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Bank Funding, Liquidity, and Capital Adequacy

Author : José Gabilondo

Publisher : Edward Elgar Publishing

Page : 170 pages

File Size : 11,30 MB

Release : 2016-09-28

Category : Business & Economics

ISBN : 1783479175

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Book Description

Focusing primarily on the banking system in the United States, this book offers an innovative framework that integrates a depository bank’s liquidity and its capital adequacy into a unified notion of funding that helps to explain how the 2007–2008 crisis unfolded, why central banks succeeded in resolving the crisis, and how the conceptual legacy of the crisis and its resolution led to lasting changes in bank funding regulation, including new objective requirements for bank liquidity. To provide a comparative context, the book also examines the funding models of non-bank intermediaries like dealer banks and insurers.



Bank Liquidity Creation and Financial Crises

Author : Allen N. Berger

Publisher : Academic Press

Page : 296 pages

File Size : 29,88 MB

Release : 2015-11-24

Category : Business & Economics

ISBN : 0128005319

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Book Description

Bank Liquidity Creation and Financial Crises delivers a consistent, logical presentation of bank liquidity creation and addresses questions of research and policy interest that can be easily understood by readers with no advanced or specialized industry knowledge. Authors Allen Berger and Christa Bouwman examine ways to measure bank liquidity creation, how much liquidity banks create in different countries, the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, the effects of bailouts, and much more. They also analyze bank liquidity creation in the US over the past three decades during both normal times and financial crises. Narrowing the gap between the "academic world" (focused on theories) and the "practitioner world" (dedicated to solving real-world problems), this book is a helpful new tool for evaluating a bank’s performance over time and comparing it to its peer group. Explains that bank liquidity creation is a more comprehensive measure of a bank’s output than traditional measures and can also be used to measure bank liquidity Describes how high levels of bank liquidity creation may cause or predict future financial crises Addresses questions of research and policy interest related to bank liquidity creation around the world and provides links to websites with data and other materials to address these questions Includes such hot-button topics as the effects of monetary policy (including interest rate policy, lender of last resort, and quantitative easing), the effects of capital, the effects of regulatory interventions, and the effects of bailouts



Bank Funding Structures and Risk

Author : Mr.Francisco F. Vazquez

Publisher : International Monetary Fund

Page : 33 pages

File Size : 16,80 MB

Release : 2012-01-01

Category : Business & Economics

ISBN : 1463933142

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Book Description

This paper analyzes the evolution of bank funding structures in the run up to the global financial crisis and studies the implications for financial stability, exploiting a bank-level dataset that covers about 11,000 banks in the U.S. and Europe during 2001?09. The results show that banks with weaker structural liquidity and higher leverage in the pre-crisis period were more likely to fail afterward. The likelihood of bank failure also increases with bank risk-taking. In the cross-section, the smaller domestically-oriented banks were relatively more vulnerable to liquidity risk, while the large cross-border banks were more susceptible to solvency risk due to excessive leverage. The results support the proposed Basel III regulations on structural liquidity and leverage, but suggest that emphasis should be placed on the latter, particularly for the systemically-important institutions. Macroeconomic and monetary conditions are also shown to be related with the likelihood of bank failure, providing a case for the introduction of a macro-prudential approach to banking regulation.





Liquidity Risk Management in Banks

Author : Roberto Ruozi

Publisher : Springer Science & Business Media

Page : 59 pages

File Size : 17,4 MB

Release : 2012-09-20

Category : Business & Economics

ISBN : 3642295819

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Book Description

The recent turmoil on financial markets has made evident the importance of efficient liquidity risk management for the stability of banks. The measurement and management of liquidity risk must take into account economic factors such as the impact area, the timeframe of the analysis, the origin and the economic scenario in which the risk becomes manifest. Basel III, among other things, has introduced harmonized international minimum requirements and has developed global liquidity standards and supervisory monitoring procedures. The short book analyses the economic impact of the new regulation on profitability, on assets composition and business mix, on liabilities structure and replacement effects on banking and financial products.​



Does Going Tough on Banks Make the Going Get Tough? Bank Liquidity Regulations, Capital Requirements, and Sectoral Activity

Author : Ms.Deniz O Igan

Publisher : International Monetary Fund

Page : 64 pages

File Size : 44,17 MB

Release : 2020-06-19

Category : Business & Economics

ISBN : 1513548107

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Book Description

Whether and to what extent tougher bank regulation weighs on economic growth is an open empirical question. Using data from 28 manufacturing industries in 50 countries, we explore the extent to which cross-country differences in bank liquidity and capital levels were related to differences in sectoral activity around the period of the global financial crisis. We find that industries which are more dependent on external finance, in countries where banks had higher liquidity and capital ratios, performed relatively better during the crisis, with regard to investment rates and the creation of new enterprises. This relationship, however, exists only for bank-based systems and emerging market economies. In the pre-crisis period, we find only a marginal link to bank capital. These findings survive a battery of robustness checks and provide some solid support for the tighter prudential measures introduced under Basel III.



Bank Capital Adequacy in Australia

Author : Mr.B. Jang

Publisher : International Monetary Fund

Page : 20 pages

File Size : 34,63 MB

Release : 2012-01-01

Category : Business & Economics

ISBN : 1463954115

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Book Description

The paper finds that, given Australia's conservative approach in implementing the Basel II framework, Australian banks' headline capital ratios underestimate their capital strengths. Given their high capital quality and the progress in their funding profiles since the global financial crisis, the Australian banks are making good progress toward meeting the Basel III requirements, including the new liquidity standards. Stress tests calibrated on the Irish crisis experience show that the banks could withstand sizable shocks to their exposure to residential mortgages. However, combining residential mortgage shocks with corporate losses expected at the peak of the global financial crisis would put more pressure on Australian banks' capital. Therefore, it would be useful to consider the merits of higher capital requirements for systemically important domestic banks.



The Net Stable Funding Ratio

Author : Jeanne Gobat

Publisher : International Monetary Fund

Page : 43 pages

File Size : 27,56 MB

Release : 2014-06-12

Category : Business & Economics

ISBN : 1498346499

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Book Description

As part of Basel III reforms, the NSFR is a new prudential liquidity rule aimed at limiting excess maturity transformation risk in the banking sector and promoting funding stability. The revised package has been issued for public consultation with a plan of making the rule binding in 2018. This paper complements earlier quantitative impact studies by discussing the potential impact of introducing the NSFR based on empirical analysis of end-2012 financial data for over 2000 banks covering 128 countries. The calculations show that a sizeable percentage of the banks in most countries would meet the minimum NSFR prudential requirement at end-2012, and, further, that larger banks tend to be more vulnerable to the introduction of the NSFR. Additionally, by comparing the NSFR to other structural funding mismatch indicators, we find that the NSFR is a relatively consistent regulatory measure for capturing banks’ funding risk. Finally, the paper discusses key policy issues for consideration in implementing the NSFR.



THREE ESSAYS ON BANK LIQUIDITY CREATION AND FUNDING LIQUIDITY RISK.

Author : Feng Tu

Publisher :

Page : pages

File Size : 22,21 MB

Release : 2015

Category :

ISBN :

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Book Description

According to the modern theory of financial intermediation, liquidity creation is an essential role of banks. Chapter 1 investigates the relationship between diversification of activities conducted by banks and bank liquidity creation. We show that despite the passage of GLBA act in 1999, banks increased their specialization in the traditional loan market and thus became less diversified from 2004 until the end of 2008. In addition, we find evidence that more specialized banks tend to create more excess liquidity during normal times, suggesting too much specialization in mortgage and other types of loans created abundant liquidity leading up to the financial crisis. Chapter 2 calculates the Net Stable Funding Ratio (NSFR) as defined in Basel III for virtually all US commercial banks during the 2001-2013 period. Compared to traditional liquidity risk measures and the NSFR estimated in the related literature, the NSFR based on our calculation is more comprehensive in evaluating funding liquidity risk on banks' balance sheet and off-balance sheet activities and also is superior in capturing the changes in liquidity risk over time. In addition, we graphically show that the deseasonalized and detrended NSFR based on our estimation is able to detect the excessive liquidity risk taking behavior of the banking sector in advance of financial stress. Furthermore, we examine the policy related issue of the effect of stricter capital requirements on bank funding liquidity risk. We find that large and medium banks with higher capital positions tend to increase exposure to liquidity risk during both normal times and the financial crisis. On the other hand, small banks with higher capital ratios tend to have lower liquidity risk exposure. Chapter 3 applies a small variation to the NSFR measure to account for the liquidity risk of brokered deposits and examines the advantage of using the brokered deposits adjusted NSFR (adj.NSFR) in detecting bank financial distress during the period of 2007-2013. The in-sample test results show that the adj.NSFR measure does add significantly incremental explanatory power to the models relying on traditional liquidity ratios. However, its superior ability to identify failures is not so pronounced in the out-of-sample periods.



Bank Solvency and Funding Cost

Author : Mr.Stefan W. Schmitz

Publisher : International Monetary Fund

Page : 46 pages

File Size : 31,6 MB

Release : 2017-05-15

Category : Business & Economics

ISBN : 1484300661

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Book Description

This paper presents new evidence on the empirical relationship between bank solvency and funding costs. Building on a newly constructed dataset drawing on supervisory data for 54 large banks from six advanced countries over 2004–2013, we use a simultaneous equation approach to estimate the contemporaneous interaction between solvency and liquidity. Our results show that liquidity and solvency interactions can be more material than suggested by the existing empirical literature. A 100 bps increase in regulatory capital ratios is associated with a decrease of bank funding costs of about 105 bps. A 100 bps increase in funding costs reduces regulatory capital buffers by 32 bps. We also find evidence of non-linear effects between solvency and funding costs. Understanding the impact of solvency on funding costs is particularly relevant for stress testing. Our analysis suggests that neglecting the dynamic features of the solvency-liquidity nexus in the 2014 EU-wide stress test could have led to a significant underestimation of the impact of stress on bank capital ratios.