Assuming that a central bank is successful in steering money market interest rates, commercial banks’ loan rate setting behaviour is not expected to change during a transition between liquidity surplus and deficit. However, this logic does not hold if the interest rates for the lending and borrowing activities of an individual bank on the money market do not coincide. In this environment, it may be appropriate to adjust the loan rates when a bank transitions between liquidity surplus and deficit (i.e. switches between the benchmark money market rates). This strategy is fundamentally different from linking the loan rates to the average cost of funding (i.e. the average between retail and wholesale funding rates). The magnitude of such loan rate adjustment is limited by the (usually moderate) spread between the funding and investment money market rates.
{"title":"Banks’ Interest Rate Setting and Transitions between Liquidity Surplus and Deficit","authors":"T. Grishina, A. Ponomarenko","doi":"10.2139/ssrn.3902640","DOIUrl":"https://doi.org/10.2139/ssrn.3902640","url":null,"abstract":"Assuming that a central bank is successful in steering money market interest rates, commercial banks’ loan rate setting behaviour is not expected to change during a transition between liquidity surplus and deficit. However, this logic does not hold if the interest rates for the lending and borrowing activities of an individual bank on the money market do not coincide. In this environment, it may be appropriate to adjust the loan rates when a bank transitions between liquidity surplus and deficit (i.e. switches between the benchmark money market rates). This strategy is fundamentally different from linking the loan rates to the average cost of funding (i.e. the average between retail and wholesale funding rates). The magnitude of such loan rate adjustment is limited by the (usually moderate) spread between the funding and investment money market rates.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"102 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-08-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"75748264","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We empirically analyze the effect of ECB monetary policy on bank default risk, captured by bank CDS spreads, of Euro Area banks during the period 2008-2018. We disentangle the impact of monetary policy in a direct channel and an indirect effect operating through a sovereign risk channel. We document that accommodative ECB policies in general lower bank default risk. ECB policy actions exert their beneficial effect on the banks’ perceived risk profile through a combination of a direct effect and an indirect-through-the-sovereign effect. We demonstrate that these effects are stronger for banks in peripheral countries of the Euro Area and that the downward effect on bank default risk was especially pronounced in the 2012-2014 sovereign stress period. Yet, our time-varying impact analysis shows that the beneficial effect of ECB policy persists in the post-2014 era during which the ECB implemented its asset purchase program and other unconventional tools. Our results support the argument that, on balance, the beneficial effects of accommodative ECB monetary policy on Euro Area banks’ risk profile outweigh any negative side-effects.
{"title":"ECB Monetary Policy and Bank Default Risk","authors":"Nicolas Soenen, Rudi Vander Vennet","doi":"10.2139/ssrn.3600739","DOIUrl":"https://doi.org/10.2139/ssrn.3600739","url":null,"abstract":"We empirically analyze the effect of ECB monetary policy on bank default risk, captured by bank CDS spreads, of Euro Area banks during the period 2008-2018. We disentangle the impact of monetary policy in a direct channel and an indirect effect operating through a sovereign risk channel. We document that accommodative ECB policies in general lower bank default risk. ECB policy actions exert their beneficial effect on the banks’ perceived risk profile through a combination of a direct effect and an indirect-through-the-sovereign effect. We demonstrate that these effects are stronger for banks in peripheral countries of the Euro Area and that the downward effect on bank default risk was especially pronounced in the 2012-2014 sovereign stress period. Yet, our time-varying impact analysis shows that the beneficial effect of ECB policy persists in the post-2014 era during which the ECB implemented its asset purchase program and other unconventional tools. Our results support the argument that, on balance, the beneficial effects of accommodative ECB monetary policy on Euro Area banks’ risk profile outweigh any negative side-effects.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"148 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-07-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"77776836","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper presents a bank capital structure model in which equity holders can increase asset risk once debt is in place. I study the effects of capital requirements and subsidized deposit insurance on the bank's privately optimal funding and operational risk level. The model predicts that there are synergetic effects of regulation and market discipline. When the regulator sets the capital charge and deposit insurance premium payments sufficiently high for a risky portfolio, the bank commits to the low-risk asset portfolio by setting a lower leverage ratio. This market discipline effect disappears when the regulatory costs become too high.
{"title":"Bank Regulation and Market Discipline in the Presence of Risk-Shifting Incentives","authors":"Suzanne Vissers","doi":"10.2139/ssrn.3892345","DOIUrl":"https://doi.org/10.2139/ssrn.3892345","url":null,"abstract":"This paper presents a bank capital structure model in which equity holders can increase asset risk once debt is in place. I study the effects of capital requirements and subsidized deposit insurance on the bank's privately optimal funding and operational risk level. The model predicts that there are synergetic effects of regulation and market discipline. When the regulator sets the capital charge and deposit insurance premium payments sufficiently high for a risky portfolio, the bank commits to the low-risk asset portfolio by setting a lower leverage ratio. This market discipline effect disappears when the regulatory costs become too high.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"41 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-07-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81205628","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Using the Difference-in-Differences method and data from 5115 banks located in 74 countries over 2009-2018, we investigate the effects of negative interest rate policy (NIRP) on customer deposit rate. Our results suggest that banks affected by NIRP reduced their customer deposit rate. We also show that this effect varies from country to country, especially among eurozone countries. Finally, we find that the reduction in the customer deposit rate is not immediate and that it becomes stronger as NIRP persists over time. Overall, our findings confirm that banks are reluctant to reduce customer deposit rates. However, this reluctance decreases as negative interest rates are prolonged over time.
{"title":"'Negative-For-Long' Interest Rates and Customer Deposit Rate","authors":"Whelsy Boungou","doi":"10.2139/ssrn.3767506","DOIUrl":"https://doi.org/10.2139/ssrn.3767506","url":null,"abstract":"Using the Difference-in-Differences method and data from 5115 banks located in 74 countries over 2009-2018, we investigate the effects of negative interest rate policy (NIRP) on customer deposit rate. Our results suggest that banks affected by NIRP reduced their customer deposit rate. We also show that this effect varies from country to country, especially among eurozone countries. Finally, we find that the reduction in the customer deposit rate is not immediate and that it becomes stronger as NIRP persists over time. Overall, our findings confirm that banks are reluctant to reduce customer deposit rates. However, this reluctance decreases as negative interest rates are prolonged over time.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"59 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"74230043","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Bradley E. Hendricks, Jed J. Neilson, Catherine Shakespeare, Christopher D. Williams
Regulation is often proposed, developed, and finalized over a lengthy rule-making period prior to its adoption. We examine the period over which banking authorities discussed, adopted, and implemented Basel III to understand how firms respond to proposed regulation. We find evidence to suggest that affected banks not only lobbied rule makers against it, but that they also made strategic financial reporting changes and altered their business models in ways that reduced their exposure to the proposed rule prior to rule makers finalizing the regulation. Further, our results indicate a sequential response, with banks responding through lobbying and strategic financial reporting prior to making business model changes. These findings highlight the interplay among firms’ financial reporting, business model, and political choices in response to proposed regulation, and indicate that the appropriate date for an event study may be the regulation’s announcement date rather than its adoption or implementation dates.
{"title":"Anticipatory effects around proposed regulation: Evidence from Basel III","authors":"Bradley E. Hendricks, Jed J. Neilson, Catherine Shakespeare, Christopher D. Williams","doi":"10.2139/ssrn.2354618","DOIUrl":"https://doi.org/10.2139/ssrn.2354618","url":null,"abstract":"Regulation is often proposed, developed, and finalized over a lengthy rule-making period prior to its adoption. We examine the period over which banking authorities discussed, adopted, and implemented Basel III to understand how firms respond to proposed regulation. We find evidence to suggest that affected banks not only lobbied rule makers against it, but that they also made strategic financial reporting changes and altered their business models in ways that reduced their exposure to the proposed rule prior to rule makers finalizing the regulation. Further, our results indicate a sequential response, with banks responding through lobbying and strategic financial reporting prior to making business model changes. These findings highlight the interplay among firms’ financial reporting, business model, and political choices in response to proposed regulation, and indicate that the appropriate date for an event study may be the regulation’s announcement date rather than its adoption or implementation dates.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"114 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"87291695","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper we revisit the question whether negative shocks to banks have adverse real economic effects. We analyze German savings banks and propose a new identification strategy. We consider distressed mergers and interpret them as exogenous shocks to the (initially non-distressed) acquiring bank. We find that in the years after a distressed merger (i) the performance of acquiring savings banks deteriorates; (ii) the shock is transmitted to firms in the acquirer’s region who cut back their investments and (iii) the overall macroeconomic dynamics in the region of the acquirer deteriorates, leading to lower investment and employment growth. To justify a causal interpretation of our results we perform several additional tests that establish the exogeneity of the shock to the acquiring bank with respect to local economic dynamics.
{"title":"The Real Effects of Distressed Bank Mergers","authors":"Valeriya Dinger, Christian Schmidt, E. Theissen","doi":"10.2139/ssrn.3865127","DOIUrl":"https://doi.org/10.2139/ssrn.3865127","url":null,"abstract":"In this paper we revisit the question whether negative shocks to banks have adverse real \u0000economic effects. We analyze German savings banks and propose a new identification \u0000strategy. We consider distressed mergers and interpret them as exogenous shocks to the \u0000(initially non-distressed) acquiring bank. We find that in the years after a distressed \u0000merger (i) the performance of acquiring savings banks deteriorates; (ii) the shock is \u0000transmitted to firms in the acquirer’s region who cut back their investments and (iii) \u0000the overall macroeconomic dynamics in the region of the acquirer deteriorates, leading \u0000to lower investment and employment growth. To justify a causal interpretation of our \u0000results we perform several additional tests that establish the exogeneity of the shock \u0000to the acquiring bank with respect to local economic dynamics.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"29 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84700171","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Corporate credit ratings have tightened gradually but substantially over two decades. We ex- amine whether syndicated loans correct for the conservatism. We find that they do not. The correction in spreads is greater for smaller, speculative borrowers, loans with fewer lenders and a greater lead bank share that resemble single lender loans, for borrower names with CDS, and in the CDS markets. The incomplete correction is also detectable in newly rated borrowers who did not earlier have ratings. Thus, even in markets with large sophisticated players, form rather than substance matters.
{"title":"Form or Substance? Incomplete Disambiguation of Credit Grades in Syndicated Bank Loans","authors":"Aysun Alp Paukowits, N. Prabhala","doi":"10.2139/ssrn.3706576","DOIUrl":"https://doi.org/10.2139/ssrn.3706576","url":null,"abstract":"Corporate credit ratings have tightened gradually but substantially over two decades. We ex- amine whether syndicated loans correct for the conservatism. We find that they do not. The correction in spreads is greater for smaller, speculative borrowers, loans with fewer lenders and a greater lead bank share that resemble single lender loans, for borrower names with CDS, and in the CDS markets. The incomplete correction is also detectable in newly rated borrowers who did not earlier have ratings. Thus, even in markets with large sophisticated players, form rather than substance matters.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-05-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84579932","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Markets with wealthier lenders experience more severe financial crises. To investigate this puzzle, we propose a model of collateralized lending in which: (1) borrowers endogenously determine collateral quality, and (2) lenders can produce costly information about collateral. When lenders are wealthier, borrowers use lower quality collateral to suppress costly information production, however, lower collateral quality in turn leads to more severe financial crises. Empirically, we find a negative relation between wealth and collateral quality, and during crises, wealth is negatively related to loan growth, investment, productivity, and output, with evidence that the effect of wealth goes through the collateral channel.
{"title":"Wealth, Endogenous Collateral Quality, and Financial Crises","authors":"Zehao Liu, Andrew J. Sinclair","doi":"10.2139/ssrn.3286494","DOIUrl":"https://doi.org/10.2139/ssrn.3286494","url":null,"abstract":"Markets with wealthier lenders experience more severe financial crises. To investigate this puzzle, we propose a model of collateralized lending in which: (1) borrowers endogenously determine collateral quality, and (2) lenders can produce costly information about collateral. When lenders are wealthier, borrowers use lower quality collateral to suppress costly information production, however, lower collateral quality in turn leads to more severe financial crises. Empirically, we find a negative relation between wealth and collateral quality, and during crises, wealth is negatively related to loan growth, investment, productivity, and output, with evidence that the effect of wealth goes through the collateral channel.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"61 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-05-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"91249837","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
India is not only the world’s largest independent democracy, but also an emerging economic giant. Without a sound and effective banking system, no country can have a healthy economy. Banks play a vital role in the economic development of a country. The Banking sector acts as a backbone of modern business. A well organized banking system is necessity for the economic development of a country. Banks being fundamental components of financial system are the most effective way to generate the credit flow of money in markets. The banking is one of the most essential and important parts of the human life. In current faster lifestyle peoples may not do proper transitions without developing the proper bank network. The banking System in India is dominated by nationalized banks. The performance of the banking sector is more closely linked to the economy than perhaps that of any other sector. At the same time banking industry like many other financial services face a rapidly changing market, new technologies, economic fears, nasty competition and especially more customers demands. The central objective of the study is to empirically investigate a role of Indian banks in capital formation and economic growth. Research is based upon the secondary data which provide the findings on commercial banks and how it is helpful in economic development.
{"title":"Role of Commercial Banks in the Economic Development of a Country:- An Indian Perspective","authors":"Sheikh Aamin Hussain, Aatif Javaid","doi":"10.2139/ssrn.3884302","DOIUrl":"https://doi.org/10.2139/ssrn.3884302","url":null,"abstract":"India is not only the world’s largest independent democracy, but also an emerging economic giant. Without a sound and effective banking system, no country can have a healthy economy. Banks play a vital role in the economic development of a country. The Banking sector acts as a backbone of modern business. A well organized banking system is necessity for the economic development of a country. Banks being fundamental components of financial system are the most effective way to generate the credit flow of money in markets. The banking is one of the most essential and important parts of the human life. In current faster lifestyle peoples may not do proper transitions without developing the proper bank network. The banking System in India is dominated by nationalized banks. The performance of the banking sector is more closely linked to the economy than perhaps that of any other sector. At the same time banking industry like many other financial services face a rapidly changing market, new technologies, economic fears, nasty competition and especially more customers demands. The central objective of the study is to empirically investigate a role of Indian banks in capital formation and economic growth. Research is based upon the secondary data which provide the findings on commercial banks and how it is helpful in economic development.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"60 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-05-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84642536","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Gianni De Nicoló, A. Presbitero, A. Rebucci, Gang Zhang
This paper studies the high and persistent U.S. cost of financial intermediation (CFI) documented by Philippon (2015) and its inverted U-shape behavior since the mid-1960s. We build a novel model of endogenous growth and bank intermediation and introduce imperfect bank competition, bank IT adoption and bank entry, and an occupational choice that determines the relative size of the labor force and the economy's average level of managerial ability. The interplay between verification costs, market structure, and occupational choice delivers implications for the CFI which are qualitatively consistent with the stylized facts of the U.S. economy. We find that the banking sector structure is the main determinant of the long-run level of the CFI. We also show that the U.S. productivity growth slowdown from the mid-1960s to the mid-1980s is a major driver of the simultaneous increase in the CFI and the number of banks during this period and their subsequent decline.
{"title":"Technology Adoption, Market Structure, and the Cost of Bank Intermediation","authors":"Gianni De Nicoló, A. Presbitero, A. Rebucci, Gang Zhang","doi":"10.2139/ssrn.3810796","DOIUrl":"https://doi.org/10.2139/ssrn.3810796","url":null,"abstract":"This paper studies the high and persistent U.S. cost of financial intermediation (CFI) documented by Philippon (2015) and its inverted U-shape behavior since the mid-1960s. We build a novel model of endogenous growth and bank intermediation and introduce imperfect bank competition, bank IT adoption and bank entry, and an occupational choice that determines the relative size of the labor force and the economy's average level of managerial ability. The interplay between verification costs, market structure, and occupational choice delivers implications for the CFI which are qualitatively consistent with the stylized facts of the U.S. economy. We find that the banking sector structure is the main determinant of the long-run level of the CFI. We also show that the U.S. productivity growth slowdown from the mid-1960s to the mid-1980s is a major driver of the simultaneous increase in the CFI and the number of banks during this period and their subsequent decline.","PeriodicalId":11689,"journal":{"name":"ERN: Commercial Banks (Topic)","volume":"100 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2021-03-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78053272","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：