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Bank Liquidity Creation And Financial Crises

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Bank Liquidity Creation and Financial Crises

Bank Liquidity Creation and Financial Crises Book
Author : Allen Berger,Christa Bouwman
Publisher : Academic Press
Release : 2015-11-24
ISBN : 0128005319
Language : En, Es, Fr & De

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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 Liquidity Creation Monetary Policy and Financial Crises

Bank Liquidity Creation  Monetary Policy  and Financial Crises Book
Author : Allen N. Berger,Christa H. S. Ouwman
Publisher : Unknown
Release : 2009
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

Download Bank Liquidity Creation Monetary Policy and Financial Crises book written by Allen N. Berger,Christa H. S. Ouwman, available in PDF, EPUB, and Kindle, or read full book online anywhere and anytime. Compatible with any devices.

Liquidity Creation and Financial Fragility

Liquidity Creation and Financial Fragility Book
Author : Christian Weistroffer
Publisher : Logos Verlag Berlin GmbH
Release : 2010
ISBN : 3832526978
Language : En, Es, Fr & De

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Book Description :

Open-end real estate funds (OEREFs) are the predominant vehicle in Germany for channeling private capital flows into commercial real estate markets. They transform longer-term investment projects into daily redeemable claims. To the extent that OEREFs stand ready to both issue new shares and redeem outstanding ones on a daily basis they provide valuable liquidity transformation. At the same time, they become susceptible to run phenomena. This dissertation analyzes the inherent fragility of open-end real estate funds in light of the German open-end fund crisis of 2005/06. The dissertation comprises three papers. The first paper explores how fund performance and other factors influenced capital flows into OEREFs before, during and after the German open-end fund crisis of 2005/06. The second paper looks at the valuation practice of OEREFs and assesses whether funds have suffered from a valuation problem. It finds evidence in support of the view that systematic deviations of appraised values from prices achieved in the market were at the heart of the 2005/06 German open-end fund crisis. The third paper relates findings from banking theory to OEREFs. It explores under which conditions the open-end fund contract resembles a demand deposit contract that is prone not only to panics but also to fundamental runs. The dissertation concludes by discussing policy options to mitigate the run problem.

High Liquidity Creation and Bank Failures

High Liquidity Creation and Bank Failures Book
Author : Zuzana Fungacova,Rima Turk,Laurent Weill
Publisher : International Monetary Fund
Release : 2015-05-06
ISBN : 1484371100
Language : En, Es, Fr & De

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Book Description :

We formulate the “High Liquidity Creation Hypothesis” (HLCH) that a proliferation in the core activity of bank liquidity creation increases failure probability. We test the HLCH in the context of Russian banking, which provides a natural field experiment due to numerous failures experienced over the past decade. Using Berger and Bouwman’s (2009) liquidity creation measures as a comprehensive proxy for overall bank output, we find that high liquidity creation significantly increases the probability of bank failure; this finding survives multiple robustness checks. Our results suggest that regulatory authorities can mitigate systemic distress and reduce the costs of bank failures to society through early identification of high liquidity creators and enhanced monitoring of their funding and investment activities.

Bank Liquidity and the Global Financial Crisis

Bank Liquidity and the Global Financial Crisis Book
Author : Laura Chiaramonte
Publisher : Springer
Release : 2018-07-09
ISBN : 3319944002
Language : En, Es, Fr & De

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Book Description :

One of the lessons learned from the Global Financial Crisis of 2007–9 is that minimum capital requirements are a necessary but inadequate safeguard for the stability of an intermediary. Despite the high levels of capitalization of many banks before the crisis, they too experienced serious difficulties due to insufficient liquidity buffers. Thus, for the first time, after the GFC regulators realized that liquidity risk can jeopardize the orderly functioning of a bank and, in some cases, its survival. Previously, the risk did not receive the same attention by regulators at the international level as other types of risk including credit, market, and operational risks. The GFC promoted liquidity risk to a significant place in regulatory reform, introducing uniform international rules and best practices. The literature has studied the potential effects of the new liquidity rules on the behaviour of banks, the financial system, and the economy as a whole. This book provides a comprehensive understanding of the bank liquidity crisis that occurred during the GFC, of the liquidity regulatory reform introduced by the Basel Committee with the Basel III Accord, and its implications both at the micro and macroeconomic levels. Università Cattolica del Sacro Cuore contributed to the funding of this research project and its publication.

Liquidity and Crises

Liquidity and Crises Book
Author : Franklin Allen,Elena Carletti,Jan Pieter Krahnen,Marcel Tyrell
Publisher : OUP USA
Release : 2011-01-13
ISBN : 0195390709
Language : En, Es, Fr & De

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Book Description :

One important cause of the 2007-2009 crisis was illiquidity combined with exposure of many financial institutions to liquidity needs. But what is liquidity and why is it so important for financial institutions to command enough liquidity? This book brings together classic articles and recent contributions to this important field.

The Maze of Banking

The Maze of Banking Book
Author : Gary B. Gorton
Publisher : Oxford University Press, USA
Release : 2015
ISBN : 0190204834
Language : En, Es, Fr & De

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Book Description :

Financial crises are devastating in human and economic terms. To avoid the next one, it is important to understand the recent financial crisis of 2007-2008 and the financial eras which preceded it. Gary Gorton has been studying financial crises since his 1983 PhD thesis, "Banking Panics."The Maze of Banking contains a collection of his academic papers on the subjects of banks, banking, and financial crises. The papers in this volume span almost 175 years of U.S. banking history, from pre-U.S. Civil War private bank notes issued during the U.S. Free Banking Era (1837-1863); followed by the U.S. National Banking Era (1863-1914) before there was a central bank; through loan sales, securitization, and the financial crisis of 2007-2008. Banking changed profoundly during these 175 years, yet it did not change in fundamental ways. The forms of money changed, resulting in associated changes in the information structure of the economy. Bank debt evolved as an instrument for storing value, smoothing consumption, and transactions, but its fundamental nature did not change. In all its forms, it is vulnerable to bank runs without government intervention. These papers provide the framework for understanding how the financial crisis of 2007-2008 developed and what can be done to promote a stabile banking industry and prevent future economic crises.

Bank Funding Structures and Risk

Bank Funding Structures and Risk Book
Author : Mr. Pablo Federico,Mr. Francisco F. Vázquez
Publisher : International Monetary Fund
Release : 2012-01-01
ISBN : 1463949529
Language : En, Es, Fr & De

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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.

International Banking in the New Era

International Banking in the New Era Book
Author : Suk-Joong Kim,Michael D. McKenzie
Publisher : Emerald Group Publishing
Release : 2010-11-10
ISBN : 1849509131
Language : En, Es, Fr & De

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Book Description :

This volume examines issues concerning the challenges and opportunities for international banks in the rapidly changing global environment. It looks at financial markets and banking, examines the role of banks and lawyers in the global financial crisis, explores post-crisis financial regulation, and highlights determinants of international banking.

Across the Great Divide

Across the Great Divide Book
Author : Martin Neil Baily
Publisher : Hoover Institution Press
Release : 2014-11-01
ISBN : 0817917861
Language : En, Es, Fr & De

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Book Description :

The financial crisis of 2008 devastated the American economy and caused U.S. policymakers to rethink their approaches to major financial crises. More than five years have passed since the collapse of Lehman Brothers, but questions still persist about the best ways to avoid and respond to future financial crises. In Across the Great Divide, a copublication with Brookings Institution, contributing economic and legal scholars from academia, industry, and government analyze the financial crisis of 2008, from its causes and effects on the U.S. economy to the way ahead. The expert contributors consider postcrisis regulatory policy reforms and emerging financial and economic trends, including the roles played by highly accommodative monetary policy, securitization run amok, government-sponsored enterprises (GSEs), large asset bubbles, excessive leverage, and the Federal funds rate, among other potential causes. They discuss the role played by the Federal Reserve and examine the concept of "too big to fail." And they review and assess resolution frameworks, considering experiences with Lehman Bros. and other firms in the crisis, Title II of the Dodd-Frank Act, and the Chapter 14 bankruptcy code proposal.

Essays on Stability and Regulation of the Banking System

Essays on Stability and Regulation of the Banking System Book
Author : Shasta Shakya
Publisher : Unknown
Release : 2018
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

This dissertation consists of three chapters each of which explores different topics in the area of banking. In the first chapter, I ask how a banks connectedness affects its financial stability and what mechanisms amplify or mitigate this effect. I consider connectedness arising due to linkages that are formed between banks when they are exposed to common housing markets, and investigate whether such connectedness explains stability around the 2007 housing crash. I show that linkages facilitate contagion of risk, and that high leverage and securitization activity of other banks amplify contagion while high liquidity ratio of other banks minimizes contagion. Finally, I provide policy implications by suggesting minimum levels of capital and liquidity ratios that could contain contagion.In the second chapter, I study the impact of a newly introduced liquidity requirement in the banking sector the Liquidity Coverage Ratio (LCR) rule on loan contract terms. This chapter employs a differences-in-differences testing method, and exploits the setting of multiple events arising from the timing of the implementation of the rule to identify the effect of LCR. I do not find evidence of high costs to lenders due to this rule, because loan pricing terms do not change in an average loan post LCR. However, banks limit their risk exposure by increasing collateral requirements. For banks that are ex-ante expected to find the rule less costly, I find evidence of cost savings because they offer lower spreads. Further results suggest that while banks provided extra benefits to relationship borrowers in the form of lower spreads pre LCR, this is no longer true post LCR, and they reduce risk exposure to borrowers with weaker relationship strength by increasing collateral requirements.In the third chapter, I study the relationship between liquidity created by a bank and its overall financial stability. I contrast results during the period of 2007 financial crisis with those during normal times. While I find that overall liquidity creation is a risky activity during both times, breaking it into different components (on- vs. off-balance sheet, asset side vs. liability side) reveals nuances on the driving forces behind this relationship. While asset side liquidity creation decreases stability during both times, results show that the effects of other components depend on overall market conditions. During the crisis period, off-balance sheet liquidity creation hurts stability, while it has no apparent benefit during normal times. Liability side liquidity creation improves stability during crisis, however there is evidence of costs of such activity during normal times. Further results show that liquid holdings and core deposits can mitigate the costs of liquidity creation during crisis without significantly hurting benefits during normal times.

Capital Flows and the Twin Crises The Role of Liquidity

Capital Flows and the Twin Crises   The Role of Liquidity Book
Author : Ilan Goldfajn,Rodrigo O. Valdés
Publisher : International Monetary Fund
Release : 1997-07
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

This paper develops a model that focuses on the interaction of liquidity creation by financial intermediaries with capital flows and exchange rate collapses. The intermediaries’ role of transforming maturities is shown to result in larger movements of capital and a higher probability of crisis. These movements resemble the observed cycle in capital flows: large inflows, crisis and abrupt outflows. The model highlights how adverse productivity and international interest rate shocks may trigger a sudden outflow of capital and an exchange collapse. The initial shock is magnified by the behavior of individual foreign investors linked through their deposits in the intermediaries. The expectation of an eventual exchange rate crisis links investors’ behavior even further.

The Oxford Handbook of Banking

The Oxford Handbook of Banking Book
Author : Allen N. Berger,Philip Molyneux,John O. S. Wilson
Publisher : Oxford University Press, USA
Release : 2019-10
ISBN : 0198824637
Language : En, Es, Fr & De

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Book Description :

The Oxford Handbook of Banking provides an overview and analysis of state-of-the-art research in banking written by leading researchers in the field. This Handbook will appeal to graduate students of economics, banking and finance, academics, practitioners and policy makers. Consequently, the book strikes a balance between abstract theory, empirical analysis, and practitioner and policy-related material. The handbook is split into five parts. Part I, The Theory of Banking, examines the role of banks in the wider financial system, why banks exist, how they function, and their legal and governance structures. Part II entitled Regulatory and Policy Perspectives discusses monetary policy, prudential regulation and supervision, and antitrust policy. Part III of the book deals with bank performance. A number of issues are assessed including efficiency, financial innovation and technological change, globalization and ability to deliver small business, consumer, and mortgage lending services. Part IV of the book provides an overview of macroeconomic perspectives in banking. This part of the book includes a discussion of the determinants of bank failures and crises, and the impact on financial stability, institutional development, and economic growth. Part V examines International Differences In Banking Structures And Environments. This part of the handbook examines banking systems in the United States, Western Europe, Transition countries, Latin America, Japan and the Developing nations of Asia.

The Oxford Handbook of Banking Second Edition

The Oxford Handbook of Banking  Second Edition Book
Author : Allen N. Berger,Philip Molyneux,John O. S. Wilson
Publisher : OUP Oxford
Release : 2014-11-27
ISBN : 0191002208
Language : En, Es, Fr & De

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Book Description :

The Oxford Handbook of Banking, Second Edition provides an overview and analysis of developments and research in banking written by leading researchers in the field. This handbook will appeal to graduate students of economics, banking and finance, academics, practitioners, regulators, and policy makers. Consequently, the book strikes a balance between abstract theory, empirical analysis, and practitioner, and policy-related material. The Handbook is split into five parts. Part I, The Theory of Banking, examines the role of banks in the wider financial system, why banks exist, how they function, and their corporate governance and risk management practices. Part II deals with Bank Operations and Performance. A range of issues are covered including bank performance, financial innovation, and technological change. Aspects relating to small business, consumer, and mortgage lending are analysed together with securitization, shadow banking, and payment systems. Part III entitled Regulatory and Policy Perspectives discusses central banking, monetary policy transmission, market discipline, and prudential regulation and supervision. Part IV of the book covers various Macroeconomic Perspectives in Banking. This part includes a discussion of systemic risk and banking and sovereign crises, the role of the state in finance and development as well as how banks influence real economic activity. The final Part V examines International Differences in Banking Structures and Environments. This part of the Handbook examines banking systems in the United States, European Union, Japan, Africa, Transition countries, and the developing nations of Asia and Latin America.

Capital Flows and the Twin Crises

Capital Flows and the Twin Crises Book
Author : Mr. Ilan Goldfajn,Mr. Rodrigo O. Valdés
Publisher : International Monetary Fund
Release : 1997-07-01
ISBN : 1452769427
Language : En, Es, Fr & De

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Book Description :

This paper develops a model that focuses on the interaction of liquidity creation by financial intermediaries with capital flows and exchange rate collapses. The intermediaries’ role of transforming maturities is shown to result in larger movements of capital and a higher probability of crisis. These movements resemble the observed cycle in capital flows: large inflows, crisis and abrupt outflows. The model highlights how adverse productivity and international interest rate shocks may trigger a sudden outflow of capital and an exchange collapse. The initial shock is magnified by the behavior of individual foreign investors linked through their deposits in the intermediaries. The expectation of an eventual exchange rate crisis links investors’ behavior even further.

Liquidity Shortages and Banking Crises

Liquidity Shortages and Banking Crises Book
Author : Douglas Warren Diamond
Publisher : Unknown
Release : 2003
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

"We show in this paper that bank failures can be contagious. Unlike earlier work where contagion stems from depositor panics or ex ante contractual links between banks, we argue bank failures can shrink the common pool of liquidity, creating or exacerbating aggregate liquidity shortages. This could lead to a contagion of failures and a possible total meltdown of the system. Given the costs of a meltdown, there is a possible role for government intervention. Unfortunately, liquidity problems and solvency problems interact and can cause each other, making it hard to determine the root cause of a crisis from observable factors. We propose a robust sequence of intervention"--NBER website

TARP and other Bank Bailouts and Bail Ins around the World

TARP and other Bank Bailouts and Bail Ins around the World Book
Author : Allen N. Berger,Raluca A. Roman
Publisher : Academic Press
Release : 2020-06-09
ISBN : 0128138653
Language : En, Es, Fr & De

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Book Description :

Financial crises are recurring phenomena that result in the financial distress of systemically important banks, making it imperative to understand how to best respond to such crises and their consequences. Two policy responses became prominent for dealing with these distressed institutions since the last Global Financial Crisis: bailouts and bail-ins. The main questions surrounding these responses touch everyone: Are bailouts or bail-ins good for the financial system and the real economy? Is it essential to save distressed financial institutions by putting taxpayer money at risk in bailouts, or is it better to use private money in bail-ins instead? Are there better options, such as first lines of defense that help prevent such distress in the first place? Can countercyclical prudential and monetary policies lessen the likelihood and severity of the financial crises that often bring about this distress? Through careful analysis, authors Berger and Roman review and critically assess the extant theoretical and empirical research on many resolution approaches and tools. Placing special emphasis on lessons learned from one of the biggest bailouts of all time, the Troubled Asset Relief Program (TARP), while also reviewing other programs and tools, TARP and Other Bank Bailouts and Bail-Ins around the World sheds light on how best to protect the financial system on Wall Street and the real economy on Main Street. Presents a well-informed and rich account of bailouts, bail-ins, and other resolution approaches to resolve financially distressed banks. Uses TARP as a key case study of bailouts that has been thoroughly researched. Provides valuable research and policy guidance for dealing with future financial crises.

Financial Crises

Financial Crises Book
Author : Franklin Allen,Douglas Gale
Publisher : Edward Elgar Pub
Release : 2008
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

This important volume presents key contributions to the study of financial crises from many different areas of economics. The book offers an economic history of financial crises, empirical studies of crises in the modern era, and classic works on the theory of banking crises. It also covers specialized topics, with sections on currency crises and financial contagion. Undergraduate students of money, banking, macroeconomics and financial crises alike will find this collection to be an invaluable overview of a critical area of study.

Domestic Regulation and Service Trade Liberalization

Domestic Regulation and Service Trade Liberalization Book
Author : Pierre Sauve,Aaditya Mattoo
Publisher : World Bank Publications
Release : 2003-08-29
ISBN : 0821383434
Language : En, Es, Fr & De

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Book Description :

Trade in services, far more than trade in goods, is affected by a variety of domestic regulations, ranging from qualification and licensing requirements in professional services to pro-competitive regulation in telecommunications services. Experience shows that the quality of regulation strongly influences the consequences of trade liberalization. WTO members have agreed that a central task in the ongoing services negotiations will be to develop a set of rules to ensure that domestic regulations support rather than impede trade liberalization. Since these rules are bound to have a profound impact on the evolution of policy, particularly in developing countries, it is important that they be conducive to economically rational policy-making. This book addresses two central questions: What impact can international trade rules on services have on the exercise of domestic regulatory sovereignty? And how can services negotiations be harnessed to promote and consolidate domestic policy reform across highly diverse sectors? The book, with contributions from several of the world's leading experts in the field, explores a range of rule-making challenges arising at this policy interface, in areas such as transparency, standards and the adoption of a necessity test for services trade. Contributions also provide an in-depth look at these issues in the key areas of accountancy, energy, finance, health, telecommunications and transportation services.

Banks Short Term Debt and Financial Crises

Banks  Short Term Debt and Financial Crises Book
Author : Douglas W. Diamond,Raghuram Rajan
Publisher : Unknown
Release : 2000
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

The National Bureau of Economic Research, Inc. (NBER) presents an abstract of the June 2000 working paper entitled "Banks, Short Term Debt and Financial Crises: Theory, Policy Implications and Applications," written by Douglas W. Diamond and Raghuram G. Rajan. The full text of the paper may be purchased online. This paper argues that while the empirical association between a financial institution's short-term borrowing and susceptibility to crises may exist, the direction of causality is often the opposite to the one traditionally suggested by commentators.