Author: Frederick T. FurlongPublisher:
ISBN:
Category :
Languages : en
Pages : 16
Book Description
Does Capital Regulation Affect Bank Risk-taking?
Author: Frederick T. FurlongBank Leverage and Monetary Policy's Risk-Taking Channel
Author: Mr.Giovanni Dell'AricciaPublisher: International Monetary Fund
ISBN: 1484381130
Category : Business & Economics
Languages : en
Pages : 41
Book Description
We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.
The Impact of Capital-based Regulation on Bank Risk-taking
Author: Paul S. CalemPublisher:
ISBN:
Category : Asset-liability management
Languages : en
Pages : 66
Book Description
Bank Capital and Risk-Taking
Author: Stéphanie M. StolzPublisher: Springer Science & Business Media
ISBN: 3540485449
Category : Business & Economics
Languages : en
Pages : 163
Book Description
The year-long consultations on Basel II mirror the international popularity of capital requirements as a regulatory instrument. Yet, the impact of capital re quirements on banks' behavior is not fully understood. The aim of this study is to contribute to this understanding by answering the following questions: How do banks adjust capital and risk after an increase in capital requirements? How do banks adjust their regulatory capital buffer over the business cycle? And what is the impact of banks' charter value on the regulatory capital buffer? The research undertaken for this study has benefited from support in terms of ideas, research facilities, and, not least, financial funding. My thanks go first of all to Claudia M. Buch for her constant encouragement, her continuous guidance, and her confidence in my research ideas. My thanks go also to the Kiel Institute for World Economics and its staff for providing a very fertile academic ground for my research and for providing excellent research facilities. In fact, conduct ing this study would not have been possible without the support of my colleagues at the Kiel Institute and elsewhere. In particular, I am grateful to Horst Siebert for providing me the freedom to pursue this topic. My special thanks go to Jorg Breitung, Kai Carstensen, and Dieter Urban for providing input on econometric issues. I am also grateful to Andrea Schertler for the long and productive discus sions I had on various parts of this study.
Bank Capital Regulation and Risk Taking
Author: Michael WedowPublisher:
ISBN: 9783832512262
Category :
Languages : en
Pages : 0
Book Description
Banking is one of the most regulated industries. The arguments for an extensive regulation of the banking industry are rooted in the importance of banks in financing economic development and the economic costs associated with financial instability in the banking system. In order to design an adequate regulatory framework that ensures financial stability it is decisive to understand the impact of regulation on banks' risk taking. As a starting point, I review the literature on the various instruments of bank regulation with a particular focus on capital regulation. In chapter 3, I provide the reader with a description of the banking system and the regulatory framework in Germany. Chapter 4 examines the role of banks' capitalization for their lending supply. I find that weak capitalization of banks did not slow down lending supply. In chapter 5, I analyze the impact of minimum capital requirements under Basel 2 on bank lending to emerging markets. The results confirm that bank lending will not be subject to dramatic shifts due to a reform in capital regulation.
Macro-Prudential Policies to Mitigate Financial System Vulnerabilities
Author: Mr.Stijn ClaessensPublisher: International Monetary Fund
ISBN: 1498357601
Category : Business & Economics
Languages : en
Pages : 36
Book Description
Macro-prudential policies aimed at mitigating systemic financial risks have become part of the policy toolkit in many emerging markets and some advanced countries. Their effectiveness and efficacy are not well-known, however. Using panel data regressions, we analyze how changes in balance sheets of some 2,800 banks in 48 countries over 2000–2010 respond to specific macro-prudential policies. Controlling for endogeneity, we find that measures aimed at borrowers––caps on debt-to-income and loan-to-value ratios––and at financial institutions––limits on credit growth and foreign currency lending––are effective in reducing asset growth. Countercyclical buffers are little effective through the cycle, and some measures are even counterproductive during downswings, serving to aggravate declines, consistent with the ex-ante nature of macro-prudential tools.
The Federal Home Loan Bank System
Author: Deborah CohenPublisher:
ISBN:
Category : Federal home loan banks
Languages : en
Pages : 72
Book Description
Monetary Policy, Leverage, and Bank Risk Taking
Author: Mr.Luc LaevenPublisher: International Monetary Fund
ISBN: 1455210838
Category : Business & Economics
Languages : en
Pages : 38
Book Description
We provide a theoretical foundation for the claim that prolonged periods of easy monetary conditions increase bank risk taking. The net effect of a monetary policy change on bank monitoring (an inverse measure of risk taking) depends on the balance of three forces: interest rate pass-through, risk shifting, and leverage. When banks can adjust their capital structures, a monetary easing leads to greater leverage and lower monitoring. However, if a bank's capital structure is fixed, the balance depends on the degree of bank capitalization: when facing a policy rate cut, well capitalized banks decrease monitoring, while highly levered banks increase it. Further, the balance of these effects depends on the structure and contestability of the banking industry, and is therefore likely to vary across countries and over time.
The Relationship Between Bank Capital, Risk-taking, and Capital Regulation
Author: Stéphanie StolzShould Increased Regulation of Bank Risk-Taking Come from Regulators Or from the Market?
Author: Robert L. HetzelPublisher: DIANE Publishing
ISBN: 1437919529
Category : Business & Economics
Languages : en
Pages : 40
Book Description
The heavy losses in bank asset portfolios do not reflect an inherent failure of markets to monitor risk adequately but rather the perverse incentives of the financial safety net to excessive risk-taking. The unsustainable rise in house prices and their subsequent sharp decline derived from the combination of a public policy to expand home ownership to unrealistic levels and from a financial safety net that encouraged excessive risk-taking by banks. Charts and tables.