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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.

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.

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.

THREE ESSAYS ON BANK LIQUIDITY CREATION AND FUNDING LIQUIDITY RISK

THREE ESSAYS ON BANK LIQUIDITY CREATION AND FUNDING LIQUIDITY RISK  Book
Author : Feng Tu
Publisher : Unknown
Release : 2015
ISBN : 0987650XXX
Language : En, Es, Fr & De

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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.

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 : 1475581807
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 Competition Efficiency and Liquidity Creation in Asia Pacific

Bank Competition  Efficiency and Liquidity Creation in Asia Pacific Book
Author : N. Genetay,Y. Lin,P. Molyneux,Xiaoqing (Maggie) Fu
Publisher : Springer
Release : 2015-07-28
ISBN : 1137533846
Language : En, Es, Fr & De

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Book Description :

Banking market integration in the Asia Pacific has greatly accelerated in recent years, in an environment of many other rapid advances in banking and finance. This has increased competition between domestic and foreign banks, and made the measurement of bank efficiency, competition, and liquidity creation a critical issue for both policy makers and bank managers. This book investigates important policy-related issues in Asia Pacific banking. It analyses the link between competition and stability, examining the cases of fourteen Asia Pacific countries between 2003 and 2010, and goes on to discuss whether bank shareholder value is influenced by cost and profit efficiency changes over time. The authors explore the different ways in which banks in Asia-Pacific create liquidity, and whether this is linked to capital generation. This book provides valuable insight for researchers, policy makers and bank managers with an interest in financial rationalization, restructuring and consolidation.

Bank Capital and Liquidity Creation

Bank Capital and Liquidity Creation Book
Author : Roman Horváth
Publisher : Unknown
Release : 2012
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

"The authors examine the relation between capital and liquidity creation. This issue is interesting because of the potential impact on liquidity creation from tighter capital requirements such as those in Basel III. They perform Granger-causality tests in a dynamic generalized method of moments (GMM) panel estimator framework on an exhaustive data set of Czech banks, which mainly includes small banks from 2000 to 2010. We observe a strong expansion in liquidity creation until the financial crisis that was mainly driven by large banks. They show that capital negatively Granger-causes liquidity creation in this industry, where majority of banks are small. But we also observe that liquidity creation Granger-causes a reduction in capital. These findings support the view that Basel III can reduce liquidity creation, but also that greater liquidity creation can reduce banks' solvency. Thus, the authors show that this reverse causality generates a trade-off between the benefits of financial stability induced by stronger capital requirements and the benefits of increased liquidity creation."--Abstract.

Bank Funding Structures and Risk

Bank Funding Structures and Risk Book
Author : Mr.Francisco F. Vazquez,Mr.Pablo Federico
Publisher : International Monetary Fund
Release : 2012-01-01
ISBN : 1463933142
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.

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.

Capital Flows and the Twin Crises

Capital Flows and the Twin Crises 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.

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

Does Going Tough on Banks Make the Going Get Tough  Bank Liquidity Regulations  Capital Requirements  and Sectoral Activity Book
Author : Ms.Deniz O Igan,Ali Mirzaei
Publisher : International Monetary Fund
Release : 2020-06-19
ISBN : 1513548107
Language : En, Es, Fr & De

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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.

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.

Lending Investments and the Financial Crisis

Lending  Investments and the Financial Crisis Book
Author : Elena Beccalli,Federica Poli
Publisher : Springer
Release : 2016-04-29
ISBN : 1137531010
Language : En, Es, Fr & De

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Book Description :

This book features contributions from leading researchers into the effect of the recent financial crisis on lending in the banking sector. They explore the emergence of alternative methods of firm financing, including crowdfunding, firm network financing and venture capital, and analyse the performance of listed European innovative firms. The book discusses related topics such as the role of loan dynamics and structure for Central and Eastern European economic growth, the liquidity policy of the European Central Bank during the Euro crisis, sovereign pensions and social security reserve funds. Lending, Investments and the Financial Crisis addresses the ways in which the strategies of institutional investors have been impacted by the crisis. The study focuses on Western, Central and Eastern Europe, while providing a wider context in terms of comparison with the Chinese banking system.

Global Liquidity Issues for Surveillance

Global Liquidity   Issues for Surveillance Book
Author : International Monetary Fund
Publisher : International Monetary Fund
Release : 2014-12-03
ISBN : 1498343651
Language : En, Es, Fr & De

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Book Description :

The paper starts by presenting evidence of commonality in global financial conditions. This commonality is then related to specific drivers of global financial conditions through a range of transmission channels, including cross-border banking and portfolio flows. Empirical analysis shows a range of price and quantity factors, including measures of risk, bank leverage, and interest rates in financial centers, to drive in part these flows. Country specific policies, including exchange rate and prudential frameworks, are shown to affect the transmission of global conditions. Much remains unknown though, including how evolving structures of global funding, changing institutions, and ongoing financial innovations affect the mechanics of liquidity creation, the channels of liquidity transmission, and potential risks going forward.

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.

The Financial Crisis

The Financial Crisis Book
Author : Ja'nel Tobias Esterhuysen,North-West University (South Africa). Potchefstroom Campus
Publisher : Unknown
Release : 2010
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

Operational risk -- Basel II -- Systemic risk -- Bank liquidity creation -- Credit crisis -- Operationale risiko -- Sistemiese risiko -- Banklikiditeitskepping -- Kredietkrisis.

Liquidity Creation Without a Lender of Last Resort

Liquidity Creation Without a Lender of Last Resort Book
Author : Anonim
Publisher : Unknown
Release : 2006
ISBN : 0987650XXX
Language : En, Es, Fr & De

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Book Description :

"Existing research on liquidity provision during National Banking Era (1863-1913) financial crises examines aggregate issuance of clearinghouse loan certificates by the New York Clearinghouse. We employ previously unexploited disaggregate data on clearinghouse loan certificate issues in New York City to document how the dominant national banks provided liquidity during the Panic of 1907. The large New York City national banks acted as private liquidity providers by requesting (and the New York Clearinghouse issuing) a volume of clearinghouse loan certificates far beyond their own immediate liquidity needs, in accord with their role as central reserve city banks in the national banking system."--Federal Reserve Bank of Atlanta web site.

A Flow of Funds Perspective on the Financial Crisis Volume I

A Flow of Funds Perspective on the Financial Crisis Volume I Book
Author : B. Winkler,A. van Riet,P. Bull,Ad van Riet
Publisher : Springer
Release : 2013-11-29
ISBN : 1137352981
Language : En, Es, Fr & De

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Book Description :

Provides a comprehensive overview of a broad range of uses of the flow of funds within the central bank community as well as in the academic field, prepared by international experts in the field. Based on the crisis experience, it offers an overview of lessons for macrofinancial analysis and financial stability.

Basel III Liquidity Regulation and Its Implications

Basel III Liquidity Regulation and Its Implications Book
Author : Mark Petersen,Janine Mukkudem-Petersen
Publisher : Business Expert Press
Release : 2014-05-07
ISBN : 1606498738
Language : En, Es, Fr & De

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Book Description :

Liquidity involves the degree to which an asset can be bought or sold in the market without affecting its price. The 2007 to 2009 financial crisis was characterized by a decrease in liquidity and necessitated the introduction of Basel III capital and liquidity regulation in 2010. Inside, you’ll learn how such regulations are applied on a broad crosssection of countries in order to understand and demonstrate the implications of Basel III. This book summarizes the defining features of the Basel I, II, and III Accords and their perceived shortcomings, as well as the role of the Basel Committee on Banking Supervision (BCBS) in promulgating international banking regulation. Basel III quantifies liquidity risk by using the measures liquidity coverage ratio (LCR) and net stable funding ratio (NSFR). This book discusses approximation techniques that may be used to estimate these liquidity measures. Inside, the authors highlight the connections between liquidity creation and bank capital and provide you with the details of an investigation of the risks liquidity creation generates for banks. In addition, we consider the impact of the implementation of Basel III liquidity regulation on macroeconomic variables such as GDP, investment, inflation, consumption, income, savings, and employment.