|
on Banking |
| By: | François Koulischer (Banque centrale du Luxembourg); Patrick Van Roy (NBB, Prudential Policy and Financial Stability, and Université libre de Bruxelles) |
| Abstract: | We show that illiquid assets such as bank loans are used by euro area banks both as central bank collateral for short-term liquidity insurance purposes and for longer-term funding purposes for issuing covered bonds or asset-backed securities. We then explore the determinants of the choice of using bank loans for short-term liquidity insurance purposes or long-term funding purposes focusing on the case of Belgian banks. We find that (1) loan types are key to alleviating asymmetries of information; (2) regulatory requirements play a major role in the choices of banks, both directly and indirectly through clientele effects and (3) there are significant switching costs between the various uses of bank loans as collateral so historical decisions also determine the use of bank loans as collateral. |
| Keywords: | Collateral, securitisation, bank loans, liquidity |
| JEL: | E52 E58 G01 F36 |
| Date: | 2017–04 |
| URL: | http://d.repec.org/n?u=RePEc:nbb:reswpp:201703-318&r=ban |
| By: | Simplice Asongu (Yaoundé/Cameroun) |
| Abstract: | The purpose of this study is to assess how information sharing offices affect loan price and quantity in the African banking industry. The empirical evidence is based on a panel of 162 banks in 42 countries for the period 2001-2011. From the Generalised Method of Moments, public credit registries decrease loan price. With instrumental Quantile Regressions, two main findings are established. Public credit registries consistently decrease the price of loans whereas private credit bureaus consistently have the opposite effect. Public credit registries increase loan quantity in bottom quintiles (or banks associated with lower loan quantities) while private credit bureaus increase loan quantity in top quintiles (or banks associated with higher loan quantities). |
| Keywords: | Information Asymmetry; Financial Access; Africa |
| JEL: | G20 G29 O16 O55 |
| Date: | 2017–01 |
| URL: | http://d.repec.org/n?u=RePEc:agd:wpaper:17/012&r=ban |
| By: | Maier, Ulf (LMU Munich) |
| Abstract: | Several countries have recently introduced national capital standards exceeding the internationally coordinated Basel III rules, which is inconsistent with the \'race to the bottom\' in capital standards found in the literature. 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 and a \'race to the top\' occurs when governments care equally about bank profits, taxpayers, and consumers. |
| Keywords: | Regulatory competition; capital requirements; bank heterogeneity; |
| JEL: | G28 F36 H73 |
| Date: | 2017–03–25 |
| URL: | http://d.repec.org/n?u=RePEc:rco:dpaper:7&r=ban |
| By: | Bridges, Jonathan (Bank of England); Jackson, Christopher (Bank of England); McGregor, Daisy (Bank of England) |
| Abstract: | We investigate the role of private sector credit in shaping the severity of recessions. Using a sample of 130 downturns in 26 advanced economies since the 1970s, we assess whether the growth or level of credit is the better predictor of the severity of a recession. In addition to GDP we examine other metrics of severity, including unemployment and labour productivity. We find that a period of rapid credit growth in the immediate run-up to a recession predicts a deeper and longer downturn than when credit growth has been subdued, whether associated with a systemic banking crisis or not and whether that credit growth reflects borrowing by households or businesses. Credit growth is a more statistically and economically significant predictor of a recession’s severity than the level of indebtedness, though there is some evidence that the effect of a credit boom is greater when leverage is high. A build-up in credit predicts worse recessions in terms of lower GDP per capita, higher unemployment and lost labour productivity. |
| Keywords: | Recessions; productivity; local projections |
| JEL: | E51 G01 N10 |
| Date: | 2017–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0659&r=ban |
| By: | Yoo, Jinhyuk |
| Abstract: | House financing has played a prominent role in advanced economies. In addition, most of the banking crises in advanced economies were associated with boom-bust cycles in house prices. Prominent researchers suggest that more grants for household debt reduction would have provided a significant boost to the economy lacking aggregate demand after the Great Recession of 2007. In contrast, leading policy makers at that time, such as Geithner and Summers, argue differently. In his paper, Yoo comes up with a dynamic stochastic equilibrium (DSGE) model to evaluate the relative effectiveness of a policy to inject capital into banks versus a policy to relieve households of mortgage debt. He concludes that in the middle of a housing debt crisis, when households are highly leveraged, the short-run effects of the debt relief policy are more substantial. When the zero lower bound is additionally considered, the debt relief pölicy can be much more powerful in boosting the economy both in the short-run and in the long-run. |
| Keywords: | capital injection to banks,debt relief to households,housing debt crisis,macro-financial linkages,leverage,zero lower bound |
| JEL: | E17 E44 E52 E62 G1 G21 H12 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:imfswp:111&r=ban |
| By: | UCHIDA Hirofumi; UESUGI Iichiro; IWAKI Hiromichi |
| Abstract: | We test the existence of adverse selection and moral hazard in financial contracting by examining the choice of borrowers between collateralized and non-collateralized loans. Using comprehensive loan-level data from all loans underwritten by a large public bank in Japan, we examine the borrowers' behavior before and after the introduction of non-collateralized loans that expand the choice set for borrowers. We find an increase in credit risk for firms that switch to non-collateralized loans after the introduction, which is consistent with moral hazard. In contrast, we find mixed and unclear evidence for the existence of adverse selection. |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:eti:dpaper:17058&r=ban |
| By: | Marco Valerio Geraci; Jean-Yves Gnabo |
| Abstract: | In this paper we propose a time-varying parameter framework to estimate the dynamic network of financial spillovers. In a series of simulation exercises, we show that our framework performs better than the classical approach based on Granger causality testing over rolling windows. We apply it to all financial stocks listed in the S&P 500 and uncover a gradual decrease in interconnectedness after the crisis, which is not observable using the rolling window approach. We show that this is because the rolling window results are highly sensitive to crisis observations. |
| Keywords: | financial interconnectedness; time-varying parameter; granger causality |
| JEL: | G10 G18 C32 C51 C63 |
| Date: | 2015–12 |
| URL: | http://d.repec.org/n?u=RePEc:eca:wpaper:2013/249920&r=ban |
| By: | Mark Egan; Stefan Lewellen; Adi Sunderam |
| Abstract: | We study the determinants of value creation within U.S. commercial banks. We focus on three theoretically-motivated drivers of bank value: screening and monitoring, "safe" deposit production, and synergies between deposit-taking and lending. To assess the relative contributions of each, we develop novel measures of banks' deposit productivity and asset productivity and use these measures to evaluate the cross-section of bank value. We find that variation in deposit productivity explains the majority of variation in bank value, consistent with theories emphasizing safe-asset production. We also find evidence of meaningful value creation from synergies between deposit-taking and lending. Overall, our findings suggest that banks are primarily "special" due to their unique liability structure rather than their ability to screen and monitor borrowers. |
| JEL: | G2 G21 |
| Date: | 2017–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:23291&r=ban |
| By: | Coen, Jamie (Bank of England); Francis, William (Bank of England); Rostom, May (Bank of England) |
| Abstract: | This paper examines the determinants of credit union failure in the United Kingdom. Using regulatory data on credit unions, we estimate several discrete-time logit models and evaluate their predictive ability at one, two and three-year time horizons. We find that a small set of financial attributes related to capital adequacy, asset quality, earnings performance and liquidity is useful for early identification of troubled credit unions. Both in and out-of-sample results indicate that this parsimonious set of firm-level characteristics, augmented with national and regional unemployment rates, reliably identifies failures while keeping false alarm rates at modest levels. The results provide support for establishing early-warning criteria for supervisory use in monitoring credit unions. |
| Keywords: | Credit unions; failure; early warning; logit; policymaker loss function |
| JEL: | G21 G28 G38 |
| Date: | 2017–04–21 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0658&r=ban |