Download or read book Essays on Bank Behaviour and Financial Regulation written by Matic Petriček and published by . This book was released on 2019 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This thesis studies bank behaviour in response to financial regulation and monetary policy. In the first chapter a novel approach to address issues of endogeneity in estimating a causal effect of leverage on risk taking by banks is used. By using data on local bank office deposits and local unemployment an instrument is constructed to use in a regression of leverage on a measure of risk taking constructed from new issuance of loans. The results are consistent with a theoretical prediction that due to limited liability banks increase their risk taking after an exogenous increase in leverage. The second chapter estimates the effect of deposit insurance on the risk-taking behaviour of banks. As shown in the theoretical literature, deposit insurance may induce moral hazard and incentivise banks to take on more risk. This chapter provides an experimental setup in which an increase in the coverage limit of deposit insurance in the U.S. is exploited in order to identify the difference in risk taking by banks that were affected and banks that were not. This difference comes from the fact that state chartered savings banks in Massachusetts had unlimited deposit insurance coverage at the time when it was increased for all other banks in the US. Given that all banks in the sample are subject to the same regulatory and supervisory requirements, and that they are similar in other characteristics, the effect of such increase in deposit insurance can be isolated. The findings suggest that, contrary to the literature, an increase in deposit insurance did not increase bank risk-taking, nor did it affect market discipline, evident through a lack of effect on deposit rates. Motivated by substantial differences in employment dynamics across different geographical areas and substantial differences across banks which operate in these geographical areas, the third chapter estimates the effect of characteristics of banks operating in a particular location on the impact of monetary policy on the local economic outcomes. The results suggest that the effect of monetary policy on local employment and local total payroll intensifies as the capital structure of local banks improves and the credit risk associated with local banks decreases. These findings go in line with a prediction that healthy banks find it easier to attain alternative sources of funding following a monetary tightening. The results also show that size and liquidity position of local banks does not affect the impact of monetary policy.
Download or read book Banking Monetary Policy and the Political Economy of Financial Regulation written by Gerald A. Epstein and published by Edward Elgar Publishing. This book was released on 2014-07-31 with total page 391 pages. Available in PDF, EPUB and Kindle. Book excerpt: The many forces that led to the economic crisis of 2008 were in fact identified, analyzed and warned against for many years before the crisis by economist Jane D�Arista, among others. Now, writing in the tradition of D�Arista's extensive work, the
Download or read book Regulation of Banks and Finance written by Carlos A. Peláez and published by Springer. This book was released on 2009-11-18 with total page 287 pages. Available in PDF, EPUB and Kindle. Book excerpt: As the financial crisis engulfs the world economy, there is an ambitous agenda for regulatory reform. This book provides a comprehensive review of the analysis of finance, economics and the law and economics, illuminating past and current banking and financial regulation designed to prevent another credit/dollar crisis and global recession.
Download or read book Essays on Banking Securitisation Financial Regulation and Stability written by Alessandro Diego Scopelliti and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays on Bank Regulation and Intervention written by Wen-ling Lu and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: My second essay, "Do Bank Regulation and Supervision Improve Bank Performance and Reduce The Likelihood of Banking Crises?" focuses on the impact of bank regulation and supervision on various banking outcomes. The emphasis is on whether specific bank regulations and supervisory practices changed over time and whether they reduced the likelihood of a country experiencing a banking crisis. Given the role that banks have played in crises over time and in countries worldwide, this cross country analysis is important to determine whether specific regulatory and supervisory practices have helped reduce the likelihood f crises in countries, and thereby enhanced bank stability, performance and development.
Download or read book Regulating Finance written by Tommaso Padoa-Schioppa and published by Oxford University Press, USA. This book was released on 2004-03-25 with total page 171 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essays originally presented between 1997 and 2002 as lectures, speeches, a conference paper and a panel discussion.
Download or read book The Regulation and Supervision of Banks written by Chen Chen Hu and published by Routledge. This book was released on 2018-04-17 with total page 494 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the past two decades, the banking industry has expanded and consolidated at a stunningly unprecedented speed. In this time banks have also moved from focusing purely on commercial banking activities to being heavily involved in market-based and transaction-oriented wholesale and investment banking activities. By carrying out an all-encompassing set of activities, banks have become large, complex, interconnected, and inclined to levels of risk-taking not previously seen. With the onset of the 2008 global financial crisis it became apparent that there was an issue of institutions being too big to fail. This book analyses the too-big-to-fail problem of banks in the EU. It approaches the topic from an interdisciplinary perspective using behavioural finance as a tool to examine the occurrence of the global financial crisis and the emergence of the structural problem in large banking institutions. The book draws a comparison between the EU, the US and the UK and the relevant rules to assess the effectiveness of various approaches to regulation in a global context. Chen Chen Hu goes on to use behavioural analyses to provide new insights in evaluating the current structural reform rules in the EU Proposal on Bank Structural Regulation and the newly adopted bank recovery and resolution regime in the EU Bank Recovery and Resolution Directive and the Single Resolution Mechanism (SRM) in the Single Resolution Regulation.
Download or read book A Behavioral Approach to Financial Supervision Regulation and Central Banking written by Ashraf Khan and published by International Monetary Fund. This book was released on 2018-08-02 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper describes how behavioral elements are relevant to financial supervision, regulation, and central banking. It focuses on (1) behavioral effects of norms (social, legal, and market); (2) behavior of others (internalization, identification, and compliance); and (3) psychological biases. It stresses that financial supervisors, regulators, and central banks have not yet realized the full potential that these behavioral elements hold. To do so, they need to devise a behavioral approach that includes aspects relating to individual and group behavior. The paper provides case examples of experiments with such an approach, including behavioral supervision. Finally, it highlights areas for further research.
Download or read book Essays in Banking and Regulation written by Tirupam Goel and published by . This book was released on 2016 with total page 125 pages. Available in PDF, EPUB and Kindle. Book excerpt: The broad goal of this dissertation is to further our understanding of the relationship between real and financial sectors of an economy, to identify inefficiencies in financial sector intermediation, and to design financial regulation policies that can address these inefficiencies. The three chapters of this dissertation contribute to specific aspects of the above goal. In the first chapter, I develop a general equilibrium macroeconomic model with a dynamic banking sector in order to characterize optimal size-dependent bank leverage regulation. Bank leverage choices are subject to the risk-return trade-off, and are inefficient due to financial frictions. I show that leverage regulation can generate welfare gains, and that optimal regulation is tighter relative to the benchmark and is bank-size dependent. In particular, optimal regulation is tighter for large banks relative to small banks, and it leads to the following welfare generating effects. First, as small banks take more leverage, they grow faster conditional on survival, leading to a selection effect. Second, small bank failures are less costly while entrants have higher relative efficiency, leading to a cleansing effect. Third, tighter regulation for large banks reduces their failure rate, which generates welfare since large banks are more efficient and costlier to replace, leading to a stabilization effect. The calibrated model rationalizes various steady state moments of the US banking industry, and points towards qualitatively similar but quantitatively tighter leverage regulation relative to the proposition in Basel III accords. In the second chapter, I study the financial contagion problem when banks in order to hedge against idiosyncratic shocks, engage in two-dimensional as opposed to one-dimensional interactions with other banks. To this end, I develop a double-edge interbank network model where banks engage in debt contract and securitization transactions with other banks. I show that the standard intuition of financial contagion does not translate from the one-dimensional case to the two-dimensional case i.e. financial contagion can either weaken or worsen depending on the network and parameter configuration. In particular, I derive parametrization for the case where financial contagion worsens. In the third chapter, we investigate whether countercyclical capital-ratio regulation (CCR) should be implemented strictly as a rule, or whether regulators should have discretion with respect to the timing and magnitude of changes in capital-ratio requirement. Using a simple model we prove the proposition that under information asymmetry, discretionary CCR leads to an increase in policy uncertainty relative to rule-based CCR. We prove a similar proposition for a general finite-horizon economy. Finally, we document that since discretionary CCR enables the regulator to respond to unexpected shocks, a benevolent regulator faces the welfare trade-off while choosing between rule-based and discretionary CCR.
Download or read book Financial Regulation written by Ester Faia and published by Cambridge University Press. This book was released on 2015-08-14 with total page 375 pages. Available in PDF, EPUB and Kindle. Book excerpt: The 2007 to 2009 financial crisis resulted in the re-emergence of the debate on financial regulation and its relationships with other macroeconomic policies, particularly monetary policy. In Europe, the financial crisis was followed by the sovereign debt crisis, as the bail-out of the financial sector put strains on public finances in several countries. The sequence of events called for a strengthening of the union, ranging from a common framework for supervisory policy that could minimize the risk of unforeseen bank or country defaults to a common resolution mechanism that could set equal rules across countries and reduce ex-ante mis-incentives to risk-taking and moral hazard. This analysis of the state of and prospects for financial regulation examines the lending and saving behavior of banks and households as well as their borrowing activities in order to understand the conflicting priorities and complicated decisions involved in the development and implementation of financial legislation.
Download or read book Essays on Stability and Regulation of the Banking System written by Shasta Shakya and published by . This book was released on 2018 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three chapters each of which explores different topics in the area of banking. In the first chapter, I ask how a banks connectedness affects its financial stability and what mechanisms amplify or mitigate this effect. I consider connectedness arising due to linkages that are formed between banks when they are exposed to common housing markets, and investigate whether such connectedness explains stability around the 2007 housing crash. I show that linkages facilitate contagion of risk, and that high leverage and securitization activity of other banks amplify contagion while high liquidity ratio of other banks minimizes contagion. Finally, I provide policy implications by suggesting minimum levels of capital and liquidity ratios that could contain contagion.In the second chapter, I study the impact of a newly introduced liquidity requirement in the banking sector the Liquidity Coverage Ratio (LCR) rule on loan contract terms. This chapter employs a differences-in-differences testing method, and exploits the setting of multiple events arising from the timing of the implementation of the rule to identify the effect of LCR. I do not find evidence of high costs to lenders due to this rule, because loan pricing terms do not change in an average loan post LCR. However, banks limit their risk exposure by increasing collateral requirements. For banks that are ex-ante expected to find the rule less costly, I find evidence of cost savings because they offer lower spreads. Further results suggest that while banks provided extra benefits to relationship borrowers in the form of lower spreads pre LCR, this is no longer true post LCR, and they reduce risk exposure to borrowers with weaker relationship strength by increasing collateral requirements.In the third chapter, I study the relationship between liquidity created by a bank and its overall financial stability. I contrast results during the period of 2007 financial crisis with those during normal times. While I find that overall liquidity creation is a risky activity during both times, breaking it into different components (on- vs. off-balance sheet, asset side vs. liability side) reveals nuances on the driving forces behind this relationship. While asset side liquidity creation decreases stability during both times, results show that the effects of other components depend on overall market conditions. During the crisis period, off-balance sheet liquidity creation hurts stability, while it has no apparent benefit during normal times. Liability side liquidity creation improves stability during crisis, however there is evidence of costs of such activity during normal times. Further results show that liquid holdings and core deposits can mitigate the costs of liquidity creation during crisis without significantly hurting benefits during normal times.
Download or read book Essays on Financial Regulation written by Mauricio Naranjo and published by . This book was released on 1995 with total page 218 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Essays in Bank Competition and Lending Behavior written by Genuine Martin and published by . This book was released on 2017 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation assesses the competitiveness of Tanzania's banking sector using both structural and non-structural (industrial organization) approaches, assesses the predictors of banks' lending behavior, and investigates the bank lending channel of monetary policy transmission process. The first and the second essays utilize bank-level panel data of commercial banks whereas the third employs aggregate time series data. My work contributes to understanding the underlying factors and processes which explain the nature of competition in the banking sector and the conduct of monetary policy in Tanzania. In the first essay, I use the dynamic regression model to test the hypotheses that the market power of banks in Tanzania leads to higher bank profits, by including the lag of the dependent variable among regressors to test the tendency of profits to persist over time, using the market share of banks to test the relative-market-power (RMP) hypothesis, and using concentration ratios to test the structure-conduct-performance (SCP) hypothesis. Using data drawn from twenty-six commercial banks during the 1998-2015 period, I establish from the results that the lag of the dependent variable, market share of banks, and industry concentration ratios (HHIs) have a positive and statistically significant effect on bank profit. These results support moderate persistence of bank profits over time, RMP and SCP hypotheses, as potential explanations of high bank profits. In the second essay, I also use the dynamic regression model to assess potential predictors of commercial banks' lending behavior and the bank lending channel of monetary policy transmission process. Using quarterly panel data for thirty-one commercial banks for the 1998-2015 period, I establish from the results that bank lending persists significantly over time, hence suggesting that some degree of relationship banking and lock-in-effect for lenders and borrowers exists. Although bank size and capital, and inflation rate are associated with higher bank lending, credit risk, private and foreign bank ownership, market power of banks, and the square of inflation rate, have a negative effect on lending. Results for the bank lending channel show that contractionary monetary policy (higher monetary policy indicators) is associated with higher bank lending, and this positive effect of contractionary monetary policy on bank lending is more pronounced in samples of all the banks and medium-sized banks that are more capitalized, in a sample of large banks with more liquidity and capital but with less assets, and in a sample of small banks with less size and capital. By drawing on a country-specific case of Tanzania, this essay is illuminating because results of studies of this nature differ across countries and regions, depending on the structure of the economy, financial sector development, institutional and regulatory environment. In Amidu (2014), determinants of bank lending are different across economic integrations (Economic Community of West African States [ECOWAS], the East African Community [EAC] and the Southern Africa Development Community [SADC]. In the third essay, I use the dynamic regression model (autoregressive process of order one), which empirically applies the theoretical seminal work of Panzar and Rosse (1987) to estimate an index of banking sector contestability, the H statistic, which is the sum of factor price elasticities of the reduced form revenue equation. Using time series data for the 1998-2015 period, the estimated H statistic of 0.57, characterizes Tanzania's banking sector as monopolistic competitive, in which high industry concentration co-exists with considerable contestable pressure. Bank revenues persist moderately over time, whereby interest revenue generation is a key bank activity. Furthermore, the aftermath of the 2006 second-generation financial sector reforms is associated with improved banking industry competitiveness, based on the moving average estimates of the H statistics, and is associated with changes in the banks' production functions, whereby banks substitute less funds (deposits) and physical capital, with more labor. These results are consistent with the dramatic decline in the interest rate spread and an increase in the proportion of labor costs.
Download or read book Lessons of the Financial Crisis for Future Regulation of Financial Institutions and Markets and for Liquidity Management written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2009-04-02 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper seeks to draw lessons for financial sector regulation and supervision and central bank liquidity management from the ongoing crisis, focusing principally on implications for the future rather than on immediate crisis management policies. Inadequacies in macroeconomic policies and the design of the international financial architecture exposed in the crisis will also have to be addressed to make the suggested changes in the regulatory framework effective.
Download or read book Financial Stability and Prudential Regulation written by Alison Lui and published by Routledge. This book was released on 2016-10-04 with total page 222 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial stability is one of the key tenets of a central bank’s functions. Since the financial crisis of 2007-2009, an area of hot debate is the extent to which the central bank should be involved with prudential regulation. This book examines the macro and micro-prudential regulatory frameworks and systems of the United Kingdom, Australia, the United States, Canada and Germany. Drawing on the regulator frameworks of these regions, this book examines the central banks’ roles of crisis management, resolution and prudential regulation. Alison Lui compares the institutional structure of the new ‘twin-peaks’ model in the UK to the Australian model, and the multi-regulatory US model and the single regulatory Canadian model. The book also discusses the extent the central bank in these countries, as well as the ECB, are involved with financial stability, and argues that the institutional architecture and geographical closeness of the Bank of England and Financial Policy Committee give rise to the fear that the UK central bank may become another single super-regulator, which may provide the Bank of England with too much power. As a multi-regional, comparative study on the importance and effectiveness of prudential regulation, this book will be of great use and interest to students and researchers in finance and bank law, economics and banking.
Download or read book Three Essays on Capital Regulations and Shadow Banking written by Diny Ghuzini and published by . This book was released on 2015 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt: The shadow banking sector is a sector that is comprised of financial intermediaries that do not have access to central bank funds and perform their activities outside the regular banking system. This sector had been rapidly growing in most developed economies. This dissertation focuses on the behavioral difference and interaction of the traditional and shadow banking sectors as displayed by the relative asset position of both sectors, their risk taking positions, and their business cycles properties. The first essay examines the impact of minimum capital requirements on the share of shadow to total banking assets. Previous literature has argued that increased regulation of the traditional banking sector will lead to regulatory arbitrage and an increase in shadow banking activities. That is, banks shift their operation away from traditional banking into the less regulated shadow banking sector when traditional banking activities are more heavily regulated. This hypothesis is tested using data from 76 countries over the 2005 through 2010 period. The results provide some evidence in favor of the regulatory arbitrage hypothesis, but only for high income countries. The second essay focuses on bank risk taking behavior when the capital requirement is strengthened. Risk is proxied by the share of non-performing loans to total loans in the banks portfolio. Using cross-section data from 82 countries, it examines whether one banking sector takes on more risks than the other sector when a specific risk based capital regulation is applied. The shadow banking sector is found to take on higher risks, as displayed by the loan failures, than the traditional banking sector in response to enhanced capital regulations. The third essay uses the relationship between leverage and assets to quantify the pro-cyclicality of leverage and evaluates the impact of Basel II implementation on procyclicality. Using panel data from 113 countries over the period of 2005-2012, procyclicality is examined for the shadow and traditional banking sectors. The key results indicate that the traditional banking sector tends to be less pro-cyclical than the shadow banking sector and that Basel II implementation intensifies the pro-cyclicality.
Download or read book Financial Supervision in the 21st Century written by A. Joanne Kellermann and published by Springer Science & Business Media. This book was released on 2014-07-08 with total page 255 pages. Available in PDF, EPUB and Kindle. Book excerpt: The financial crisis prompted financial supervisors to take a critical look at their own performance. The "toolkit" available to supervisors is considerably more varied than it was a few years ago. Supervision has become more forward-looking, taking into account also soft controls, such as ‘conduct and culture’, corporate governance, and business models of financial institutions. This collection of essays discusses several significant changes in supervision methods and supervisory organisations and examines what methods contribute to ‘good supervision’ and what can reasonably be expected of supervisors. The authors are experts in the field and most of them are affiliated to organisations responsible for financial supervision.
