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Author : Carmen Matutes
Publisher :
ISBN 13 :
Total Pages : 30 pages
Book Rating : 4.:/5 (328 download)
Download or read book Imperfect Competition, Risk Taking, and Regulation in Banking written by Carmen Matutes and published by . This book was released on 1995 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Sven Lilienthal
Publisher : GRIN Verlag
ISBN 13 : 3640302184
Total Pages : 85 pages
Book Rating : 4.6/5 (43 download)
Download or read book Thoughts on Entry Regulation, Financial Market Competition and Financial Crisis written by Sven Lilienthal and published by GRIN Verlag. This book was released on 2009-04 with total page 85 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2009 in the subject Business economics - Economic Policy, grade: 1,0, University of Frankfurt (Main), course: Financial Regulation, language: English, abstract: This paper deals with the terms entry regulation, financial market competition and also indicates connections to potential financial crises. Authors in research have been attempting for years to build up a remedy for an optimal set-up.1 So, this is the reason I observe a seemingly never-ending discussion between two unofficial parties: Neither the proponents of the concentration-stability view, neither those of the concentration-fragility view will retreat from how to install proper competition in order to ensure stability. This paper also aims to understand the terms of both parties; their arguments and whether either monopolistic structures or competition are desirable in the financial industry. Therefore, I lay the theoretical foundation. I demonstrate with a model of the authors Boyd & De Nicoló that even economies with monopolistic structure are exposed to risk-taking activities - and not only banks in competitive industries. In chapter 3, I turn to the topic "Entry Regulation". I unveil different yardsticks of entry regulation, reveal some advantages and draw up my own index. I show that mainly countries that suffered devastating crises in recent times have stringent entry regulation. This can be shown by regarding their high capital requirements or their barriers for submitting information of managers, future plans or composition of shareholders. I also show that entry regulation is an appropriate means for governments to control or to curb competition. In the last chapter, it is also shown that high entry capital requirements prevent mainly weak or inefficient banks from entry. In chapter 4, I present two ratios for assessing competition: The concentration ratio (CR) and H-Statistics (H). CR is widely used in literature and defines the market share of the largest banks
Author : Olga Korniienko
Publisher : GRIN Verlag
ISBN 13 : 3656362777
Total Pages : 25 pages
Book Rating : 4.6/5 (563 download)
Download or read book Capital requirements and deposit rate ceilings as regulatory instruments in a dynamic model of imperfect competition in banking written by Olga Korniienko and published by GRIN Verlag. This book was released on 2013-01-30 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: Essay from the year 2011 in the subject Business economics - Banking, Stock Exchanges, Insurance, Accounting, grade: 1,7, Martin Luther University (Finance and Banking), course: Seminar in Banking and Competiton , language: English, abstract: An increase in financial liberalization in the banking sector leads to a growth in competition that destroys the future profits of the banks and therefore their franchise value, – a present value of the future gains. The probability of good loans decreases and involves a moral hazard problem. It leads to bigger incentives for the banks to invest in the gamble assets. Competition has always been regarded to be an environment of extreme risk-taking and as a result, it takes a lot of measures to control the amount invested in the risky assets, and motivation of the prudent behavior of the banks. The most important instruments of regulation that will be taken into account in the paper are capital regulations and deposit rate ceilings in the context of dynam-ic model of imperfect competition according to Repullo (2004). In this model, banks can invest either into the prudent asset (riskless) or gambling asset (risky). Without any regulations there are two potential types of equilibrium, which are, prudent equilibrium, where the banks invest into the riskless assets and gambling equilibrium, in which the banks invest into the risky assets. The expected payoff of the prudent asset is higher than the expected payoff of the gambling asset, but the latter gives a higher return if the gamble turns out well. The intermediation margin of the banks in prudent and gambling equilibrium is equal to the relationship between the transportation costs and the number of banks. This represents the so called market power of the banks.
Author : Mr.Gianni De Nicolo
Publisher : International Monetary Fund
ISBN 13 : 1451853815
Total Pages : 25 pages
Book Rating : 4.4/5 (518 download)
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.
Author : Alan Xiaochen Feng
Publisher : International Monetary Fund
ISBN 13 : 1484364023
Total Pages : 46 pages
Book Rating : 4.4/5 (843 download)
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.
Author : Mr.Gianni De Nicolo
Publisher : International Monetary Fund
ISBN 13 : 1451865570
Total Pages : 51 pages
Book Rating : 4.4/5 (518 download)
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.
Author : Hans-Werner Sinn
Publisher :
ISBN 13 :
Total Pages : 56 pages
Book Rating : 4.3/5 ( download)
Download or read book Risk Taking, Limited Liability and the Competition of Bank Regulators written by Hans-Werner Sinn and published by . This book was released on 2001 with total page 56 pages. Available in PDF, EPUB and Kindle. Book excerpt: Limited liability and asymmetric information between an investment bank and its lenders provide an incentive for a bank to undercapitalise and finance overly risky business projects. To counter this market failure, national governments have imposed solvency constraints on banks. However, these constraints may not survive in systems competition, as systems competition is likely to suffer from the same type of information asymmetry which induced the private market failure and which brought in the government in the first place (Selection Principle). As national solvency regulation creates a positive international policy externality on foreign lenders of domestic banks, there will be an undersupply of such regulation. This may explain why Asian banks were undercapitalised and took excessive risks before the banking crisis emerged.
Author : Dan Galai
Publisher : Springer Science & Business Media
ISBN 13 : 1461550432
Total Pages : 216 pages
Book Rating : 4.4/5 (615 download)
Download or read book Risk Management and Regulation in Banking written by Dan Galai and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: Over the last fifty years, increasingly sophisticated risk measurement and management techniques have revolutionized the field of finance. More recently, the globalization of financial markets and policy changes in the regulation of financial institutions have impacted upon how commercial banks manage risk. The widespread implications of these fundamental changes prompted an international conference held in May, 1997, devoted to the topic of risk management and regulation in banking. This book contains the formal papers and the panel discussions that comprise the conference proceedings, and thus collects some of the latest research on managing financial market risk by top scholars, policymakers, and high-ranking banking officials from around the world.
Author : Tobias Adrian
Publisher : International Monetary Fund
ISBN 13 : 1484343913
Total Pages : 53 pages
Book Rating : 4.4/5 (843 download)
Download or read book Risk Management and Regulation written by Tobias Adrian and published by International Monetary Fund. This book was released on 2018-08-01 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: The evolution of risk management has resulted from the interplay of financial crises, risk management practices, and regulatory actions. In the 1970s, research lay the intellectual foundations for the risk management practices that were systematically implemented in the 1980s as bond trading revolutionized Wall Street. Quants developed dynamic hedging, Value-at-Risk, and credit risk models based on the insights of financial economics. In parallel, the Basel I framework created a level playing field among banks across countries. Following the 1987 stock market crash, the near failure of Salomon Brothers, and the failure of Drexel Burnham Lambert, in 1996 the Basel Committee on Banking Supervision published the Market Risk Amendment to the Basel I Capital Accord; the amendment went into effect in 1998. It led to a migration of bank risk management practices toward market risk regulations. The framework was further developed in the Basel II Accord, which, however, from the very beginning, was labeled as being procyclical due to the reliance of capital requirements on contemporaneous volatility estimates. Indeed, the failure to measure and manage risk adequately can be viewed as a key contributor to the 2008 global financial crisis. Subsequent innovations in risk management practices have been dominated by regulatory innovations, including capital and liquidity stress testing, macroprudential surcharges, resolution regimes, and countercyclical capital requirements.
Author : Ningyu Qian
Publisher :
ISBN 13 :
Total Pages : 28 pages
Book Rating : 4.:/5 (13 download)
Download or read book Industry Environment, Bank Risk-Taking and Deposit Insurance written by Ningyu Qian and published by . This book was released on 2016 with total page 28 pages. Available in PDF, EPUB and Kindle. Book excerpt: Classic theories always ignore the influence of the banking industry environment on deposit insurance's regulation mechanism. With information transparency and competition degree dimensions, we build a banking risk-taking model and find that the optimal regulation mechanism does not depend on the advantage of the scheme oneself, but it is a trade-off of bank's risk incentive which involves the banking industry environment. Under the suitable competition degree, fair-priced explicit deposit insurance is optimal when the information transparency is high. Otherwise implicit deposit insurance is optimal; moreover if the competition is fierce, then deposit insurance's regulation fails. We find that in the regulation feasible region, the improvement of industry environment will correct moral hazard; however in the regulation failure region, we perfect the exit mechanism of the bank which is in trouble by giving the disposal cost pricing strategy. And the most important is that this regulation mechanism demonstrates the endogenous cause of the exist of China's implicit guarantee system featured by strict administrative control. Based on our research we think that if we do well with the delegating power and strengthening regulation, improve the industry environment, and the collaboration with different policies then we will reform the regulation system successfully and improve the society's economic efficiency.
Author : Mr.Giovanni Dell'Ariccia
Publisher : International Monetary Fund
ISBN 13 : 1484381130
Total Pages : 41 pages
Book Rating : 4.4/5 (843 download)
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.
Author : Gianni De Nicoló
Publisher : International Monetary Fund
ISBN 13 :
Total Pages : 42 pages
Book Rating : 4.3/5 ( download)
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.
Author : Ahmad Peivandi
Publisher : Eliva Press
ISBN 13 : 9781952751967
Total Pages : 68 pages
Book Rating : 4.7/5 (519 download)
Download or read book Aggregate Risk, Bank Competition and Regulation in General Equilibrium written by Ahmad Peivandi and published by Eliva Press. This book was released on 2020-10-02 with total page 68 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the optimal design of bank regulation in a general equilibrium model. The benchmark unregulated economy has a unique equilibrium in which banks are maximally leveraged and financed entirely via inside equity and deposits. We characterize the efficient allocation and show that the unregulated economy underinvests (overinvests) in risky production when aggregate risk is low (high). We carry out a normative analysis by showing how the efficient allocation can be implemented via capital and reserve requirements, deposit insurance and bailouts. There is a range of efficient regulatory policies with a stricter capital requirement on banks being accompanied by a looser reserve requirement and less deposit insurance. Capital and reserve requirements become stricter as aggregate risk increases. Depositor subsidies are efficient if aggregate risk is below a threshold. When aggregate risk exceeds the threshold, it is efficient to subsidize productive firms by levying taxes (in expectation) on bank depositors and equityholders.
Author : Mr.Luc Laeven
Publisher : International Monetary Fund
ISBN 13 : 1455210838
Total Pages : 38 pages
Book Rating : 4.4/5 (552 download)
Download or read book Monetary Policy, Leverage, and Bank Risk Taking written by Mr.Luc Laeven and published by International Monetary Fund. This book was released on 2010-12-01 with total page 38 pages. Available in PDF, EPUB and Kindle. Book excerpt: 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.
Author : Thomas K. Kick
Publisher :
ISBN 13 :
Total Pages : 31 pages
Book Rating : 4.:/5 (13 download)
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.
Author : Hans-Werner Sinn
Publisher :
ISBN 13 :
Total Pages : 208 pages
Book Rating : 4.3/5 (97 download)
Download or read book Risk-taking, Limited Liability, and the Banking Crisis written by Hans-Werner Sinn and published by . This book was released on 2009 with total page 208 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The volume includes theoretical articles on banks' liability restrictions, on the possible causes of the banking crisis and economic-policy recommendations on banking regulation by Hans-Werner Sinn in the past three decades."--Publisher's website.
Author : Kent Matthews
Publisher : Wiley Global Education
ISBN 13 : 1118935888
Total Pages : 355 pages
Book Rating : 4.1/5 (189 download)
Download or read book The Economics of Banking written by Kent Matthews and published by Wiley Global Education. This book was released on 2014-08-08 with total page 355 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Economics of Banking describes and explains the behaviour of banks by examining trends and operations in banking within a mathematically accessible microeconomic framework. This new 3rd edition has been fully revised and updated to reflect the major changes that have taken place in the banking sector and many new topics including new coverage of Islamic banking. This accessible and user-friendly textbook is essential reading for final year undergraduate and postgraduate students taking courses in banking. New to this Edition: Fully updated including new material on the financial crisis and the many implications for banking New coverage of Islamic banking Discussion of microfinance/credit unions is included in chapter 4 New coverage of the Shadow Banking System The impact of Basel 3 and the Vickers Report is discussed particularly with regards to the idea of ring fencing Updated statistics and financial data
