High Liquidity Creation And Bank Failures
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High Liquidity Creation And Bank Failures
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Author : Zuzana Fungacova
language : en
Publisher: International Monetary Fund
Release Date : 2015-05-06
High Liquidity Creation And Bank Failures written by Zuzana Fungacova and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-05-06 with Business & Economics categories.
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.
High Liquidity Creation And Bank Failures
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Author : Zuzana Fungacova
language : en
Publisher: International Monetary Fund
Release Date : 2015-05-06
High Liquidity Creation And Bank Failures written by Zuzana Fungacova and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-05-06 with Business & Economics categories.
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 Creation And Financial Crises
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Author : Allen N. Berger
language : en
Publisher: Academic Press
Release Date : 2015-11-24
Bank Liquidity Creation And Financial Crises written by Allen N. Berger and has been published by Academic Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-11-24 with Business & Economics categories.
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
Does Excessive Liquidity Creation Trigger Bank Failures
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Author : Zuzana Fungác̆ová
language : en
Publisher:
Release Date : 2013
Does Excessive Liquidity Creation Trigger Bank Failures written by Zuzana Fungác̆ová and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013 with categories.
Does Excessive Liquidity Creation Trigger Bank Failures
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Author : Zuzana Fungáčová
language : en
Publisher:
Release Date : 2016
Does Excessive Liquidity Creation Trigger Bank Failures written by Zuzana Fungáčová and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
This paper introduces the "Excessive Liquidity Creation Hypothesis," whereby a rise in a bank's core liquidity creation activity increases its probability of failure. Russia experienced many bank failures over the past decade, making it an ideal natural field experiment for testing this hypothesis. Using Berger and Bouwman's (2009) liquidity creation measures, we find that excessive liquidity creation significantly increased the probability of bank failure during our observation period (2000?2007). This finding survives multiple robustness checks. Our results further suggest that regulatory authorities can mitigate systemic distress and reduce the costs to society from bank failures through early identification and enhanced monitoring of excessive liquidity creators.
Three Essays On Bank Liquidity Creation And Funding Liquidity Risk
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Author : Feng Tu
language : en
Publisher:
Release Date : 2015
Three Essays On Bank Liquidity Creation And Funding Liquidity Risk written by Feng Tu and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
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.
Liquidity Shortages And Banking Crises
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Author : Douglas Warren Diamond
language : en
Publisher:
Release Date : 2003
Liquidity Shortages And Banking Crises written by Douglas Warren Diamond and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Bank failures categories.
"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
Liquidity And Crises
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Author : Franklin Allen
language : en
Publisher: Oxford University Press, USA
Release Date : 2011-02-03
Liquidity And Crises written by Franklin Allen and has been published by Oxford University Press, USA this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011-02-03 with Business & Economics categories.
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.
Bank Liquidity And The Global Financial Crisis
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Author : Laura Chiaramonte
language : en
Publisher: Springer
Release Date : 2018-07-09
Bank Liquidity And The Global Financial Crisis written by Laura Chiaramonte and has been published by Springer this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-07-09 with Business & Economics categories.
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 Banking And Bank Failures
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Author : University of Western Ontario. Centre for the Study of International Economic Relations
language : en
Publisher: London : Department of Economics, University of Western Ontario
Release Date : 1986
Liquidity Banking And Bank Failures written by University of Western Ontario. Centre for the Study of International Economic Relations and has been published by London : Department of Economics, University of Western Ontario this book supported file pdf, txt, epub, kindle and other format this book has been release on 1986 with Banks and banking Mathematical models categories.