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Business and Economics > Investments: Stocks

You are looking at 1 - 4 of 4 items for :

  • Type: Journal Issue x
  • Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies x
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Cover IMF Working Papers
How is the likelihood of fire sales in a crisis affected by the interaction of various bank regulations?
Mr. Divya Kirti
and
Vijay Narasiman
We present a model that describes how different types of bank regulation can interact to affect the likelihood of fire sales in a crisis. In our model, risk shifting motives drive how banks recapitalize following a negative shock, leading banks to concentrate their portfolios. Regulation affects the likelihood of fire sales by giving banks the incentive to sell certain assets and retain others. Ex-post incentives from high risk weights and the interaction of capital and liquidity requirements can make fire sales more likely. Time-varying risk weights may be an effective tool to prevent fire sales.
Keywords:
WP; diversified portfolio; capital ratio
Cover IMF Working Papers
Bank Profitability and Risk-Taking
Natalya Martynova
,
Mr. Lev Ratnovski
, and
Mr. Razvan Vlahu
Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They take risk by levering up to engage in risky ‘side activities’(such as market-based investments) alongside the core business. A more profitable core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk of given size. Consequently, more profitable banks may have higher risk-taking incentives. The framework is consistent with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis.
Keywords:
WP; interest rate; monetary policy; Banks; Risk-Taking; Bank Capital; Repo Markets; Crises; market-based investment; risky investment; investment X; side investment; project investment; Bank soundness; Accommodative monetary policy; Investment banking; Stocks; Global
Cover IMF Working Papers
Identifying Vulnerabilities in Systemically-Important Financial Institutions in a Macro-Financial Linkages Framework
Tao Sun
This paper attempts to identify the indicators that can demonstrate the vulnerabilities in systemically important financial institutions. The paper finds that (i) indicators on leverage, liquidity, and business scope can help identify the differences between the intervened and non-intervened financial institutions during the subprime crisis; (ii) the expected default frequencies react positively to shocks to leverage, inflation, global financial stress, and global excess liquidity, and negatively to return on assets and equity prices; and (iii) leverage has been the most robust factor with a long-run causal effect on the expected default frequencies.
Keywords:
WP; expected default frequency; bank; vulnerabilities; systemic; financial institutions; macro-financial linkages; long-term debt; IMF staff estimate; retained earnings; return on equity; book value per share; leverage ratio; Moody's KMV EDF datum; subprime crisis; Stocks; Capital adequacy requirements; Financial soundness indicators; Loans; Investment banking; Global
Cover IMF Staff Country Reports
Switzerland: Selected Issues and Statistical Appendix
International Monetary Fund
The Swiss banking system is characterized by a two-tier structure. The first tier is composed of the two large banks and some smaller banks focused on private banking, all of which have a significant international presence. These banks represent, so to speak, the “international face” of the Swiss banks. They are mostly joint-stock companies or privately owned (unlimited personal liability). The second tier is composed of a varied group of banks, mostly focused on domestic, or even regional, business.
Keywords:
ISCR; CR; asset; bank; cantonal bank; share; portfolio share; portfolio equity assets; foreign assets; asset characteristic; Foreign assets; Current account; Foreign banks; Current account surpluses; Investment banking; Global; Europe