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You are looking at 1 - 10 of 14 items for :

  • Type: Journal Issue x
  • Financial regulation and supervision x
  • General Financial Markets: General (includes Measurement and Data) x
  • Banks and Banking x
  • Financial crises x
  • Banks; Depository Institutions; Micro Finance Institutions; Mortgages x
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Cover IMF Working Papers
Finding the Bad Apples in the Barrel: Using the Market Value of Equity to Signal Banking Sector Vulnerabilities
Will Kerry
This paper measures the performance of different metrics in assessing banking system vulnerabilities. It finds that metrics based on equity market valuations of bank capital are better than regulatory capital ratios, and other metrics, in spotting banks that failed (bad apples). This paper proposes that these market-based ratios could be used as a surveillance tool to assess vulnerabilities in the banking sector. While the measures may provide a somewhat fuzzy signal, it is better to have a strategy for identifying bad apples, even if sometimes the apples turn out to be fine, than not being able to spot any bad apples before the barrel has been spoiled.
Keywords:
WP; bank; market; problem bank; Banks; capital; leverage; market value of capital.; market-adjusted capital ratio; equity market; market-based capital ratios; signaling bank distress; bank health; Capital adequacy requirements; Distressed institutions; Credit default swap; Stock markets; Global financial crisis of 2008-2009; Global; North America
Cover IMF Working Papers
Competition and Bank Risk the Role of Securitization and Bank Capital
Yener Altunbas, Michiel van Leuvensteijn, and Tianshu Zhao
We examine how bank competition in the run-up to the 2007–2009 crisis affects banks’ systemic risk during the crisis. We then investigate whether this effect is influenced by two key bank characteristics: securitization and bank capital. Using a sample of the largest listed banks from 15 countries, we find that greater market power at the bank level and higher competition at the industry level lead to higher realized systemic risk. The results suggest that the use of securitization exacerbates the effects of market power on the systemic dimension of bank risk, while capitalization partially mitigates its impact.
Keywords:
WP; bank risk; capital ratio; bank competition variable; securitization; competition; index value; Lerner index; bank capital; bank competition; monopolist bank; bank market power; bank capitalization; bank-quarter estimation; Systemic risk; Capital adequacy requirements; Global
Cover IMF Working Papers
Can Good Governance Lower Financial Intermediation Costs?
Mariusz Jarmuzek and Mr. Tonny Lybek
This paper argues that better governance practices can reduce the costs, risks and uncertainty of financial intermediation. Our sample covers high-, middle- and low-income countries before and after the global financial crisis (GFC). We find that net interest margins of banks are lower if various governance indicators are better. More cross-border lending also appears conducive to lower intermediation costs, while the level of capital market development is not significant. The GFC seems not to have had a strong impact except via credit risk. Finally, we estimate the size of potential gains from improved governance.
Keywords:
WP; intermediation cost; bank-dealership model; bank characteristic; banks capital; transaction size; financial intermediation costs; governance; corruption; bank-dealership framework; Credit risk; Global financial crisis of 2008-2009; Capital markets; Competition; Inflation; Global
Cover IMF Working Papers
Regulatory Cycles: Revisiting the Political Economy of Financial Crises
Jihad Dagher
Financial crises are traditionally analyzed as purely economic phenomena. The political economy of financial booms and busts remains both under-emphasized and limited to isolated episodes. This paper examines the political economy of financial policy during ten of the most infamous financial booms and busts since the 18th century, and presents consistent evidence of pro-cyclical regulatory policies by governments. Financial booms, and risk-taking during these episodes, were often amplified by political regulatory stimuli, credit subsidies, and an increasing light-touch approach to financial supervision. The regulatory backlash that ensues from financial crises can only be understood in the context of the deep political ramifications of these crises. Post-crisis regulations do not always survive the following boom. The interplay between politics and financial policy over these cycles deserves further attention. History suggests that politics can be the undoing of macro-prudential regulations.
Keywords:
WP; central bank; financial market; political economy; banking sector; Financial Regulation; Financial Crises; Boom-Bust Cycles; Glass-Steagall Act; financial bubble; ruling party; share price; joint stock; crony capitalism; plain vanilla; stock index; bubble company; joint-stock bank; incumbent governments policy; government sponsorship; Housing; Global financial crisis of 2008-2009; Banking crises; Global; South America
Cover IMF Staff Country Reports
Israel: Technical Assistance Report- Consultations on the Work of the Banking Supervision Department of the Bank of Israel
International Monetary Fund. Monetary and Capital Markets Department
This paper first takes a historical perspective, studying the implications of the oil boom of the 2000s on industry structure and economy-wide productivity. It then examines progress with the ongoing transition thus far both in the real sector and in the labor market, bearing in mind the short time span that has passed. This paper also explores two possible explanations for lagging productivity—namely, product market regulation and the low level of research and innovation. An extensive data set of mainland Norwegian firms is used to empirically assess the potential productivity gains from product market reforms as well as increasing research and development spending.
Keywords:
ISCR; CR; BSD; lending; BoI; engagement model; BSD staff; credit card company; mid-sized bank; BSD mindset; bank customer; supervisory stance; Credit; Commercial banks; Competition; Bank supervision; Deposit insurance; Global
Cover IMF Working Papers
The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions
Mr. Stijn Claessens and Ms. Laura E. Kodres
We identify current challenges for creating stable, yet efficient financial systems using lessons from recent and past crises. Reforms need to start from three tenets: adopting a system-wide perspective explicitly aimed at addressing market failures; understanding and incorporating into regulations agents’ incentives so as to align them better with societies’ goals; and acknowledging that risks of crises will always remain, in part due to (unknown) unknowns – be they tipping points, fault lines, or spillovers. Corresponding to these three tenets, specific areas for further reforms are identified. Policy makers need to resist, however, fine-tuning regulations: a “do not harm” approach is often preferable. And as risks will remain, crisis management needs to be made an integral part of system design, not relegated to improvisation after the fact.
Keywords:
WP; risk; market; bank; capital; OTC derivatives market; Financial crises; regulation; systemic risks; macroprudential policies; market participant; market discipline; market intelligence; party repo market; financial system stress tests; market infrastructure; market signal; moribund securitization market; intra-day counterparty risk; counterparty risk; securitization market; Systemic risk; Shadow banking; Liquidity requirements; Global
Cover IMF Working Papers
Risk Exposures and Financial Spillovers in Tranquil and Crisis Times: Bank-Level Evidence
Jochen M. Schmittmann
For a sample of 83 financial institutions during 2003–2011, this paper attempts to answer three questions: first, what is the evolution of banks’ stock price exposure to country-level and global risk factors as approximated by equity indices; second, which bank-specific characteristics explain these risk exposures; third, are there clusters of banks with equity price linkages beyond market risk factors. The paper finds a rise in sensitivities to both country and global risk factors in 2011, although on average to levels still below those of the subprime crisis. The average sensitivity to European risk, specifically, has been steadily rising since 2008. Banks that are reliant on wholesale funding, have weaker capital levels and low valuations, and higher exposures to crisis countries are found to be the most vulnerable to shocks. The analysis of bank-to-bank linkages suggests that any “globalization” of the euro area crisis is likely to be channelled through U.K. and U.S. banks, with little evidence of direct spillover effects to other regions.
Keywords:
WP; BNP Paribas; bank beta; subprime crisis; bank fundamentals; equity risk; risk exposure; Financial sector; financial institutions; banks; Europe; financial crisis; spillovers; country beta; spillover effect; core EA bank distress; funding condition; B. bank Betas; share price; country market index; Stocks; Stock markets; Capital adequacy requirements; Global
Cover IMF Working Papers
What Drives the POLONIA Spread in Poland?
Miss Yinqiu Lu
Since the start of the 2008 - 09 financial crisis, the Polish Overnight Index Average (POLONIA) has persistently been below the policy rate, suggesting a limited influence of the NBP’s open market operations on the short-term interbank rate. In this regard, this paper analyzes the behavior of the POLONIA spread and explore several potential factors that could influence the spread. An empirical analysis confirms that the negative POLONIA spread is related to a few factors, which include the existence of the structural liquidity in the banking system; bank’s unwillingness to lock up liquidity in the NBP bills; the frontloading of banks’ fulfillment of the reserve requirements; and external market sentiment. The analysis also shows the effectiveness of the NBP’s responses to the financial crisis and structural liquidity surplus.
Keywords:
WP; POLONIA spread; Poland; bank; POLONIA; monetary policy; interbank market; GARCH; liquidity demand; Polonia rate; FX purchase; NBP bill; NBP's liquidity injection; fine-tuning operations; Interbank markets; Liquidity; Central bank policy rate; Credit risk; Global
Cover IMF Working Papers
How Risky Are Banks' Risk Weighted Assets? Evidence From the Financial Crisis
Miss Sonali Das and Mr. Amadou N Sy
We study how investors account for the riskiness of banks' risk-weighted assets (RWA) by examining the determinants of stock returns and market measures of risk. We find that banks with higher RWA had lower stock returns over the US and European crises. This relationship is weaker in Europe where banks can use Basel II internal risk models. For large banks, investors paid less attention to RWA and rewarded instead lower wholesale funding and better asset quality. RWA do not, in general, predict market measures of risk although there is evidence of a positive relationship before the US crisis which becomes negative afterwards.
Keywords:
WP; stock return; return on assets; capital requirement; bank's specialization; market index; Banks; capital; crisis; liquidity; regulation; risk weighted assets; Basel III; tangible assets; Stocks; Capital adequacy requirements; Securities; Nonperforming loans; Europe; Asia and Pacific; North America
Cover IMF Working Papers
Bank Capital: Lessons From the Financial Crisis