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Bank Competition Risk Taking And Their Consequences Evidence From The Us Mortgage And Labor Markets
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Book Synopsis Bank Competition, Risk Taking, and their Consequences: Evidence from the U.S. Mortgage and Labor Markets by : Alan Xiaochen Feng
Download or read book Bank Competition, Risk Taking, and their Consequences: Evidence from the U.S. Mortgage and Labor Markets written by Alan Xiaochen Feng and published by International Monetary Fund. This book was released on 2018-07-06 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank competition can induce excessive risk taking due to risk shifting. This paper tests this hypothesis using micro-level U.S. mortgage data by exploiting the exogenous variation in local house price volatility. The paper finds that, in response to high expected house price volatility, banks in U.S. counties with a competitive mortgage market lowered lending standards by twice as much as those with concentrated markets between 2000 and 2005. Such risk taking pattern was associated with real economic outcomes during the financial crisis, including higher unemployment rates in local real sectors.
Book Synopsis Bank Risk-Taking and Competition Revisited by : Mr.Gianni De Nicolo
Download or read book Bank Risk-Taking and Competition Revisited written by Mr.Gianni De Nicolo and published by International Monetary Fund. This book was released on 2006-12-01 with total page 51 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies two new models in which banks face a non-trivial asset allocation decision. The first model (CVH) predicts a negative relationship between banks' risk of failure and concentration, indicating a trade-off between competition and stability. The second model (BDN) predicts a positive relationship, suggesting no such trade-off exists. Both models can predict a negative relationship between concentration and bank loan-to-asset ratios, and a nonmonotonic relationship between bank concentration and profitability. We explore these predictions empirically using a cross-sectional sample of about 2,500 U.S. banks in 2003 and a panel data set of about 2,600 banks in 134 nonindustrialized countries for 1993-2004. In both these samples, we find that banks' probability of failure is positively and significantly related to concentration, loan-to-asset ratios are negatively and significantly related to concentration, and bank profits are positively and significantly related to concentration. Thus, the risk predictions of the CVH model are rejected, those of the BDN model are not, there is no trade-off between bank competition and stability, and bank competition fosters the willingness of banks to lend.
Book Synopsis Bank Competition, Risk Taking, and their Consequences: Evidence from the U.S. Mortgage and Labor Markets by : Alan Xiaochen Feng
Download or read book Bank Competition, Risk Taking, and their Consequences: Evidence from the U.S. Mortgage and Labor Markets written by Alan Xiaochen Feng and published by International Monetary Fund. This book was released on 2018-07-06 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: Bank competition can induce excessive risk taking due to risk shifting. This paper tests this hypothesis using micro-level U.S. mortgage data by exploiting the exogenous variation in local house price volatility. The paper finds that, in response to high expected house price volatility, banks in U.S. counties with a competitive mortgage market lowered lending standards by twice as much as those with concentrated markets between 2000 and 2005. Such risk taking pattern was associated with real economic outcomes during the financial crisis, including higher unemployment rates in local real sectors.
Book Synopsis Bank Leverage and Monetary Policy's Risk-Taking Channel by : Mr.Giovanni Dell'Ariccia
Download or read book Bank Leverage and Monetary Policy's Risk-Taking Channel written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2013-06-06 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Book Synopsis Bank Competition, Risk and Asset Allocations by : Gianni De Nicoló
Download or read book Bank Competition, Risk and Asset Allocations written by Gianni De Nicoló and published by International Monetary Fund. This book was released on 2009-07 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study a banking model in which banks invest in a riskless asset and compete in both deposit and risky loan markets. The model predicts that as competition increases, both loans and assets increase; however, the effect on the loans-to-assets ratio is ambiguous. Similarly, as competition increases, the probability of bank failure can either increase or decrease. We explore these predictions empirically using a cross-sectional sample of 2,500 U.S. banks in 2003, and a panel data set of about 2600 banks in 134 non-industrialized countries for the period 1993-2004. With both samples, we find that banks' probability of failure is negatively and significantly related to measures of competition, and that the loan-to-asset ratio is positively and significantly related to measures of competition. Furthermore, several loan loss measures commonly employed in the literature are negatively and significantly related to measures of bank competition. Thus, there is no evidence of a trade-off between bank competition and stability, and bank competition seems to foster banks' willingness to lend.
Book Synopsis Bank Risk-Taking and Competition Revisited by : Mr.Gianni De Nicolo
Download or read book Bank Risk-Taking and Competition Revisited written by Mr.Gianni De Nicolo and published by International Monetary Fund. This book was released on 2003-06-01 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study reinvestigates the theoretical relationship between competition in banking and banks' exposure to risk of failure. There is a large existing literature that concludes that when banks are confronted with increased competition, they rationally choose more risky portfolios. We briefly review this literature and argue that it has had a significant influence on regulators and central bankers, causing them to take a less favorable view of competition and encouraging anti-competitive consolidation as a response to banking instability. We then show that existing theoretical analyses of this topic are fragile, since they do not detect two fundamental risk-incentive mechanisms that operate in exactly the opposite direction, causing banks to aquire more risk per portfolios as their markets become more concentrated. We argue that these mechanisms should be essential ingredients of models of bank competition.
Book Synopsis The Financial Crisis Inquiry Report by : Financial Crisis Inquiry Commission
Download or read book The Financial Crisis Inquiry Report written by Financial Crisis Inquiry Commission and published by Cosimo, Inc.. This book was released on 2011-05-01 with total page 692 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Financial Crisis Inquiry Report, published by the U.S. Government and the Financial Crisis Inquiry Commission in early 2011, is the official government report on the United States financial collapse and the review of major financial institutions that bankrupted and failed, or would have without help from the government. The commission and the report were implemented after Congress passed an act in 2009 to review and prevent fraudulent activity. The report details, among other things, the periods before, during, and after the crisis, what led up to it, and analyses of subprime mortgage lending, credit expansion and banking policies, the collapse of companies like Fannie Mae and Freddie Mac, and the federal bailouts of Lehman and AIG. It also discusses the aftermath of the fallout and our current state. This report should be of interest to anyone concerned about the financial situation in the U.S. and around the world.THE FINANCIAL CRISIS INQUIRY COMMISSION is an independent, bi-partisan, government-appointed panel of 10 people that was created to "examine the causes, domestic and global, of the current financial and economic crisis in the United States." It was established as part of the Fraud Enforcement and Recovery Act of 2009. The commission consisted of private citizens with expertise in economics and finance, banking, housing, market regulation, and consumer protection. They examined and reported on "the collapse of major financial institutions that failed or would have failed if not for exceptional assistance from the government."News Dissector DANNY SCHECHTER is a journalist, blogger and filmmaker. He has been reporting on economic crises since the 1980's when he was with ABC News. His film In Debt We Trust warned of the economic meltdown in 2006. He has since written three books on the subject including Plunder: Investigating Our Economic Calamity (Cosimo Books, 2008), and The Crime Of Our Time: Why Wall Street Is Not Too Big to Jail (Disinfo Books, 2011), a companion to his latest film Plunder The Crime Of Our Time. He can be reached online at www.newsdissector.com.
Book Synopsis Bank Size and Systemic Risk by : Mr.Luc Laeven
Download or read book Bank Size and Systemic Risk written by Mr.Luc Laeven and published by International Monetary Fund. This book was released on 2014-05-08 with total page 34 pages. Available in PDF, EPUB and Kindle. Book excerpt: The proposed SDN documents the evolution of bank size and activities over the past 20 years. It discusses whether this evolution can be explained by economies of scale or “too big to fail” subsidies. The paper then presents evidence on the extent to which bank size and market-based activities contribute to systemic risk. The paper concludes with policy messages in the area of capital regulation and activity restrictions to reduce the systemic risk posed by large banks. The analysis of the paper complements earlier Fund work, including SDN 13/04 and the recent GFSR chapter on “too big to fail” subsidies, and its policy message is in line with this earlier work.
Author :International Monetary Fund. Monetary and Capital Markets Department Publisher :International Monetary Fund ISBN 13 :1498325882 Total Pages :57 pages Book Rating :4.4/5 (983 download)
Book Synopsis Singapore by : International Monetary Fund. Monetary and Capital Markets Department
Download or read book Singapore written by International Monetary Fund. Monetary and Capital Markets Department and published by International Monetary Fund. This book was released on 2019-07-15 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This technical note examines the implications of fintech for the regulation and supervision of the Singaporean financial services sector. It provides an overview of the financial system with a focus on fintech developments. The note looks at not only fintech developments but also the institutional setup as well as Monetary Authority of Singapore’s (MAS) approach to fintech. The MAS has so far managed to strike the right balance between innovation and safety and soundness. MAS has responded quickly to the challenges of fintech. The impact of fintech on the financial services sector has largely been internalized by financial institutions (FI). FIs are swiftly digitizing and modernizing their systems, products and business models. Because of their market knowledge and higher investment capacities, incumbent FIs are getting better at providing services and products by adopting new technologies or improving existing ones. The note also recommends that it is imperative to develop a cyber network map that considers both financial linkages and Information and Communications Technology connections and use it for cyber risk surveillance.
Book Synopsis Bank Risk Taking and Competition by : Thomas K. Kick
Download or read book Bank Risk Taking and Competition written by Thomas K. Kick and published by . This book was released on 2016 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the bank competition-stability nexus using a unique regulatory dataset provided by the Deutsche Bundesbank over the period 1994 to 2010. First, we use outright bank defaults as the most direct measure of bank risk available and contrast the results to weaker forms of bank distress. Second, we control for a wide array of different time-varying characteristics of banks which are likely to influence the competition-risk taking channel. Third, we include different measures of competition, contestability and market power, each corresponding to a different contextual level of a bank's competitive environment. Our results indicate that political implications derived from empirical banking market studies must recognize the theoretical properties of the indicators for market power and competition. Using the Lerner Index as a proxy for bank-specific market power, our results support the view that market power tends to reduce banks' default probability. In contrast, using the Boone Indicator (derived on the state level) and/or the regional branch share as a measure of competition, we find strong support that increased competition lowers the riskiness of banks.
Book Synopsis Bank Lending in the Knowledge Economy by : Mr.Giovanni Dell'Ariccia
Download or read book Bank Lending in the Knowledge Economy written by Mr.Giovanni Dell'Ariccia and published by International Monetary Fund. This book was released on 2017-11-07 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study bank portfolio allocations during the transition of the real sector to a knowledge economy in which firms use less tangible capital and invest more in intangible assets. We show that, as firms shift toward intangible assets that have lower collateral values, banks reallocate their portfolios away from commercial loans toward other assets, primarily residential real estate loans and liquid assets. This effect is more pronounced for large and less well capitalized banks and is robust to controlling for real estate loan demand. Our results suggest that increased firm investment in intangible assets can explain up to 20% of bank portfolio reallocation from commercial to residential lending over the last four decades.
Book Synopsis The Federal Reserve System Purposes and Functions by : Board of Governors of the Federal Reserve System
Download or read book The Federal Reserve System Purposes and Functions written by Board of Governors of the Federal Reserve System and published by . This book was released on 2002 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides an in-depth overview of the Federal Reserve System, including information about monetary policy and the economy, the Federal Reserve in the international sphere, supervision and regulation, consumer and community affairs and services offered by Reserve Banks. Contains several appendixes, including a brief explanation of Federal Reserve regulations, a glossary of terms, and a list of additional publications.
Book Synopsis Managing Climate Risk in the U.S. Financial System by : Leonardo Martinez-Diaz
Download or read book Managing Climate Risk in the U.S. Financial System written by Leonardo Martinez-Diaz and published by U.S. Commodity Futures Trading Commission . This book was released on 2020-09-09 with total page 196 pages. Available in PDF, EPUB and Kindle. Book excerpt: This publication serves as a roadmap for exploring and managing climate risk in the U.S. financial system. It is the first major climate publication by a U.S. financial regulator. The central message is that U.S. financial regulators must recognize that climate change poses serious emerging risks to the U.S. financial system, and they should move urgently and decisively to measure, understand, and address these risks. Achieving this goal calls for strengthening regulators’ capabilities, expertise, and data and tools to better monitor, analyze, and quantify climate risks. It calls for working closely with the private sector to ensure that financial institutions and market participants do the same. And it calls for policy and regulatory choices that are flexible, open-ended, and adaptable to new information about climate change and its risks, based on close and iterative dialogue with the private sector. At the same time, the financial community should not simply be reactive—it should provide solutions. Regulators should recognize that the financial system can itself be a catalyst for investments that accelerate economic resilience and the transition to a net-zero emissions economy. Financial innovations, in the form of new financial products, services, and technologies, can help the U.S. economy better manage climate risk and help channel more capital into technologies essential for the transition. https://doi.org/10.5281/zenodo.5247742
Download or read book Bank Concentration and Crises written by and published by World Bank Publications. This book was released on with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Financial Opening, Deposit Insurance, and Risk in a Model of Banking Competition by : Mr.Tito Cordella
Download or read book Financial Opening, Deposit Insurance, and Risk in a Model of Banking Competition written by Mr.Tito Cordella and published by International Monetary Fund. This book was released on 1998-06-01 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies the impact of competition on the determination of interest rates and banks’ risk-taking behavior under different assumptions about deposit insurance and the dissemination of financial information. It finds that lower entry costs foster competition in deposit rate sand reduce banks’ incentives to limit risk exposure. Although higher insurance coverage amplifies this effect, two alternative arrangements (risk-based contributions to the insurance fund and public disclosure of financial information) help to reduce it. Moreover, uninsured but fully informed depositors and risk-based full deposit insurance yield the same equilibrium risk level, which is independent of entry costs. The welfare implications of the different arrangements are also explored.
Book Synopsis Powering the Digital Economy: Opportunities and Risks of Artificial Intelligence in Finance by : El Bachir Boukherouaa
Download or read book Powering the Digital Economy: Opportunities and Risks of Artificial Intelligence in Finance written by El Bachir Boukherouaa and published by International Monetary Fund. This book was released on 2021-10-22 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper discusses the impact of the rapid adoption of artificial intelligence (AI) and machine learning (ML) in the financial sector. It highlights the benefits these technologies bring in terms of financial deepening and efficiency, while raising concerns about its potential in widening the digital divide between advanced and developing economies. The paper advances the discussion on the impact of this technology by distilling and categorizing the unique risks that it could pose to the integrity and stability of the financial system, policy challenges, and potential regulatory approaches. The evolving nature of this technology and its application in finance means that the full extent of its strengths and weaknesses is yet to be fully understood. Given the risk of unexpected pitfalls, countries will need to strengthen prudential oversight.
Book Synopsis Financial Crises Explanations, Types, and Implications by : Mr.Stijn Claessens
Download or read book Financial Crises Explanations, Types, and Implications written by Mr.Stijn Claessens and published by International Monetary Fund. This book was released on 2013-01-30 with total page 66 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper reviews the literature on financial crises focusing on three specific aspects. First, what are the main factors explaining financial crises? Since many theories on the sources of financial crises highlight the importance of sharp fluctuations in asset and credit markets, the paper briefly reviews theoretical and empirical studies on developments in these markets around financial crises. Second, what are the major types of financial crises? The paper focuses on the main theoretical and empirical explanations of four types of financial crises—currency crises, sudden stops, debt crises, and banking crises—and presents a survey of the literature that attempts to identify these episodes. Third, what are the real and financial sector implications of crises? The paper briefly reviews the short- and medium-run implications of crises for the real economy and financial sector. It concludes with a summary of the main lessons from the literature and future research directions.
