Download or read book High Liquidity Creation and Bank Failures written by Zuzana Fungacova and published by International Monetary Fund. This book was released on 2015-05-06 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We formulate the “High Liquidity Creation Hypothesis” (HLCH) that a proliferation in the core activity of bank liquidity creation increases failure probability. We test the HLCH in the context of Russian banking, which provides a natural field experiment due to numerous failures experienced over the past decade. Using Berger and Bouwman’s (2009) liquidity creation measures as a comprehensive proxy for overall bank output, we find that high liquidity creation significantly increases the probability of bank failure; this finding survives multiple robustness checks. Our results suggest that regulatory authorities can mitigate systemic distress and reduce the costs of bank failures to society through early identification of high liquidity creators and enhanced monitoring of their funding and investment activities.
Download or read book High Liquidity Creation and Bank Failures written by Zuzana Fungacova and published by International Monetary Fund. This book was released on 2015-05-06 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: We formulate the “High Liquidity Creation Hypothesis” (HLCH) that a proliferation in the core activity of bank liquidity creation increases failure probability. We test the HLCH in the context of Russian banking, which provides a natural field experiment due to numerous failures experienced over the past decade. Using Berger and Bouwman’s (2009) liquidity creation measures as a comprehensive proxy for overall bank output, we find that high liquidity creation significantly increases the probability of bank failure; this finding survives multiple robustness checks. Our results suggest that regulatory authorities can mitigate systemic distress and reduce the costs of bank failures to society through early identification of high liquidity creators and enhanced monitoring of their funding and investment activities.
Download or read book Bank Liquidity Creation and Financial Crises written by Allen N. Berger and published by Academic Press. This book was released on 2015-11-24 with total page 296 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank Liquidity Creation and Financial Crises delivers a consistent, logical presentation of bank liquidity creation and addresses questions of research and policy interest that can be easily understood by readers with no advanced or specialized industry knowledge. Authors Allen Berger and Christa Bouwman examine ways to measure bank liquidity creation, how much liquidity banks create in different countries, the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, the effects of bailouts, and much more. They also analyze bank liquidity creation in the US over the past three decades during both normal times and financial crises. Narrowing the gap between the "academic world" (focused on theories) and the "practitioner world" (dedicated to solving real-world problems), this book is a helpful new tool for evaluating a bank's performance over time and comparing it to its peer group. - Explains that bank liquidity creation is a more comprehensive measure of a bank's output than traditional measures and can also be used to measure bank liquidity - Describes how high levels of bank liquidity creation may cause or predict future financial crises - Addresses questions of research and policy interest related to bank liquidity creation around the world and provides links to websites with data and other materials to address these questions - Includes such hot-button topics as the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, and the effects of bailouts
Download or read book Does Excessive Liquidity Creation Trigger Bank Failures written by Zuzana Fungác̆ová and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Does Excessive Liquidity Creation Trigger Bank Failures written by Zuzana Fungáčová and published by . This book was released on 2016 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper introduces the "Excessive Liquidity Creation Hypothesis," whereby a rise in a bank's core liquidity creation activity increases its probability of failure. Russia experienced many bank failures over the past decade, making it an ideal natural field experiment for testing this hypothesis. Using Berger and Bouwman's (2009) liquidity creation measures, we find that excessive liquidity creation significantly increased the probability of bank failure during our observation period (2000?2007). This finding survives multiple robustness checks. Our results further suggest that regulatory authorities can mitigate systemic distress and reduce the costs to society from bank failures through early identification and enhanced monitoring of excessive liquidity creators.
Download or read book Bank Failure written by and published by . This book was released on 1988 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Liquidity Shortages and Banking Crises written by Douglas Warren Diamond and published by . This book was released on 2003 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt: "We show in this paper that bank failures can be contagious. Unlike earlier work where contagion stems from depositor panics or ex ante contractual links between banks, we argue bank failures can shrink the common pool of liquidity, creating or exacerbating aggregate liquidity shortages. This could lead to a contagion of failures and a possible total meltdown of the system. Given the costs of a meltdown, there is a possible role for government intervention. Unfortunately, liquidity problems and solvency problems interact and can cause each other, making it hard to determine the root cause of a crisis from observable factors. We propose a robust sequence of intervention"--NBER website
Download or read book Liquidity Banking and Bank Failures written by University of Western Ontario. Centre for the Study of International Economic Relations and published by London : Department of Economics, University of Western Ontario. This book was released on 1986 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Determinants of Ex Ante Banking System Distress written by Ms.Brenda Gonzalez-Hermosillo and published by International Monetary Fund. This book was released on 1999-03-01 with total page 115 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically analyzes the contribution of microeconomic and macroeconomic factors in five recent episodes of banking system problems in the U.S. Southwest (1986–92), Northeast (1991–92), and California (1992–93); Mexico (1994–95); and Colombia (1982–87). The paper finds that a low capital equity and reserve coverage of problem loans ratio is a leading indicator of bank distress, signaling a high likelihood of near-term failure. Distress is shown to be a function of the same fundamental macro-micro sources of risk that determine bank failures. Focusing on distress has the advantage that the fragility of the banking system can be assessed before a crisis actually occurs.
Download or read book Crisis and Response written by Federal Deposit Insurance Corporation and published by . This book was released on 2018-03-06 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Crisis and Response: An FDIC History, 2008¿2013 reviews the experience of the FDIC during a period in which the agency was confronted with two interconnected and overlapping crises¿first, the financial crisis in 2008 and 2009, and second, a banking crisis that began in 2008 and continued until 2013. The history examines the FDIC¿s response, contributes to an understanding of what occurred, and shares lessons from the agency¿s experience.
Download or read book Liquidity and Crises written by Franklin Allen and published by OUP USA. This book was released on 2011-01-13 with total page 718 pages. Available in PDF, EPUB and Kindle. Book excerpt: One important cause of the 2007-2009 crisis was illiquidity combined with exposure of many financial institutions to liquidity needs. But what is liquidity and why is it so important for financial institutions to command enough liquidity? This book brings together classic articles and recent contributions to this important field.
Download or read book Financial Crises and Bank Liquidity Creation This is an OLD WP that has been split into 2 parts written by Allen N. Berger and published by . This book was released on 2013 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Financial crises and bank liquidity creation are often connected. We examine this connection from two perspectives. First, we examine the aggregate liquidity creation of banks before, during, and after five major financial crises in the U.S. from 1984:Q1 to 2008:Q1. We uncover numerous interesting patterns, such as a significant build-up or drop-off of quot;abnormalquot; liquidity creation before each crisis, where quot;abnormalquot; is defined relative to a time trend and seasonal factors. Banking and market-related crises differ in that banking crises were preceded by abnormal positive liquidity creation, while market-related crises were generally preceded by abnormal negative liquidity creation. Bank liquidity creation has both decreased and increased during crises, likely both exacerbating and ameliorating the effects of crises. Off-balance sheet guarantees such as loan commitments moved more than on-balance sheet assets such as mortgages and business lending during banking crises.Second, we examine the effect of pre-crisis bank capital ratios on the competitive positions and profitability of individual banks during and after each crisis. The evidence suggests that high capital served large banks well around banking crises - they improved their liquidity creation market share and profitability during these crises and were able to hold on to their improved performance afterwards. In addition, high-capital listed banks enjoyed significantly higher abnormal stock returns than low-capital listed banks during banking crises. These benefits did not hold or held to a lesser degree around market-related crises and in normal times. In contrast, high capital ratios appear to have helped small banks improve their liquidity creation market share during banking crises, market-related crises, and normal times alike, and the gains in market share were sustained afterwards. Their profitability improved during two crises and subsequent to virtually every crisis. Similar results were observed during normal times for small banks.
Download or read book Liquidity Shortages and Banking Crises written by Douglas W. Diamond and published by . This book was released on 2002 with total page 72 pages. Available in PDF, EPUB and Kindle. Book excerpt: Banks can fail either because they are insolvent or because an aggregate shortage of liquidity can render them insolvent. We show that bank failures can themselves cause liquidity shortages. The failure of some banks can then lead to a cascade of failures and a possible total meltdown of the system. Contagion here is not caused by contractual or informational links between banks but because bank failure could lead to a contraction in the common pool of liquidity. There is a possible role for government intervention. Unfortunately, liquidity problems and solvency problems interact, and can each cause the other. It is therefore hard to determine the root cause of a crisis from observable factors. The practical difficulty of determining the most appropriate intervention, as well as the costs of the wrong kind of intervention (such as infusing capital when the need is for liquidity) have to be traded off against the costs of a meltdown, which can be substantial. We propose a robust sequence of intervention.
Download or read book How Big Banks Fail and What to Do about It written by Darrell Duffie and published by Princeton University Press. This book was released on 2010-10-18 with total page 108 pages. Available in PDF, EPUB and Kindle. Book excerpt: A leading finance expert explains how and why big banks fail—and what can be done to prevent it Dealer banks—that is, large banks that deal in securities and derivatives, such as J. P. Morgan and Goldman Sachs—are of a size and complexity that sharply distinguish them from typical commercial banks. When they fail, as we saw in the global financial crisis, they pose significant risks to our financial system and the world economy. How Big Banks Fail and What to Do about It examines how these banks collapse and how we can prevent the need to bail them out. In sharp, clinical detail, Darrell Duffie walks readers step-by-step through the mechanics of large-bank failures. He identifies where the cracks first appear when a dealer bank is weakened by severe trading losses, and demonstrates how the bank's relationships with its customers and business partners abruptly change when its solvency is threatened. As others seek to reduce their exposure to the dealer bank, the bank is forced to signal its strength by using up its slim stock of remaining liquid capital. Duffie shows how the key mechanisms in a dealer bank's collapse—such as Lehman Brothers' failure in 2008—derive from special institutional frameworks and regulations that influence the flight of short-term secured creditors, hedge-fund clients, derivatives counterparties, and most devastatingly, the loss of clearing and settlement services. How Big Banks Fail and What to Do about It reveals why today's regulatory and institutional frameworks for mitigating large-bank failures don't address the special risks to our financial system that are posed by dealer banks, and outlines the improvements in regulations and market institutions that are needed to address these systemic risks.
Download or read book The Lost Bank written by Kirsten Grind and published by Simon and Schuster. This book was released on 2012-06-12 with total page 401 pages. Available in PDF, EPUB and Kindle. Book excerpt: An award-winning reporter chronicles the calamitous story of Washington Mutual, the single-largest bank failure in American history, in this fast-paced, compelling, and gripping saga of greed and excess. During the most dizzying days of the financial crisis, Washington Mutual, a bank with hundreds of billions of dollars in its coffers, suffered a crippling bank run. The story of its final, brutal collapse in the autumn of 2008, and its controversial sale to JPMorgan Chase, is an astonishing account of how one bank lost itself to greed and mismanagement, and how the entire financial industry—even the entire country—lost its way as well. Written as compellingly as the finest fiction, The Lost Bank introduces readers to the regulators and the bankers, the home buyers and the lenders who together created the largest bank failure in American history. The result is a magisterial and gripping account of the incredible rise and the precipitous collapse of not only an institution but of trust, fortunes, and the marketplaces for risk across the world.
Download or read book Bank Insolvencies Cross country Experience written by Gerard Caprio (Jr.), Daniela Klingebiel and published by World Bank Publications. This book was released on 1996 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Systemic Financial Crises written by Douglas Darrell Evanoff and published by World Scientific. This book was released on 2005 with total page 474 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank failures, like illness and taxes, are almost a certainty at some time in the future. What is less certain is their cost to and adverse implications for macroeconomies. Past failures have frequently been resolved at very high cost to society. However, the cost could be reduced through having a well-developed, credible and widely publicized plan ready to put into action by policymakers. If no such plan is ready when a large bank approaches insolvency, political pressures are likely to influence the response of regulators.Minimizing immediate, short-run costs are likely to outweigh minimizing further out, longer-run and longer-lasting costs, even if these delayed costs promise to be substantially greater. Stated differently, today will win out over tomorrow and politics will trump economics. How best to prevent such unfavorable outcomes is the major theme of this volume. The articles presented review past insolvency resolutions, draw lessons from these resolutions, discuss impediments to efficient resolutions ? including cross-country, cross-regulator, and institutional challenges ? and recommend how to move forward.
