This paper is the first to examine the unlimited deposit insurance on noninterest-bearing transaction accounts (NIBTAs) provided by Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). During Dodd-Frank, banks had a smaller ratio of NIBTAs compared to later periods without the unlimited insurance but have larger deposit flows in NIBTAs over the $250,000 FDIC limit. The results suggest that depositors took advantage of the unlimited insurance, but that banks were not harmed by drawdowns when the insurance expired. Furthermore, the results suggest that emergency deposit insurance might be a good complement to FDIC insurance during recessionary times.
本文首次考察了《多德-弗兰克华尔街改革与消费者保护法》(Dodd-Frank Wall Street Reform and Consumer Protection Act)第343条对无息交易账户(NIBTAs)提供的无限制存款保险。在多德-弗兰克法案实施期间，与没有无限保险的后期相比，银行的nibta比例较小，但nibta的存款流量超过了25万美元的FDIC上限。结果表明，存款人利用了无限保险，但当保险到期时，银行并没有受到提款的损害。此外，结果表明，紧急存款保险可能是一个很好的补充FDIC保险在经济衰退时期。
{"title":"Dodd-Frank and Unlimited Deposit Insurance","authors":"Anna‐Leigh Stone","doi":"10.2139/ssrn.3905573","DOIUrl":"https://doi.org/10.2139/ssrn.3905573","url":null,"abstract":"This paper is the first to examine the unlimited deposit insurance on noninterest-bearing transaction accounts (NIBTAs) provided by Section 343 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank). During Dodd-Frank, banks had a smaller ratio of NIBTAs compared to later periods without the unlimited insurance but have larger deposit flows in NIBTAs over the $250,000 FDIC limit. The results suggest that depositors took advantage of the unlimited insurance, but that banks were not harmed by drawdowns when the insurance expired. Furthermore, the results suggest that emergency deposit insurance might be a good complement to FDIC insurance during recessionary times.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115322363","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 compares `direct maturity transformations' (DMTs), in which risky long-term assets are directly financed with short-term debt, with `indirect maturity transformations' (IMTs), in which such assets are financed with long-term debt that is financed with short-term debt in a second, separate step. Analyzing the properties of debt contracts I show that the default probability of short-term debt is higher in case of an IMT than in case of a direct transformation - for the same assets and the same level of short-term debt. Based on a model of financial intermediation I suggest two reasons why IMTs can be privately optimal although they entail a higher solvency risk than DMTs: first, the indirect reference of short-term debt to the underlying assets can decrease liquidity risk; second, IMTs allow for regulatory arbitrage in case of capital requirements that do not take account of the different solvency risk of IMTs and DMTs.
{"title":"Indirect Maturity Transformations","authors":"Raphael Flore","doi":"10.2139/ssrn.3906275","DOIUrl":"https://doi.org/10.2139/ssrn.3906275","url":null,"abstract":"This paper compares `direct maturity transformations' (DMTs), in which risky long-term assets are directly financed with short-term debt, with `indirect maturity transformations' (IMTs), in which such assets are financed with long-term debt that is financed with short-term debt in a second, separate step. Analyzing the properties of debt contracts I show that the default probability of short-term debt is higher in case of an IMT than in case of a direct transformation - for the same assets and the same level of short-term debt. Based on a model of financial intermediation I suggest two reasons why IMTs can be privately optimal although they entail a higher solvency risk than DMTs: first, the indirect reference of short-term debt to the underlying assets can decrease liquidity risk; second, IMTs allow for regulatory arbitrage in case of capital requirements that do not take account of the different solvency risk of IMTs and DMTs.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"98 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-06-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121684867","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 study the 'interconnectedness' of stress-tested banks by exploiting how they are mentioned together in the context of financial news. We start by constructing weekly co-occurrence network matrices following Ronnqvist and Sarlin (2015) text-to-network approach. Using the COVID-19 pandemic as an external shock, we examine how bank networks behave during high stress periods. We find that banks become more interconnected during peaks of COVID-19 induced stress. We put forth a new measure of systemic risk that utilizes text-based eigenvector centrality. This measure provides a more stable ranking system than the traditional SRISK measure during both high and low stress periods.
{"title":"News and Networks: Using Text Analytics to Assess Bank Networks During COVID-19 Crisis","authors":"Sophia Kazinnik, Cooper Killen, D. Scida, John Wu","doi":"10.2139/ssrn.3815250","DOIUrl":"https://doi.org/10.2139/ssrn.3815250","url":null,"abstract":"We study the 'interconnectedness' of stress-tested banks by exploiting how they are mentioned together in the context of financial news. We start by constructing weekly co-occurrence network matrices following Ronnqvist and Sarlin (2015) text-to-network approach. Using the COVID-19 pandemic as an external shock, we examine how bank networks behave during high stress periods. We find that banks become more interconnected during peaks of COVID-19 induced stress. We put forth a new measure of systemic risk that utilizes text-based eigenvector centrality. This measure provides a more stable ranking system than the traditional SRISK measure during both high and low stress periods.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"49 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-03-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125462588","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}
The digital and tech industry of Nigeria woke up to what could be better termed 'nightmare at dawn' in the early hours of Friday 5 February 2021 following the letter from the Central Bank of Nigeria (CBN) to all deposit money banks, non-bank financial institutions and other financial institutions in which the CBN referred them to the CBN circular of 12 January 2017 wherein the CBN cautioned all deposit money banks (DMB), non-bank financial institutions (NBFIs), other financial institutions (OFIs) and members of the public on the risk associated with transactions in crypto currency.
In the letter, the CBN further to the directive on the circular, called the attention of regulated institutions that dealing in crypto currencies and facilitating payments for cryptocurrency exchanges is prohibited in Nigeria. Flowing from the above, CBN directed regulated institutions listed above to identify persons and or entities transacting in or operating crypto currency exchange within their systems and ensure that such accounts are closed immediately. News of the CBN's decision to prohibit banks from facilitating crypto-related transactions through the banking system has since gotten very harsh reactions on social media, the tech and digital market with many condemning the policy as a deliberate attempt by the government to impoverish young Nigerians who have been able to create wealth for themselves through crypto trading.
Following the outburst on social media, the CBN did a press release on 7 February 2021 therein they stated that they are not an outlier in its decision and further listed countries and prominent investors who share the same opinion on crypto currency. In the press release, the CBN announced that the major reasons backing up their decision on banning transaction on cryptocurrencies are potential risk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities. These reasons are only reasonable as the crypto currency market is not regulated and can be manipulated in many ways.
Some have also noted the lack of policy cooperation between financial regulators in Nigeria due to the fact that the SEC had only a few months ago proposed a new set of rules that will regulate crypto-token or Crypto-coin investments when the character of the investment qualifies as securities transactions. Flowing from this, SEC did a press release clarifying that they are not in any contradiction with CBN and are currently engaged with the CBN and agreed to work together to further analyze, and better understand the identified risks to ensure that appropriate and adequate mitigants are put in place, should such securities be allowed in the future. SEC has also by the press release stated that they have put on hold assessment of all persons (and products) seeking admittance into the SEC Regulatory Incubation Framework who are affected by the CBN letter of 05 February 2021. The entire situation has got
{"title":"Is It Time for Nigeria To Regulate Cryptocurrency?","authors":"Niji Oni & Co","doi":"10.2139/ssrn.3788831","DOIUrl":"https://doi.org/10.2139/ssrn.3788831","url":null,"abstract":"The digital and tech industry of Nigeria woke up to what could be better termed 'nightmare at dawn' in the early hours of Friday 5 February 2021 following the letter from the Central Bank of Nigeria (CBN) to all deposit money banks, non-bank financial institutions and other financial institutions in which the CBN referred them to the CBN circular of 12 January 2017 wherein the CBN cautioned all deposit money banks (DMB), non-bank financial institutions (NBFIs), other financial institutions (OFIs) and members of the public on the risk associated with transactions in crypto currency. <br><br>In the letter, the CBN further to the directive on the circular, called the attention of regulated institutions that dealing in crypto currencies and facilitating payments for cryptocurrency exchanges is prohibited in Nigeria. Flowing from the above, CBN directed regulated institutions listed above to identify persons and or entities transacting in or operating crypto currency exchange within their systems and ensure that such accounts are closed immediately. News of the CBN's decision to prohibit banks from facilitating crypto-related transactions through the banking system has since gotten very harsh reactions on social media, the tech and digital market with many condemning the policy as a deliberate attempt by the government to impoverish young Nigerians who have been able to create wealth for themselves through crypto trading. <br><br>Following the outburst on social media, the CBN did a press release on 7 February 2021 therein they stated that they are not an outlier in its decision and further listed countries and prominent investors who share the same opinion on crypto currency. In the press release, the CBN announced that the major reasons backing up their decision on banning transaction on cryptocurrencies are potential risk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities. These reasons are only reasonable as the crypto currency market is not regulated and can be manipulated in many ways. <br><br>Some have also noted the lack of policy cooperation between financial regulators in Nigeria due to the fact that the SEC had only a few months ago proposed a new set of rules that will regulate crypto-token or Crypto-coin investments when the character of the investment qualifies as securities transactions. Flowing from this, SEC did a press release clarifying that they are not in any contradiction with CBN and are currently engaged with the CBN and agreed to work together to further analyze, and better understand the identified risks to ensure that appropriate and adequate mitigants are put in place, should such securities be allowed in the future. SEC has also by the press release stated that they have put on hold assessment of all persons (and products) seeking admittance into the SEC Regulatory Incubation Framework who are affected by the CBN letter of 05 February 2021. The entire situation has got","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125813302","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}
The chapter examines the effects of several macroprudential tools on household choices in the mortgage market. In recent years, following the global financial crisis, central banks have imposed macroprudential policy tools on mortgage loans in order to protect the banking system from systemic risk associated with highly leveraged homeowners. Using a unique and detailed dataset on mortgage loans taken in Israel in the last decade, we empirically estimate the impact of these regulations on household choices and the housing market. In particular, we examine borrowers’ response to the following regulatory restrictions: Loan-to-Value (LTV) limits of 75% for first time buyers, 70% for home improvers, and 50% for investors; a payment-to-income (PTI) limit of 50%; a 2/3 limit on the adjustable rate component; and a 30-year maturity limit. We found that overall, the regulatory provisions tested in this project influenced the borrowers’ responses. Interestingly, two of these provisions served as an anchor to the borrowers. We obtained an increase in mortgage loans maturity following the imposed maturity limit and an increase in PTI ratio following the imposed PTI limits. We argue that these unintended consequences of the tested macroprudential regulation are a result of the anchoring and adjustment heuristic.
{"title":"(Un)intended Consequences of Macroprudential Regulation","authors":"Moran Ofir, Yevgeny Mugerman","doi":"10.2139/ssrn.3788156","DOIUrl":"https://doi.org/10.2139/ssrn.3788156","url":null,"abstract":"The chapter examines the effects of several macroprudential tools on household choices in the mortgage market. In recent years, following the global financial crisis, central banks have imposed macroprudential policy tools on mortgage loans in order to protect the banking system from systemic risk associated with highly leveraged homeowners. Using a unique and detailed dataset on mortgage loans taken in Israel in the last decade, we empirically estimate the impact of these regulations on household choices and the housing market. In particular, we examine borrowers’ response to the following regulatory restrictions: Loan-to-Value (LTV) limits of 75% for first time buyers, 70% for home improvers, and 50% for investors; a payment-to-income (PTI) limit of 50%; a 2/3 limit on the adjustable rate component; and a 30-year maturity limit. We found that overall, the regulatory provisions tested in this project influenced the borrowers’ responses. Interestingly, two of these provisions served as an anchor to the borrowers. We obtained an increase in mortgage loans maturity following the imposed maturity limit and an increase in PTI ratio following the imposed PTI limits. We argue that these unintended consequences of the tested macroprudential regulation are a result of the anchoring and adjustment heuristic.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128691146","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}
The financial sector faces different systemic events. The early recognition of these events is a key step to monitor and track possible financial crises. Three main questions arise related to systemic risk, and they deal with their quantification, their probability of occurrence and the role of main contributors. This paper proposes a methodology based on a reverse stress test exercise to shed light on these questions. Time series and cross-section information regarding systemic risk are obtained. Further, an assessment of how these results of systemic assessment could change depending on key parameters in a Gaussian framework is undertaken and, finally, a small empirical exercise is performed.
{"title":"Deconstructing Systemic Risk: A Reverse Stress Testing Approach","authors":"Javier Ojea Ferreiro","doi":"10.2139/ssrn.3783224","DOIUrl":"https://doi.org/10.2139/ssrn.3783224","url":null,"abstract":"The financial sector faces different systemic events. The early recognition of these events is a key step to monitor and track possible financial crises. Three main questions arise related to systemic risk, and they deal with their quantification, their probability of occurrence and the role of main contributors. This paper proposes a methodology based on a reverse stress test exercise to shed light on these questions. Time series and cross-section information regarding systemic risk are obtained. Further, an assessment of how these results of systemic assessment could change depending on key parameters in a Gaussian framework is undertaken and, finally, a small empirical exercise is performed.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130495228","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 study specifically investigates the effects of external governance mechanisms and regulatory settings on the profitability of Islamic banks operating in the Arab markets from 2003 to 2017. The empirical results underscore that the external governance mechanism and its dimensions in particular the political stability, regulatory quality, rule of law, and control of corruption impact Islamic banks’ profitability positively. However, the regulatory settings and its sub-indices particularly the extent of disclosure and ease of shareholder suits have the opposite effect. Likewise, the results of traditional determinants indicate that the profitability of Islamic banks is shaped by the bank-specific, industry-specific, and country and global-level determinants. Results are robust and consistent with alternative estimation procedures and also support for the negative and positive effect of voice and accountability external governance’s dimension and inflation, respectively. The findings of this study have important policy implications for regulators, policymakers, and banks’ managers.
{"title":"The Impact of External Governance and Regulatory Settings on the Profitability of Islamic Banks: Evidence from Arab Markets","authors":"Seyed Alireza Athari, Mahboubeh Bahreini","doi":"10.2139/ssrn.3782745","DOIUrl":"https://doi.org/10.2139/ssrn.3782745","url":null,"abstract":"This study specifically investigates the effects of external governance mechanisms and regulatory settings on the profitability of Islamic banks operating in the Arab markets from 2003 to 2017. The empirical results underscore that the external governance mechanism and its dimensions in particular the political stability, regulatory quality, rule of law, and control of corruption impact Islamic banks’ profitability positively. However, the regulatory settings and its sub-indices particularly the extent of disclosure and ease of shareholder suits have the opposite effect. Likewise, the results of traditional determinants indicate that the profitability of Islamic banks is shaped by the bank-specific, industry-specific, and country and global-level determinants. Results are robust and consistent with alternative estimation procedures and also support for the negative and positive effect of voice and accountability external governance’s dimension and inflation, respectively. The findings of this study have important policy implications for regulators, policymakers, and banks’ managers.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132170262","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}
Marcus Buckmann, Paula Gallego Marquez, Mariana Gimpelewicz, S. Kapadia, Katie Rismanchi
This paper assesses the value of multiple requirements in bank regulation using a novel empirical rule‑based methodology. Exploiting a dataset of capital and liquidity ratios for a sample of global banks in 2005 and 2006, we apply simple threshold-based rules to assess how different regulations individually and in combination might have identified banks that subsequently failed during the global financial crisis. Our results generally support the case for a small portfolio of different regulatory metrics. Under the objective of correctly identifying a high proportion of banks which subsequently failed, we find that a portfolio of a leverage ratio, a risk-weighted capital ratio, and a net stable funding ratio yields fewer false alarms than any of these metrics individually – and at less stringent calibrations of each individual regulatory metric. We also discuss how these results apply in different robustness exercises, including out-of-sample evaluations. Finally, we consider the potential role of market-based measures of bank capitalisation, showing that they provide complementary value to their accounting-based counterparts.
{"title":"The More the Merrier? Evidence from the Global Financial Crisis on the Value of Multiple Requirements in Bank Regulation","authors":"Marcus Buckmann, Paula Gallego Marquez, Mariana Gimpelewicz, S. Kapadia, Katie Rismanchi","doi":"10.2139/ssrn.3778190","DOIUrl":"https://doi.org/10.2139/ssrn.3778190","url":null,"abstract":"This paper assesses the value of multiple requirements in bank regulation using a novel empirical rule‑based methodology. Exploiting a dataset of capital and liquidity ratios for a sample of global banks in 2005 and 2006, we apply simple threshold-based rules to assess how different regulations individually and in combination might have identified banks that subsequently failed during the global financial crisis. Our results generally support the case for a small portfolio of different regulatory metrics. Under the objective of correctly identifying a high proportion of banks which subsequently failed, we find that a portfolio of a leverage ratio, a risk-weighted capital ratio, and a net stable funding ratio yields fewer false alarms than any of these metrics individually – and at less stringent calibrations of each individual regulatory metric. We also discuss how these results apply in different robustness exercises, including out-of-sample evaluations. Finally, we consider the potential role of market-based measures of bank capitalisation, showing that they provide complementary value to their accounting-based counterparts.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"14 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126790445","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}
Pearpilai Jutasompakorn, C. Lim, Tharindra Ranasinghe, Kevin Ow Yong
The Basel III Accord tightens capital adequacy requirements for banks by increasing the minimum Tier 1 regulatory capital threshold from 4 to 6 percent. It also emphasizes the need to improve timeliness of loan loss provisions. Using a sample of European banks, we examine the impact of this regulation on banks’ discretionary loan loss provisioning behavior. Underscoring banks’ increased incentives to report higher capital ratios, we observe a post-Basel III increase in banks’ use of discretionary loan loss provisions (DLLPs) for capital management purposes and a corresponding reduction in the use of these provisions for income smoothing purposes. Moreover, we find that the timeliness of loan loss provisions has improved following Basel III. We also find that the post-Basel III increase in capital management behavior is greater for banks that do not face conflicting incentives when using DLLPs to improve Tier 1 versus total capital ratio. In contrast, the improvement in loan loss provisioning timeliness is greater for banks that are less likely to engage in capital management due to these conflicting incentives. Our findings suggest that Basel III has significantly altered banks’ discretionary loan loss provisioning behavior.
{"title":"Impact of Basel III on the Discretion and Timeliness of Banks’ Loan Loss Provisions","authors":"Pearpilai Jutasompakorn, C. Lim, Tharindra Ranasinghe, Kevin Ow Yong","doi":"10.2139/ssrn.3761820","DOIUrl":"https://doi.org/10.2139/ssrn.3761820","url":null,"abstract":"The Basel III Accord tightens capital adequacy requirements for banks by increasing the minimum Tier 1 regulatory capital threshold from 4 to 6 percent. It also emphasizes the need to improve timeliness of loan loss provisions. Using a sample of European banks, we examine the impact of this regulation on banks’ discretionary loan loss provisioning behavior. Underscoring banks’ increased incentives to report higher capital ratios, we observe a post-Basel III increase in banks’ use of discretionary loan loss provisions (DLLPs) for capital management purposes and a corresponding reduction in the use of these provisions for income smoothing purposes. Moreover, we find that the timeliness of loan loss provisions has improved following Basel III. We also find that the post-Basel III increase in capital management behavior is greater for banks that do not face conflicting incentives when using DLLPs to improve Tier 1 versus total capital ratio. In contrast, the improvement in loan loss provisioning timeliness is greater for banks that are less likely to engage in capital management due to these conflicting incentives. Our findings suggest that Basel III has significantly altered banks’ discretionary loan loss provisioning behavior.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"147 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-01-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124411824","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}
Pub Date : 2020-12-28DOI: 10.31014/aior.1992.03.04.315
M. Sabatino
The beginning of the 21st century, the phenomenon of globalization, the IT revolution and the financialization of the economy have also changed the terms of the comparison among capitalist countries. At global level, the rapid expansion of the financial sector was also encouraged by an increase in innovative financial products. Regulators and supervisors have not been able to adequately identify and address the growing risks in the financial system. The beginning of the financial crisis has brought to light such weaknesses. And it is from this negative experience that the major world authorities have intervened, trying to set up plans and regulations to protect the financial system and consumers. The analysis of the framework that comes with the financial crisis of 2007-2013 is thus a starting point for this work to understand the new features of world capitalism. American and European capitalist systems seem to diverge above all on the policies and instruments for regulating the financial system. The aim of the work is to show the differences between the US and European financial and banking regulation. The former is geared towards reviving deregulation and financial innovation while the latter is more geared towards redesigning a more accentuated regulatory model with a governance of the economy that always sees the presence of a mixed welfare and market system.
{"title":"Systems, Instruments and Regulatory Policies of American and European Capitalism","authors":"M. Sabatino","doi":"10.31014/aior.1992.03.04.315","DOIUrl":"https://doi.org/10.31014/aior.1992.03.04.315","url":null,"abstract":"The beginning of the 21st century, the phenomenon of globalization, the IT revolution and the financialization of the economy have also changed the terms of the comparison among capitalist countries. At global level, the rapid expansion of the financial sector was also encouraged by an increase in innovative financial products. Regulators and supervisors have not been able to adequately identify and address the growing risks in the financial system. The beginning of the financial crisis has brought to light such weaknesses. And it is from this negative experience that the major world authorities have intervened, trying to set up plans and regulations to protect the financial system and consumers. The analysis of the framework that comes with the financial crisis of 2007-2013 is thus a starting point for this work to understand the new features of world capitalism. American and European capitalist systems seem to diverge above all on the policies and instruments for regulating the financial system. The aim of the work is to show the differences between the US and European financial and banking regulation. The former is geared towards reviving deregulation and financial innovation while the latter is more geared towards redesigning a more accentuated regulatory model with a governance of the economy that always sees the presence of a mixed welfare and market system.","PeriodicalId":376194,"journal":{"name":"ERN: Regulation & Supervision (Topic)","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-12-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125753392","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}
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