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on Banking |
| By: | Giraldo, Carlos (Latin American Reserve Fund); Giraldo, Iader (Latin American Reserve Fund); Gomez-Gonzalez, Jose E. (City University of New York – Lehman College); Uribe, Jorge M. (Universitat Oberta de Catalunya) |
| Abstract: | This study utilizes weekly datasets on loan growth in Colombia to develop a daily indicator of credit expansion using a two-step machine learning approach. Initially, employing Random Forests (RF), missing data in the raw credit indicator is filled using high frequency indicators like spreads, interest rates, and stock market returns. Subsequently, Quantile Random Forest identifies periods of excessive credit creation, particularly focusing on growth quantiles above 95%, indicative of potential financial instability. Unlike previous studies, this research combines machine learning with mixed frequency analysis to create a versatile early warning instrument for identifying instances of excessive credit growth in emerging market economies. This methodology, with its ability to handle nonlinear relationships and accommodate diverse scenarios, offers significant value to central bankers and macroprudential authorities in safeguarding financial stability. |
| Keywords: | Credit growth; Machine learning methodology; Excessive credit creation; Financial stability |
| JEL: | C45 E44 G21 |
| Date: | 2024–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:col:000566:021077&r=ban |
| By: | Yener Altunbas (Bangor University); Xiaoxi Qu (Bangor University); John Thornton (University of East Anglia) |
| Abstract: | We present and estimate a Bernanke et al. (1999)-type dynamic general equilibrium model modified to allow the authorities to use monetary and fiscal policy to shape bank behavior in support of climate goals. In the model, central bank refinancing and reserve requirements are employed to support bank lending for environmentally friendly projects at lower rates of interest than for other projects. At the same time, fiscal policy supports green bank lending through loan guarantees, which also reduces the relative cost of borrowing by green firms. Under reasonable parameters of the model, rediscount lending is shown to be the most effective policy tool for directing bank lending to support climate goals |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:310&r=ban |
| By: | Carin van der Cruijsen; Marie-Claire Broekhoff |
| Abstract: | Gender gaps are widespread. The world of payments is no exception, as our research using novel survey data from Dutch households shows. First, we find that men are more likely than women to have experienced paying with a credit card or contactless via their smartphone or smartwatch. Differences in digital literacy and attitudes towards new payment instruments lie at the heart of these gender gaps, with men expressing higher levels of digital literacy and greater enjoyment when trying out new payment instruments. Second, our research shows a division of payment tasks within households. For example, men are more involved in paying housing-related costs, while women tend to be in charge of grocery payments. Finally, women have poorer payment fraud knowledge and express more fear of the digital world. Our research underscores the importance of policies aimed at improving digital literacy and fraud knowledge, especially among women. |
| Keywords: | payments; gender gap; inclusion; fraud knowledge; digital literacy |
| JEL: | D12 D83 G50 J16 J33 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:805&r=ban |
| By: | Brugués, Felipe; De Simone, Rebeca |
| Abstract: | We study the interaction of market structure and tax-and-subsidy strategies utilizing pass-through estimates from the unexpected introduction of a loan tax in Ecuador, a quantitative model, and a comprehensive commercial-loan dataset. Our model generalizes bank competition theories, including Bertrand-Nash competition, credit rationing, and joint-maximization. While we find the loan tax is distortionary, neglecting the possibility of non-competitive lending inflates estimated tax deadweight loss by 80% because non-competitive banks internalize some of the burden. Conversely, subsidies are less effective in non-competitive settings. If competition were stronger, tax revenue would be 10% lower. The findings suggest that policymakers should consider market structure in tax-and-subsidy strategies. |
| Keywords: | Banks;Government regulation of banks;Taxation and subsidies;market structure;firm strategy;market performance |
| JEL: | G21 G28 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:idb:brikps:13409&r=ban |
| By: | Fricke, Daniel; Greppmair, Stefan; Paludkiewicz, Karol |
| Abstract: | We show that the transmission of the European Central Bank's (ECB) recent monetary policy tightening differs across banks depending on their level of excess reserves. Specifically, the net worth of reserve-rich banks may display a boost when the interest rate paid on reserves increases strongly. Focusing on the ECB's 2022 rate hiking cycle, we show that reserve-rich banks' credit supply is less sensitive to the monetary policy tightening compared to other banks. The effect varies in the cross-section of both banks and firms. The results are binding at the firm level, indicating the presence of real effects. |
| Keywords: | interest rates, bank lending, excess liquidity, monetary policy |
| JEL: | E43 E44 E52 G21 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:284406&r=ban |
| By: | Christophe J. GODLEWSKI (LaRGE Research Center, Université de Strasbourg); Malgorzata OLSZAK (Wydzial Zarzadzania, Uniwersytet Warszawski) |
| Abstract: | We analyze the impact of macroprudential policies on corporate loans. We utilize a dataset of over 4, 800 syndicated loans from 1999-2017, matched with detailed macroprudential policy data from the European Central Bank. We investigate how overall policy stance and specific tools influence key loan terms at origination, including the amount, maturity, collateral, and covenants. Drawing upon hypotheses related to credit growth, risk-taking, and efficiency transmission channels, we show that a tighter macroprudential policy leads to an increase in loan amounts and collateralization. These effects are most prominent for tools that tighten lending standards and capital buffers, particularly in domestic credit markets. Additionally, we provide insights into the influence of loan, borrower, and lender characteristics on the impact of macroprudential policy on loan terms. Our findings offer novel empirical evidence of macroprudential transmission occurring through risk-shifting and compensating behaviors in private debt markets. |
| Keywords: | macroprudential policy, bank loans, financial contracting, Europe |
| JEL: | G21 G28 G32 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2024-01&r=ban |
| By: | Connor M. Brennan; Margaret M. Jacobson; Christian Matthes; Todd B. Walker |
| Abstract: | Different series of high-frequency monetary shocks can have a correlation coefficient as low as 0.5 and the same sign in only two-thirds of observations. Both data and methods drive these differences, which are starkest when the federal funds rate is at its effective lower bound. Methods that exploit the differential responsiveness of short- and long-term asset prices can incorporate additional information. After documenting differences in monetary shocks, we explore their consequence for inference. We find that empirical estimates of monetary policy transmission from local projections and VARs are less affected by shock choice than forecast revision specifications. |
| Keywords: | High-frequency monetary policy shocks; Monetary policy transmission; Empirical monetary economics |
| JEL: | E52 E58 E31 E32 |
| Date: | 2024–02–28 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedgfe:2024-11&r=ban |
| By: | Matthias H\"ansel |
| Abstract: | How does public debt matter for price stability? If it is useful for the private sector to insure idiosyncratic risk, government debt expansions can increase the natural rate of interest and create inflation. As I demonstrate using a tractable model, this holds in the presence of an active Taylor rule and does not require the absence of future fiscal consolidation. Further analysis using a full-blown 2-asset HANK model reveals the quantitative magnitude of the mechanism to crucially depend on the structure of the asset market: under standard assumptions, the effect of public debt on the natural rate is either overly strong or overly weak. Employing a parsimonious way to overcome this issue, my framework suggests relevant effects of public debt on inflation under active monetary policy: In particular, persistently elevated public debt may make it harder to go the last "mile of disinflation" unless central banks explicitly take its effect on the neutral rate into account. |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.00471&r=ban |
| By: | Selcuk Gul |
| Abstract: | [EN] This study aims to identify the role played by the sovereign risk in determining the local currency lending rates to the non-financial sector. In this context, lending rate equations for five emerging countries that are members of the Organisation for Economic Cooperation and Development (OECD) are estimated by the Autoregressive Distributed Lag (ARDL) model. The findings indicate that the impact of sovereign risk on lending rates varies among countries. While an increase in the sovereign risk premium leads to a significant rise in the local currency lending rates in Türkiye, its impacts on the lending rates are relatively low in Poland and Mexico and almost negligible in Hungary and Chile. Results imply that, in the case of Türkiye, as the decline in the risk premium, accompanying the monetary tightening policy initiated in June 2023, become permanent, it may have a reducing effect on the financing costs of the non-financial sector in the medium-to-long term. [TR] Bu calisma, finansal olmayan sektore verilen yerli para cinsiden kredi faizlerinin belirlenmesinde ulke riskinin oynadigi rolu ortaya koymayi amaclamaktadir. Bu cercevede, Ekonomik Kalkinma ve Isbirligi Teskilati (OECD) uyeleri arasindan secilmis bes gelismekte olan ulke icin kredi faizi denklemleri Otoregresif Gecikmesi Dagitilmis (ARDL) modeli ile tahmin edilmektedir. Bulgular, ulke riskinin kredi faizleri uzerindeki etkisinin ulkeler arasinda degiskenlik gosterdigine isaret etmektedir. Ulke risk primindeki artis finansal olmayan sektore verilen yerli para cinsinden kredi faizlerini Turkiye ekonomisinde onemli oranda artirirken, Polonya ve Meksika'da soz konusu artisin kredi faizleri uzerindeki etkisinin daha zayif, Macaristan ve Sili’de ise neredeyse ihmal edilebilir duzeyde oldugu gorulmektedir. Sonuclar, Turkiye ozelinde, 2023 yilinin haziran ayinda uygulanmaya baslanan parasal sikilastirma politikasina eslik eden risk primindeki dususun kalici hale gelmesiyle, orta ve uzun vadede finansal olmayan sektorun finansman maliyetlerini azaltici etkide bulunabilecegini ima etmektedir. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:econot:2403&r=ban |
| By: | Ethan Ilzetzki (London School of Economics (LSE); Centre for Macroeconomics (CFM)) |
| Abstract: | The UK government’s “mini-budget” announcement on September 23, 2022 sent yields on UK government bonds soaring at a daily rate not seen since November 1988, brought the value of the pound to all-time lows, lead some mortgage providers to suspend lending, and dropped the UK pension system to a liquidity crisis. The worst pressures on the UK economy and financial system appear to have subsided. Nevertheless, risks still remain and some problems — particularly with mortgage affordability - are likely to persist at currently projected interest rates. This note begins with a diagnosis of the causes and nature of the crisis and continues with policy recommendations for current circumstances and groundwork that should be set pre-emptively, in case interest rates rise again beyond current expectations. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:cfm:wpaper:2408&r=ban |
| By: | Vasilii Chsherbakov Ilia Karpov |
| Abstract: | Inflation is one of the most important macroeconomic indicators that have a great impact on the population of any country and region. Inflation is influenced by range of factors, one of which is inflation expectations. Many central banks take this factor into consideration while implementing monetary policy within the inflation targeting regime. Nowadays, a lot of people are active users of the Internet, especially social networks. There is a hypothesis that people search, read, and discuss mainly only those issues that are of particular interest to them. It is logical to assume that the dynamics of prices may also be in the focus of user discussions. So, such discussions could be regarded as an alternative source of more rapid information about inflation expectations. This study is based on unstructured data from Vkontakte social network to analyze upward and downward inflationary trends (on the example of the Omsk region). The sample of more than 8.5 million posts was collected between January 2010 and May 2022. The authors used BERT neural networks to solve the problem. These models demonstrated better results than the benchmarks (e.g., logistic regression, decision tree classifier, etc.). It makes possible to define pro-inflationary and disinflationary types of keywords in different contexts and get their visualization with SHAP method. This analysis provides additional operational information about inflationary processes at the regional level The proposed approach can be scaled for other regions. At the same time the limitation of the work is the time and power costs for the initial training of similar models for all regions of Russia. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2403.00774&r=ban |
| By: | Pala, Melissa |
| Abstract: | This paper provides evidence of a highly fragmented European interbank market that is tightened during the COVID-19 pandemic, when the interbank market was under stress. Using a unique dataset of unsecured, overnight interbank loans at the transactional level allows me to apply advanced panel methods. Furthermore, this paper shows liquidity hoarding during the pandemic and relationship lending as a German phenomenon. In addition, there is evidence that borrowers who have to pay higher rates in the market are more likely to participate in tender auctions and that the COVID-19 pandemic had the greatest impact on smaller interbank borrowers. |
| Keywords: | nterbank Market, Relationship Lending, Liquidity, COVID-19, Monetary Policy |
| JEL: | G01 G15 G18 G21 D85 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:bubdps:284408&r=ban |
| By: | Dr. Lukas Voellmy |
| Abstract: | In various banking models, banks are viewed as arrangements that insure households against uncertain liquidity needs. However, the exact nature of the liquidity risk faced by households – and hence the insurance function of banks – differs across models. This paper attempts to disentangle the different meanings of the term ‘liquidity insurance’ in the literature and to clarify what kind of insurance banks provide in which models. The paper also shows under which conditions banking is equivalent to eliminating uncertainty about liquidity needs or letting households trade with each other in an asset market. Special attention is given to the comparison of banking models in the tradition of Diamond and Dybvig (1983) with those based on monetary (notably New Monetarist) frameworks. |
| Keywords: | Liquidity insurance, Banking theory |
| JEL: | G21 G52 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:snb:snbwpa:2024-03&r=ban |
| By: | Paul Beaumont; Huan Tang; Éric Vansteenberghe |
| Abstract: | This paper investigates the impact of introducing junior unsecured loans via FinTech crowdlending platforms in the small business lending market. Using French administrative data, we find that FinTech borrowers experience a 20% increase in bank credit following FinTech loan origination. We establish causality using a shift-share instrument exploiting firms’ differential exposure to banks’ collateral requirements. The credit expansion only occurs when FinTech borrowers invest in new assets, and Fintech borrowers are subsequently more likely to pledge collateral to banks. This suggests that firms use FinTech loans to acquire assets that they then pledge to banks, thereby increasing their total borrowing capacity. <p> Cet article examine l'impact de l'introduction de prêts non garantis juniors via les plateforme FinTech de crowdlending sur le marché du prêt aux petites entreprises. En utilisant des données administratives françaises, nous constatons que les emprunteurs FinTech connaissent une augmentation de 20% de leur crédit bancaire suite à l'origination du prêt FinTech. Nous établissons la causalité en utilisant un instrument dit shiftshare qui exploite l'exposition différentielle des entreprises aux exigences de garantie des banques. L'expansion du crédit ne se produit que lorsque les emprunteurs FinTech investissent dans de nouveaux actifs, et ces emprunteurs FinTech sont par la suite plus susceptibles de mettre en gage des garanties aux banques. Cela suggère que les entreprises utilisent les prêts FinTech pour acquérir des actifs qu'elles mettent ensuite en gage aux banques, augmentant ainsi leur capacité d'emprunt totale. |
| Keywords: | FinTech, SMEs, small business lending; FinTech, PMEs, prêts aux petites entreprises |
| JEL: | G21 G23 G33 |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:bfr:decfin:42&r=ban |
| By: | Cosmin L. Ilut; Pavel Krivenko; Martin Schneider |
| Abstract: | Why did the real interest rate decline and the equity premium increase over the last 30 years? This paper assesses the role of uncertainty and credit market frictions. We quantify a model with heterogeneous households using data on asset prices and macro aggregates, as well as on households' debt and equity positions. We find that compensation for both uncertainty and frictions is reflected in asset prices. Moreover, a secular increase in frictions is important to understand jointly the decline in real rate and the relative scarcity of debt. Modeling uncertainty as ambiguity allows for tractable characterization of asset premia and precautionary savings effects in steady state. |
| JEL: | E2 E4 G1 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32198&r=ban |
| By: | Congressional Budget Office |
| Abstract: | Lawmakers created Federal Home Loan Banks (FHLBs) as a government-sponsored enterprise (GSE) to support mortgage lending by the banks’ member institutions, which include commercial banks and insurance companies. This report describes the role of FHLBs in financial markets, their financial condition, the value of the federal subsidies they receive, and the risks they pose. CBO estimates that because of their GSE status, FHLBs will receive subsidies in fiscal year 2024 totaling $7.3 billion (the central estimate, with a plausible range of $5.7 billion to $8.9 billion). |
| JEL: | G18 G21 G22 G23 G28 |
| Date: | 2024–03–07 |
| URL: | http://d.repec.org/n?u=RePEc:cbo:report:59712&r=ban |
| By: | Adair Morse |
| Abstract: | The provision of venture debt financing to growth-oriented startups which are backed by venture capital (VC) equity has been a bit of a puzzle given the lack of positive cash flows or traditional collateral of such startups. This short paper lays out the hurdles for debt to overcome to be a viable source of finance and casts the three types of venture debt – patent loans, venture leverage, and bridge loans – as solutions to such hurdles, casting the literature in terms of financial innovation. Finally, the paper addresses the risks implied by venture debt and discusses whether the demise of Silicon Valley Bank speaks to whether innovation ecosystem risk transmutes to the financial system through debt and the extent to which innovation ecosystem risk remains unstudied. |
| JEL: | G24 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:32183&r=ban |
| By: | Deepeka Garg; Benjamin Patrick Evans; Leo Ardon; Annapoorani Lakshmi Narayanan; Jared Vann; Udari Madhushani; Makada Henry-Nickie; Sumitra Ganesh |
| Abstract: | Mortgages account for the largest portion of household debt in the United States, totaling around \$12 trillion nationwide. In times of financial hardship, alleviating mortgage burdens is essential for supporting affected households. The mortgage servicing industry plays a vital role in offering this assistance, yet there has been limited research modelling the complex relationship between households and servicers. To bridge this gap, we developed an agent-based model that explores household behavior and the effectiveness of relief measures during financial distress. Our model represents households as adaptive learning agents with realistic financial attributes. These households experience exogenous income shocks, which may influence their ability to make mortgage payments. Mortgage servicers provide relief options to these households, who then choose the most suitable relief based on their unique financial circumstances and individual preferences. We analyze the impact of various external shocks and the success of different mortgage relief strategies on specific borrower subgroups. Through this analysis, we show that our model can not only replicate real-world mortgage studies but also act as a tool for conducting a broad range of what-if scenario analyses. Our approach offers fine-grained insights that can inform the development of more effective and inclusive mortgage relief solutions. |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2402.17932&r=ban |
| By: | Oberrauch, Luis (University of Kaiserslautern); Kaiser, Tim (University of Kaiserslautern) |
| Abstract: | We study the effects of low-intensity digital financial education interventions on undergraduate students' financial knowledge in a small-scale RCT. We test the substitutability or complementarity of two treatments: an online video financial education treatment and an incentive-based approach where students are issued pre-paid voucher cards worth 50 EUR to register with a broker specializing in roboadvised investment in Exchange Traded Funds (ETFs). Three months after the intervention, the video treatment enhanced financial knowledge scores by more than 50 percent of a standard deviation. Conversely, the vouchers showed no effect. The findings suggest that subsidies encouraging roboadvised investment into ETFs cannot substitute direct financial education in our setting, and there is no evidence for complementarity between these interventions in creating human capital in the domain of financial decision-making. |
| Keywords: | digital intervention, financial literacy, financial knowledge, financial education, robo-advisor, ETFs |
| JEL: | G53 |
| Date: | 2024–02 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp16811&r=ban |
| By: | Bank of Japan (Bank of Japan) |
| Abstract: | On December 4, 2023, the first workshop on the "Review of Monetary Policy from a Broad Perspective, " entitled "The Effects and Side Effects of Unconventional Monetary Policy, " was held at the Bank of Japan's Head Office. At the workshop, economists and financial and economic experts participated in a lively discussion on the effects and side effects of monetary policy over the past 25 years, focusing on four topics: financial markets, the financial system, the Bank of Japan's balance sheet, and unconventional monetary policy. Session 1 provided an overview of domestic financial markets over the past 25 years and the impact of monetary policy on the degree of market functioning. Participants discussed whether it would be possible to assess the impact of monetary policy from a broader perspective, for example by broadening the scope of the analysis. Session 2 focused on the impact of the low interest rate environment on the risk-taking behavior of financial institutions. Participants discussed issues such as developments in the demand for funds and the allocation of funds. Session 3 looked at issues concerning central bank finances. Participants discussed topics such as central banks' external communication. Session 4 examined the impact of unconventional monetary policy on factors such as economic activity and prices. Participants discussed a range of issues, including issues not covered in the presentations at the workshop such as the formation mechanism of inflation expectations and linkages between wages and prices. The panel discussion in Session 5 mainly covered issues such as methods for analyzing the effects and side effects of monetary policy and the mechanisms underlying price developments. Participants pointed out that it was difficult to assess the effects and side effects of unconventional monetary policy in a comprehensive manner given that multiple policy tools were used at the same time, and that it was therefore important to gather experts with different backgrounds to discuss a variety of issues, as in this workshop. Furthermore, participants also noted that in assessing the impact of monetary policy, it was necessary to deepen the analysis not only of the formation of inflation expectations but also of firms' behavior and its impact on economic developments and the formation of wages and prices. |
| Date: | 2024–03–11 |
| URL: | http://d.repec.org/n?u=RePEc:boj:bojron:ron240311a&r=ban |
| By: | Evangelos Charalambakis; Federica Teppa; Athanasios Tsiortas |
| Abstract: | Abstract This paper analyses the consumer’s decision to apply for credit and the probability of the credit being accepted in the euro area during a period characterized by the unprecedented concomitance of events and changing borrowing conditions linked to the global COVID-19 pandemic and the Russian invasion of Ukraine. We use data between 2020Q1 and 2023Q2 from the ECB’s Consumer Expectations Survey. We find that the credit demand is highest when the first lockdown ends and drops when supportive monetary compensation schemes are implemented. There is evidence that constrained households are significantly less likely to apply for credit. Credit is more likely to be accepted under favourable borrowing conditions and after the approval of national recovery plans. We also find that demographic, economic factors, perceptions and expectations are associated with the demand for credit and the credit grant. |
| Keywords: | Consumer finance; Liquidity constraints; Credit applications; Consumer Expectations Survey |
| JEL: | C23 D12 D14 G51 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:807&r=ban |
| By: | Jens H. E. Christensen; Sarah Mouabbi |
| Abstract: | The so-called equilibrium or natural rate of interest, widely known as r*t, is a key variable used to judge the stance of monetary policy. We offer a novel euro-area estimate based on a dynamic term structure model estimated directly on the prices of bonds with cash flows indexed to the euro-area harmonized index of consumer prices with adjustments for bond-specific risk and real term premia. Despite a recent increase, our estimate indicates that the natural rate in the euro area has fallen about 2 percentage points on net since 2002 and remains negative at the end of our sample. We also devise a related measure of the stance of monetary policy, which suggests that monetary policy in the euro area was not accommodative at the height of the COVID-19 pandemic. |
| Keywords: | affine arbitrage-free term structure model; financial markets; frictions; monetary policy; rstar; covid19 |
| JEL: | C32 E43 E52 G12 |
| Date: | 2024–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedfwp:97927&r=ban |
| By: | Emanuela Cerrato (Bank of Italy); Enrica Detto (Bank of Italy); Daniele Natalizi (Bank of Italy); Federico Semorile (Bank of Italy); Fabio Zuffranieri (Bank of Italy) |
| Abstract: | Technology providers have taken on the crucial role in supporting the financial sector, enabling firms – even small ones – to become more efficient and keep pace with innovation. Yet, the interdependencies between such providers and financial entities may pose new systemic risks, deserving the attention of financial regulators and overseers. This paper presents the authorities’ point of view, focusing on the payments sector; it demonstrates how numerous initiatives at international and national level have made a consistent and dynamic effort to create a regulatory and policy framework aimed at balancing security with innovation. |
| Keywords: | payment system, market infrastructure, third parties, digital operational resilience, DORA, regulation, oversight |
| JEL: | E42 G32 G38 O33 |
| Date: | 2024–03 |
| URL: | http://d.repec.org/n?u=RePEc:bdi:wpmisp:mip_047_24&r=ban |
| By: | Josef Sveda (Czech National Bank and Charles University, Prague); Jiri Panos (European Central Bank and University of Economics, Prague); Vojtech Siuda (Czech National Bank and University of Economics, Prague) |
| Abstract: | We propose an improved methodology for modelling potential scenario paths of banks' riskweighted assets, which drive the denominator of capital adequacy ratios. Our approach centres on modelling the internal risk structure of bank portfolios and thus aims to provide more accurate estimations than the common portfolio level approaches used in top-down stress testing frameworks. This should reduce the likelihood of significant misestimation of riskweighted assets, which can lead to unjustifiably high or low solvency measures and induce false perceptions about banks' financial health. The proposed methodology is easy to replicate and suitable for various applications, including stress testing and calibration of macroprudential tools. After the methodology is introduced, we show how our proposed approach compares favourably to the methods typically used. Subsequently, we use our approach to estimate the potential increase in risk weights due to a cyclical deterioration in credit parameters and the corresponding setup of the countercyclical capital buffer for the Czech banking sector. Finally, an illustrative, hands-on example is provided in the Appendix. |
| Keywords: | Risk weighted exposure; stress-testing; credit portfolio structure; countercyclical capital buffer |
| JEL: | E58 G21 G28 G29 |
| Date: | 2024–03–15 |
| URL: | http://d.repec.org/n?u=RePEc:gii:giihei:heidwp04-2024&r=ban |
| By: | Mehmet Selman Colak; Yavuz Kilic; Huseyin Ozturk; Mehmet Emre Samci |
| Abstract: | [EN] The asset quality of a banking system has the utmost importance not only for the soundness of the banking sector, but also for other major components of an economy. The lack of consensus on a certain set of variables for modeling asset quality leads to a problem, which is also known as “model uncertainty”. In this study, we investigate how non-performing loans in the Turkish banking system respond to changes in macroeconomic and bank-specific variables. To address model uncertainty, we employ a model averaging approach. Our results confirm the main findings in the literature with regards to the nexus between asset quality and macroeconomic and bank-specific variables. In addition, parameter estimates obtained from 1, 023 models using combinations of 10 variables suggest that even under extreme shocks, the NPL ratio of the Turkish banking sector remains within reasonable limits. [TR] Bankacilik sisteminin aktif kalitesi, sadece bankacilik sektorunun saglamligi acisindan degil, ekonominin diger temel bilesenleri acisindan da buyuk onem arz etmektedir. Aktif kalitesinin modellenmesinde belirli bir dizi degisken uzerinde fikir birliginin bulunmamasi, “model belirsizligi” olarak da bilinen bir soruna yol acmaktadir. Bu calismada, Turk bankacilik sistemindeki takipteki kredilerin makroekonomik ve bankaya ozgu degiskenlerdeki degisimlere nasil tepki verdigi incelenmektedir. Model belirsizligi sorununu gidermek icin model ortalamasi yaklasimi kullanilmaktadir. Sonuclarimiz, aktif kalitesi ile makroekonomik ve bankaya ozgu degiskenler arasindaki baglantiya iliskin literaturdeki ana bulgulari dogrulamaktadir. Ayrica, 10 degiskenin kombinasyonu kullanilarak 1023 modelden elde edilen katsayi tahminleri, asiri soklarda bile takipteki kredi oraninin makul sinirlar icinde kaldigini ortaya koymaktadir. |
| Date: | 2024 |
| URL: | http://d.repec.org/n?u=RePEc:tcb:econot:2404&r=ban |