the Federal Reserve System. 2 |
| Keywords: | bank geographic diversification,risk,return,agency costs |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-01338717&r=ban |
| By: | Emanuele Brancati; Marco Macchiavelli |
| Abstract: | We challenge the common view that short-term debt, by having to be rolled over continuously, is a risk factor that exposes banks to higher default risk. First, we show that the average effect of expiring obligations on default risk is insignificant; it is only when a bank has limited access to new funds that maturing debt has a detrimental impact on default risk. Next, we show that both limited access to new funds and shorter maturities are causally determined by deteriorating market expectations about the bank's future profitability. In other words, short-term debt is not a cause of fragility but the result of creditors losing faith in the long-run prospects of the bank, hence forcing it to shorten its debt maturity. Finally, we build a model that endogenizes the debt maturity structure and predicts that worse market expectations lead to a maturity shortening. |
| Keywords: | Banks ; Debt issuance ; Financial crisis ; Maturity structure ; Rollover risk |
| JEL: | G01 G21 G32 |
| Date: | 2016–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2016-74&r=ban |
| By: | Malik Shukayev; Argyn Toktamyssov |
| Abstract: | BIS interbank lending data show that the Great Recession generated large and persistent changes in the international interbank lending positions of various countries. The main objective of this study is to understand the role of changes in international interbank credit flows in transmitting shocks across borders. To accomplish this task, we needed a global structural model with an international interbank market. Our search for a suitable structural model revealed that the Bank of Canada version of the global economy model (BoC-GEM-FIN) comes closest to our needs. BoC-GEM-FIN includes region-specific interbank markets, as well as some international borrowing and lending, but abstracts from the international interbank lending. This paper describes the modifications we made in order to introduce the international interbank market into BoC-GEM-FIN. The modified model is calibrated to match the changes in international interbank lending positions and the decline in the business lending of US banks that took place after the fourth quarter of 2008. Our simulations show that the international interbank market amplifies spillover effects of demand shocks but does not systematically alter the effects of supply shocks, including those for commodities. |
| Keywords: | Business fluctuations and cycles, Economic models, International topics |
| JEL: | E27 E37 F47 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocadp:16-19&r=ban |
| By: | Gipper,Brandon (Stanford University) |
| Abstract: | We provide the first large-sample evidence of banks playing an important role in facilitating tax planning by client firms. Capturing bank-client relationships using lending contracts and measuring borrower tax avoidance with the three-year cash effective tax rate and the unrecognized tax benefit balance, we document the extent to which banks are associated with tax avoidance by corporate borrowers. In multivariate analyses, we find that the average tax avoidance of a bank's other borrowers is an economically important determinant of a client firm's own tax avoidance. In additional tests, we find evidence consistent with this result being driven in part by banks acting as tax planning intermediaries. Finally, we find that clients experience meaningful increases in tax avoidance when they begin a new relationship with a bank whose existing borrowers are substantial tax avoiders. Overall, our results suggest that banks, in addition to being financial intermediaries, also act as tax planning intermediaries in facilitating corporate tax planning. |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3443&r=ban |
| By: | Laura Blattner; Luisa Farinha; Gil Nogueira |
| Abstract: | We analyze the effect of the ECB's Quantitative Easing program (Expanded Asset Purchase Program - EAPP) on bank lending using security-level bank balance sheet data combined with a comprehensive dataset on new loans in Portugal. Our identification relies on the fact that only a subset of Portuguese banks was exposed to EAPP via prior holdings of EAPP-eligible securities and origination of eligible ABS and covered bonds. Using a difference-in-differences specication with borrower and bank xed effects, we find that lending rates to the same borrower drop by 64 b.p. at banks exposed to QE relative to banks not exposed to QE. Loan volumes to existing corporate clients grow by one percentage point faster at exposed banks relative non-exposed banks. This result is robust to including both bank and borrower*time fixed effects, as well as a wide range of loan and borrower characteristics. At the extensive margin, the probability of credit approval to a new corporate client is about 1 percentage point higher at exposed banks post-QE announcement. |
| JEL: | E43 E44 E52 G21 G28 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201608&r=ban |
| By: | Montagna, Mattia; Kok, Christoffer |
| Abstract: | In this paper, we develop an agent-based multi-layered interbank network model based on a sample of large EU banks. The model allows for taking a more holistic approach to interbank contagion than is standard in the literature. A key finding of the paper is that there are material non-linearities in the propagation of shocks to individual banks when taking into account that banks are related to each other in various market segments. The contagion effects when considering the shock propagation simultaneously across multiple layers of interbank networks can be substantially larger than the sum of the contagion-induced losses when considering the network layers individually. In addition, a bank “systemic importance” measure based on the multi-layered network model is developed and is shown to outperform standard network centrality indicators. The finding of non-linear contagion effects when accounting for the interaction between the different layers of banks’ interlinkages have important policy implications. For example, it provides an argument for separating banks’ trading activities from their other intermediation activities. JEL Classification: C45, C63, D85, G21 |
| Keywords: | Financial contagion, interbank market, network theory |
| Date: | 2016–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20161944&r=ban |
| By: | Wolski, Marcin; van de Leur, Michiel |
| Abstract: | This study develops a novel agent-based model of the interbank market with endogenous credit risk formation mechanisms. We allow banks to exchange funds through unsecured and secured transactions in order to facilitate the flow of funds to the most profitable investment projects. Our model confirms basic stylized facts on (i) bank balance sheet distributions, (ii) interbank interest rates and (iii) interbank lending volumes, for both the secured and the unsecured market segments. We also find that network structures within the secured market segment are characterized by the presence of dealer banks, while we do not observe similar patterns in the unsecured market. Finally, we illustrate the usefulness of our model for analysing a number of policy scenarios. JEL Classification: C63, E17, E47, E58 |
| Keywords: | agent-based models, collateral, interbank lending, networks, repo |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20161959&r=ban |
| By: | Dominique Guegan (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Bertrand K. Hassani (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Kehan Li (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique) |
| Abstract: | The financial industry has extensively used quantile-based risk measures relying on the Value-at-Risk (VaR). They need to be estimated from relevant historical data set. Consequently, they contain uncertainty. We propose an alternative quantile-based risk measure (the Spectral Stress VaR) to capture the uncertainty in the historical VaR approach. This one provides flexibility to the risk manager to implement prudential regulatory framework. It can be a VaR based stressed risk measure. In the end we propose a stress testing application for it. |
| Keywords: | Prudential financial regulation,Stress risk measure,Tail risk measure,Historical method,Uncertainty,Value-at-Risk,Stress testing |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01277880&r=ban |
| By: | Ayelen Banegas; Manjola Tase |
| Abstract: | We study developments in reserve balances and the federal funds market in the context of two banking regulatory changes: the widening of the Federal Deposit Insurance Corporation (FDIC) assessment base and the introduction of the Basel III leverage ratio. Using a novel data set that includes FDIC fees and balance sheet data for depository institutions, we find that, as most foreign banks were not subject to the FDIC fee, they absorbed increasing amounts of reserve balances. Furthermore, foreign banks experienced positive and improving conditions for arbitraging between borrowing reserve balances in the federal funds market and earning interest on excess reserves by holding those reserves at the Federal Reserve Banks, contributing to an increase in federal funds borrowing by foreign banks relative to domestic banks. However, the implementation of the Basel III leverage ratio was associated with temporary declines in foreign bank federal funds borrowing at reporting dates. |
| Keywords: | Basel III ratios ; FDIC fees ; IOER arbitrage ; Reserve balances ; Federal funds market |
| JEL: | E49 E52 G28 |
| Date: | 2016–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2016-79&r=ban |
| By: | Jack, William; Kremer, Michael; Laat, Joost de; Suri, Tavneet |
| Abstract: | We examine the potential of asset-collateralized loans in low-income country credit markets. When a Kenyan dairy cooperative exogenously replaced high down payments and joint liability requirements with loans collateralized by the asset itself - a large water tank - loan take-up increased from 2.4% to 41.9%. In contrast, substituting joint liability requirements for deposit requirements had no impact on loan take up. There were no repossessions among farmers allowed to collateralize 75% of their loans, and a 0.7% repossession rate among those offered 96% asset collateralization. A Karlan-Zinman test based on waiving borrowing requirements ex post finds evidence of adverse selection with very low deposit requirements, but not of moral hazard. A simple model and rough calibration suggests that adverse selection and regulatory caps on interest rates may deter lenders from making welfare-improving loans with low deposit requirements. We estimate that 2/3 of marginal loans led to increased water storage investment. Real effects of loosening borrowing requirements include increased household water access, reductions in child time spent on water-related tasks, and greater school enrollment forr girls. |
| Keywords: | agriculture; asymmetric information; borrowing requirements; collateralization; credit; down-payment; Kenya |
| JEL: | O13 O16 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11523&r=ban |
| By: | Aldasoro, Iñaki; Alves, Iván |
| Abstract: | Research on interbank networks and systemic importance is starting to recognise that the web of exposures linking banks balance sheets is more complex than the single-layer-of-exposure approach. We use data on exposures between large European banks broken down by both maturity and instrument type to characterise the main features of the multiplex structure of the network of large European banks. This multiplex network presents positive correlated multiplexity and a high similarity between layers, stemming both from standard similarity analyses as well as a core-periphery analyses of the different layers. We propose measures of systemic importance that fit the case in which banks are connected through an arbitrary number of layers (be it by instrument, maturity or a combination of both). Such measures allow for a decomposition of the global systemic importance index for any bank into the contributions of each of the sub-networks, providing a useful tool for banking regulators and supervisors in identifying tailored policy instruments. We use the dataset of exposures between large European banks to illustrate that both the methodology and the specific level of network aggregation matter in the determination of interconnectedness and thus in the policy making process. JEL Classification: G21, D85, C67 |
| Keywords: | interbank networks, multiplex networks, systemic importance |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20161962&r=ban |
| By: | Hannes Hoffmann; Thilo Meyer-Brandis; Gregor Svindland |
| Abstract: | We axiomatically introduce risk-consistent conditional systemic risk measures defined on multidimensional risks. This class consists of those conditional systemic risk measures which can be decomposed into a state-wise conditional aggregation and a univariate conditional risk measure. Our studies extend known results for unconditional risk measures on finite state spaces. We argue in favor of a conditional framework on general probability spaces for assessing systemic risk. Mathematically, the problem reduces to selecting a realization of a random field with suitable properties. Moreover, our approach covers many prominent examples of systemic risk measures from the literature and used in practice. |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1609.07897&r=ban |
| By: | Granja, Joao (MIT); Matvos, Gregor (University of Chicago); Seru, Amit (University of Chicago) |
| Abstract: | We show that the allocation of failed banks in the Great Recession was likely distorted because potential acquirers of these banks were poorly capitalized. We illustrate this phenomenon within a model of auctions with budget constraints. In our model poor capitalization of some potential acquirers drives a wedge between their willingness to pay and the ability to pay for a failed bank. Using our framework, we infer three characteristics that drive potential acquirers' willingness to pay for a failed bank in the data: geographic proximity, bank specialization, and increased market concentration. Consistent with predictions of our model, we find that low capitalization of potential acquirers decreases their ability to acquire a failed bank. Finally, we show that the wedge between potential acquirers' willingness and ability to pay distorts the allocation of failed banks. The costs of this misallocation are substantial, as measured by the additional resolution costs of the FDIC. These findings have direct implications for the design of the bank resolution process. |
| JEL: | E65 G18 G21 |
| Date: | 2016–04 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:stabus:3461&r=ban |
| By: | Diana Bonfim; Gil Nogueira; Steven Ongena |
| Abstract: | We study loan conditions when bank branches close and firms subsequently transfer to a branch of another bank in the vicinity. Such transfer loans allow us for the first time to observe the conditions granted when banks pool-price new applicants. Consistent with recent theoretical work on hold up in bank-firm relationships we find that transfer loans do not receive the discount in loan rates that prevails when firms otherwise switch banks. We hereby critically augment recent empirical evidence on dynamic cycles in loan rates. |
| JEL: | G21 L11 L14 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201607&r=ban |
| By: | Sofia Saldanha |
| Abstract: | Money markets were severely impaired by the financial and subsequent sovereign debt crises. Although the euro money market has been studied substantially, little has been done for the particular case of Portugal. This thesis investigates how the Portuguese part of the euro unsecured interbank money market was affected by the two consecutive crises. I constructed and adapted a Furfine-based algorithm to identify the loans traded and settled in TARGET2, in which a least one of the counterparties is a Portuguese bank. Identified loans have overnight and one-week maturities. Data shows a clear trend towards a closed interbank money market. In addition, there is a visibly significant reduction in the number of times banks trade in the market, accompanied by a parallel drop in volumes transacted. Finally, I find that interest rates rise above the benchmark and those in the domestic market are persistently higher than rates agreed upon through cross-border operations. |
| JEL: | E58 G21 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:ptu:wpaper:w201615&r=ban |
| By: | Rahimi, Lutfi |
| Abstract: | This paper looks at randomised assessment of microcredit intervention through Spandana in Hyderabad, India. It looks at households with six or more than six members as a restricting conditioning to see whether provision of microcredit affects them differently. This paper finds significant differences in the way which smaller and bigger families allocate their additional resource received in the form of microcredit intervention. As stated above, bigger households spend more on durable goods as soon as they received a loan whereas smaller households do not emphasis on increasing household stocks. These results are revealing on how different households prioritise their expenditure categories and thus may serve as a guide to microcredit institutions on how to provide tailored credit packages. Likewise, intuitively bigger households had higher borrowing levels compared to smaller households . Furthermore, this paper concludes that smaller households increase their borrowing from banks and informal sources as well. The reasons behind this contrast maybe due to unconsidered factors in this study such as existing family businesses, household preferences or loan provider criteria. |
| Keywords: | Keywords: microfinance, microcredit, poverty elevation, family size |
| JEL: | G2 G21 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:73906&r=ban |
| By: | Yuanyuan Li (University of Bielefeld - University of Bielefeld, CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique); Bertrand Wigniolle (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics) |
| Abstract: | In this paper, we propose a new mechanism able to explain the occurrence of credit crunches. Considering a credit market with an asymmetry of information between borrowers and lenders, we assume that borrowers have to pay a cost to reveal information on the quality of their project. They decide to be transparent if it is necessary for getting a loan or for paying a lower interest rate. Two types of competitive equilibria may exist: an opaque equilibrium in which all projects receive funding without revealing information; a transparent one in which only the best projects reval information and receive funding. It is also possible to get multiple equilibria. Incorporating this microeconomic mechanism in an OLG model, the economy may experience fluctuations due to the change of regime, and indeterminacy may occur. |
| Keywords: | endogenous information revelation,credit crunch |
| Date: | 2016–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-01277539&r=ban |
| By: | Fahlenbrach, Rudiger (Ecole Polytechnique Federale de Lausanne); Prilmeier, Robert (Tulane University); Stulz, Rene M. (Ohio State University and European Corporate Governance Institute) |
| Abstract: | From 1973 to 2014, the common stock of U.S. banks with loan growth in the top quartile of banks over a three-year period significantly underperforms the common stock of banks with loan growth in the bottom quartile over the next three years. The benchmark-adjusted cumulative difference in performance over three years exceeds twelve percentage points. The high growth banks also have significantly higher crash risk over the three-year period. This poor performance is explained by fast loan growth as asset growth separate from loan growth is not followed by poor performance. These banks reserve less for loan losses when their loans grow quickly than other banks. Subsequently, they have a lower return on assets and increase their loan loss reserves. The poorer performance of the fast growing banks is not explained by merger activity and loan growth through mergers is not accompanied by the same poor loan performance. The evidence is consistent with fast-growing banks, analysts, and investors failing to properly appreciate the extent to which the fast loan growth results from making riskier loans and failing to charge for these risks correctly. |
| JEL: | G01 G12 G21 |
| Date: | 2016–03 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ohidic:2016-07&r=ban |
| By: | James E. Kennedy; Maria G. Perozek; Paul A. Smith |
| Abstract: | The level of outstanding home mortgage debt in the United States has declined about $1.5 trillion, or 13 percent, since its peak six years ago. This large drop in mortgage debt has been the primary driver of the reduction in household liabilities often referred to as "household deleveraging" and frequently measured by statistics such as aggregate household debt relative to income. |
| Date: | 2014–10–31 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2014-10-31-1&r=ban |
| By: | Camba-Méndez, Gonzalo; Durré, Alain; Mongelli, Francesco Paolo |
| Abstract: | This paper sheds light on how recent financial tensions in the euro area were ultimately reflected in bank interest rate setting. We make two new contributions. First, we develop a theoretical model capturing banks financing and the rate setting choices. Banks in the model can finance themselves through deposits, on the money market and/or by issuing bonds. Second, we assemble a novel database and put our model to test. Our model extends that of Gambacorta (2004), as we formalise banks' decision to issue debt endogenously. Gambacorta's analysis was conducted for Italian banks and did not include the recent financial crisis. Instead, we focus our analysis on the Great Recession period (July 2007 to October 2014) and euro area banks. From a monetary policy perspective, both our theoretical model and the empirical results provide useful information on the impact of some of the measures introduced by the ECB during the financial crisis. First, the ECB introduced specific measures to alleviate tensions in money markets. To the extent that these measures fostered stability in money markets, and reduced the volatility of money market rates, this paper shows that they were also channelled to bank rates. Second, the ECB also introduced measures to address tensions in bond markets. Our results also show that having access to debt financing has important implications for bank rate setting. JEL Classification: C32, E43,E52, E58, G01 |
| Keywords: | bank financing, bank interest rate setting, non-standard monetary policy and euro area crisis |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20161965&r=ban |
| By: | Chris Garbers; Guangling Liu |
| Abstract: | This paper presents a real business cycle model with financial frictions and two credit markets to investigate the qualitative and quantitative relevance of credit market heterogeneity. To address this line of inquiry we contrast the transmission of financial shocks in an economy where loans are the only form of credit to one in which both loans and bonds exist. We estimate the model using Bayesian methods over the sample period 1985Q1 { 2015Q1 for the U.S. economy. We find that credit market heterogeneity plays an important role in attenuating the impact of financial shocks by allowing borrowers to substitute away from the affected credit market. The shock attenuation property of credit market heterogeneity works through asset prices and substitution toward alternative credit types. Bank balance sheet linkages reduce the shock attenuation effect associated with heterogeneous credit markets. The origination of financial shocks can influence both the size and the persistence of their impact. |
| Keywords: | Credit Market, Business Cycle, Financial Inter-mediation, Operational Diversification, heterogeneity, DSGE |
| JEL: | E32 E43 E44 E51 E52 E20 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:633&r=ban |
| By: | Ralf R. Meisenzahl |
| Abstract: | The Enhanced Financial Accounts initiative is an ambitious, long-term effort to augment the Financial Accounts of the United States with a more detailed picture of financial intermediation in the United States. This Note describes one initial project to provide more detailed information on the holdings and activities of depository institutions. |
| Date: | 2015–08–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfn:2015-08-28-2&r=ban |
| By: | Rosengard, Jay (Harvard University) |
| Abstract: | A powerful tool to achieve equitable development is promotion of economic empowerment for marginalized citizens by increasing formal financial services access and utilization. The provision of these services via mobile phones has shown great promise in overcoming geographic, demographic, and institutional constraints to financial inclusion, especially in Africa and led by the mobile banking revolution in Kenya. This is exemplified by the extraordinary success since 2007 of Safaricom's M-PESA, a mobile phone-based money transfer, payment, and banking service: as of June 2015, Safaricom had more than 22 million M-PESA subscribers served by over 90,000 M-PESA agents. The confluence of several factors have contributed to M-PESA's success, including Kenya's political and economic context, demographics, telecommunications sector structure, lack of affordable consumer options, and enabling regulatory policies. Equally important have been Safaricom's internal astute management and marketing of M-PESA. But M-PESA is now facing a strong new rival in Airtel Money, offered by Equity Bank, Kenya's third largest bank. Now two different models for mobile financial services are competing vigorously in Kenya: Safaricom, an example of telecom-led mobile banking and Equity Bank, an example of bank-led mobile banking. There are three key challenges in Kenya to further promotion of financial inclusion via development of mobile financial services: facilitation of increased competition; transformation of non-digital microfinance institutions; and enactment of greater consumer protection. Where Kenya's success factors might be present, many of Kenya's lessons can be adapted. Where conditions are significantly different, the challenge becomes how best to nurture home-grown innovative solutions to address specific local constraints. |
| Date: | 2016–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:16-032&r=ban |
| By: | Berg, Tobias |
| Abstract: | Using a lender cut-off rule that generates plausibly exogenous variation in credit supply, I analyze real effects of loan rejections in a sample of small and medium-sized enterprises. I find that loan rejections reduce asset growth, investments, and employment, and these effects are concentrated among low liquidity firms. Precautionary savings motives aggravate real effects: firms whose loan applications got rejected increase cash holdings and cut non-cash assets in excess of the requested loan amount. These results point to the amplifying effect of precautionary savings motives in the transmission of credit supply shocks. JEL Classification: G21, G32, J23 |
| Keywords: | credit supply, liquidity demand, precautionary savings, real effects |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20161960&r=ban |