Balance Sheet Strength And Bank Lending During The Global Financial Crisis

Author : Mr.Tümer Kapan,Ms.Camelia Minoiu
Publisher : International Monetary Fund
Page : 38 pages
File Size : 43,6 Mb
Release : 2013-05-08
Category : Business & Economics
ISBN : 9781484315842

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Balance Sheet Strength and Bank Lending During the Global Financial Crisis by Mr.Tümer Kapan,Ms.Camelia Minoiu Pdf

We examine the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy. Using data from the syndicated loan market, we exploit variation in banks’ reliance on wholesale funding and their structural liquidity positions in 2007Q2 to estimate the impact of exposure to market freezes during 2007–08 on the supply of bank credit. We find that banks with strong balance sheets were better able to maintain lending during the crisis. In particular, banks that were ex-ante more dependent on market funding and had lower structural liquidity reduced the supply of credit more than other banks. However, higher and better-quality capital mitigated this effect. Our results suggest that strong bank balance sheets are key for the recovery of credit following crises, and provide support for regulatory proposals under the Basel III framework.

Author : Tümer Kapan
Publisher : Unknown
Page : 48 pages
File Size : 45,9 Mb
Release : 2016
Category : Electronic
ISBN : OCLC:1306009270

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Balance Sheet Strength and Bank Lending During the Global Financial Crisis by Tümer Kapan Pdf

We examine the role of bank balance sheet strength in the transmission of financial sector shocks to the real economy. Using data from the syndicated loan market, we exploit variation in banks' reliance on wholesale funding and their structural liquidity positions in 2007Q2 to estimate the impact of exposure to market freezes during 2007-08 on the supply of bank credit. We find that banks with strong balance sheets were better able to maintain lending during the crisis. In particular, banks that were ex ante more dependent on market funding and had lower structural liquidity reduced the supply of credit more than other banks. However, higher levels of better-quality capital mitigated this effect. Our results suggest that strong bank balance sheets are key for the recovery of credit following crises, and provide support for regulatory proposals under the Basel III framework.

Author : Tümer Kapan,Camelia Minoiu
Publisher : Unknown
Page : 38 pages
File Size : 45,7 Mb
Release : 2013
Category : Electronic
ISBN : 3865589510

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Balance Sheet Strength and Bank Lending During the Global Financial Crisis by Tümer Kapan,Camelia Minoiu Pdf

Author : Joseph Crowley
Publisher : International Monetary Fund
Page : 54 pages
File Size : 41,9 Mb
Release : 2015-02-27
Category : Business & Economics
ISBN : 9781475564273

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Central and Commercial Bank Balance Sheet Risk Before, During, and After the Global Financial Crisis by Joseph Crowley Pdf

This paper presents an overview of exposures in the balance sheets of central banks, banks, and other depository institutions during the past decade, with emphasis on asset growth and currency composition. It exploits the IMF’s SRF-based monetary data to show: (i) there was a widely observed buildup of assets prior to the global financial crisis, but there has been no significant reduction in its wake; (ii) the foreign currency composition of the balance sheets of banks and other depository institutions remained remarkably constant in spite of the crisis, significant changes in the composition of balance sheets, and globalization, and does not seem to have been significantly influenced by the behavior of exchange rates; and (iii) exposure to households increased prior to the crisis, but this increased risk was offset by increased capitalization.

Author : Mr.Eugenio Cerutti,Galina Hale,Ms.Camelia Minoiu
Publisher : International Monetary Fund
Page : 59 pages
File Size : 45,9 Mb
Release : 2014-10-16
Category : Business & Economics
ISBN : 9781484361443

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Financial Crises and the Composition of Cross-Border Lending by Mr.Eugenio Cerutti,Galina Hale,Ms.Camelia Minoiu Pdf

We examine the composition and drivers of cross-border bank lending between 1995 and 2012, distinguishing between syndicated and non-syndicated loans. We show that on-balance sheet syndicated loan exposures account for almost one third of total cross-border loan exposures during this period. Furthermore, syndicated loan exposures increased during the global financial crisis due to large drawdowns on credit lines extended before the crisis. Our empirical analysis of the drivers of cross-border loan exposures in a large bilateral dataset shows three main results. First, banks with lower levels of capital favor syndicated over other kinds of cross-border loans. Second, borrower country characteristics such as level of development, economic size, and capital account openness, are less important in driving syndicated than non-syndicated loan activity, suggesting a diversification motive for syndication. Third, information asymmetries between lender and borrower countries, which are important both in normal and crisis times, became more binding for both types of cross-border lending activity during the recent crisis.

Author : Nicola Cetorelli
Publisher : DIANE Publishing
Page : 41 pages
File Size : 42,9 Mb
Release : 2010-11
Category : Business & Economics
ISBN : 9781437933871

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Global Banks and International Shock Transmission by Nicola Cetorelli Pdf

Global banks played a significant role in transmitting the 2007-09 financial crisis to emerging-market (EM) economies. The authors examine adverse liquidity shocks on main developed-country banking systems and their relationships to EM across Europe, Asia, and Latin Amer., isolating loan supply from loan demand effects. Loan supply in EM across Europe, Asia, and Latin Amer. was affected significantly through three separate channels: (1) a contraction in direct, cross-border lending by foreign banks; (2) a contraction in local lending by foreign banks¿ affiliates in EM; and (3) a contraction in loan supply by domestic banks, resulting from the funding shock to their balance sheets induced by the decline in interbank, cross-border lending. Charts and tables.

Author : Mr.Jiaqian Chen,Giuseppe Vera
Publisher : International Monetary Fund
Page : 28 pages
File Size : 55,5 Mb
Release : 2017-05-08
Category : Business & Economics
ISBN : 9781475599169

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Bank Balance Sheets and the Value of Lending by Mr.Jiaqian Chen,Giuseppe Vera Pdf

We study 1,400 UK syndicated loans, together with the financial history of the lead bank and the borrowing firm. We interpret abnormal equity returns around loan announcements as the value of the lending relationship to the firm. We find that: (i) Consistent with previous evidence, the value of lending is higher when the firm is riskier or more opaque, suggesting that it primarily reflects the lead bank’s screening and monitoring activities. (ii) As a bank becomes larger, more profitable or more capitalized, the value of its loans first increases and then decreases. The largest, most capitalised or most profitable banks do not give the most valuable loans. (iii) Firms which receive low-value loans are more likely to experience low profitability and financial distress during the lending relationship. By relating the state of bank balance sheets to borrower performance, we offer a new angle to evaluate the impact of financial conditions on the real economy.

Author : Mr.Stijn Claessens,Neeltje van Horen
Publisher : International Monetary Fund
Page : 50 pages
File Size : 45,6 Mb
Release : 2014-10-27
Category : Business & Economics
ISBN : 9781498301435

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The Impact of the Global Financial Crisis on Banking Globalization by Mr.Stijn Claessens,Neeltje van Horen Pdf

Although cross-border bank lending has fallen sharply since the crisis, extending our bank ownership database from 1995-2009 up to 2013 shows only limited retrenchment in foreign bank presence. While banks from OECD countries reduced their foreign presence (but still represent 89% of foreign bank assets), those from emerging markets and developing countries expanded abroad and doubled their presence. Especially advanced countries hit by a systemic crisis reduced their presence abroad, with far flung and relatively small investments more likely to be sold. Poorer and slower growing countries host fewer banks today, while large investments less likely expanded. Conversely, faster host countries’ growth and closeness to potential investors meant more entry. Lending by foreign banks locally grew more than cross-border bank claims did for the same home-host country combination, and each was driven by different factors. Altogether, our evidence shows that global banking is not becoming more fragmented, but rather is going through some important structural transformations with a greater variety of players and a more regional focus.

Author : B. Winkler,A. van Riet,P. Bull,Ad van Riet
Publisher : Springer
Page : 326 pages
File Size : 51,8 Mb
Release : 2013-11-29
Category : Business & Economics
ISBN : 9781137352989

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A Flow-of-Funds Perspective on the Financial Crisis Volume I by B. Winkler,A. van Riet,P. Bull,Ad van Riet Pdf

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.

Author : Mathias Dewatripont,Jean-Charles Rochet,Jean Tirole
Publisher : Princeton University Press
Page : 149 pages
File Size : 49,5 Mb
Release : 2010-04-19
Category : Business & Economics
ISBN : 9781400834648

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Balancing the Banks by Mathias Dewatripont,Jean-Charles Rochet,Jean Tirole Pdf

An international perspective on the financial crisis and the future of banking regulation The financial crisis that began in 2007 in the United States swept the world, producing substantial bank failures and forcing unprecedented state aid for the crippled global financial system. Bringing together three leading financial economists to provide an international perspective, Balancing the Banks draws critical lessons from the causes of the crisis and proposes important regulatory reforms, including sound guidelines for the ways in which distressed banks might be dealt with in the future. While some recent policy moves go in the right direction, others, the book argues, are not sufficient to prevent another crisis. The authors show the necessity of an adaptive prudential regulatory system that can better address financial innovation. Stressing the numerous and complex challenges faced by politicians, finance professionals, and regulators, and calling for reinforced international coordination (for example, in the treatment of distressed banks), the authors put forth a number of principles to deal with issues regarding the economic incentives of financial institutions, the impact of economic shocks, and the role of political constraints. Offering a global perspective, Balancing the Banks should be read by anyone concerned with solving the current crisis and preventing another such calamity in the future.

Author : Mr.John C Caparusso,Ms.Yingyuan Chen,Mr.Peter Dattels,Rohit Goel,Paul Hiebert
Publisher : International Monetary Fund
Page : 34 pages
File Size : 48,5 Mb
Release : 2019-12-27
Category : Business & Economics
ISBN : 9781513525259

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Post-Crisis Changes in Global Bank Business Models: A New Taxonomy by Mr.John C Caparusso,Ms.Yingyuan Chen,Mr.Peter Dattels,Rohit Goel,Paul Hiebert Pdf

The Global Financial Crisis unleashed changes in the operating and regulatory environments for large international banks. This paper proposes a novel taxonomy to identify and track business model evolution for the 30 Global Systemically Important Banks (G-SIBs). Drawing from banks’ reporting, it identifies strategies along four dimensions –consolidated lines of business and geographic orientation, and the funding models and legal entity structures of international operations. G-SIBs have adjusted their business models, especially by reducing market intensity. While G-SIBs have maintained international orientation, pressures on funding models and entity structures could affect the efficiency of capital flows through the bank channel.

Author : Mr.Francisco F. Vazquez,Mr.Pablo Federico
Publisher : International Monetary Fund
Page : 33 pages
File Size : 52,7 Mb
Release : 2012-01-01
Category : Business & Economics
ISBN : 9781463933142

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Bank Funding Structures and Risk by Mr.Francisco F. Vazquez,Mr.Pablo Federico Pdf

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.

Author : George Chacko,Carolyn L. Evans,Hans Gunawan,Anders Sjoman
Publisher : FT Press
Page : 258 pages
File Size : 54,6 Mb
Release : 2011-06-08
Category : Business & Economics
ISBN : 9780132172981

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The Global Economic System by George Chacko,Carolyn L. Evans,Hans Gunawan,Anders Sjoman Pdf

Written for financial professionals, the authors thoroughly explain the modern global credit system; the roles of banks, hedge funds, insurers, central banks, mortgage markets, and other participants; and the credit-related instruments they rely on. In particular, the authors illuminate the crucial importance of liquidity, and show why liquidity failures have been the key cause of all major market crashes for the past several decades. The Global Financial System thoroughly examines economic environments in which slow de-leveraging leads to prolonged sluggish growth, and compares today's environment to other periods of deleveraging, such as the Great Depression and the Japanese economic meltdown of the '90s and '00s. It predicts potential pathways for the current crisis, and offers essential guidance to both policymakers and investment decision-makers.

Author : Jaromir Benes,Mr. Michael Kumhof,Mr. Douglas Laxton
Publisher : International Monetary Fund
Page : 55 pages
File Size : 53,7 Mb
Release : 2014-04-04
Category : Business & Economics
ISBN : 9781475515206

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Financial Crises in DSGE Models: Selected Applications of MAPMOD by Jaromir Benes,Mr. Michael Kumhof,Mr. Douglas Laxton Pdf

This paper, together with a technical companion paper, presents MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of both the pre-crisis and crisis phases of financial cycles.

Author : Mr.Philippe D Karam,Ouarda Merrouche,Moez Souissi,Rima Turk
Publisher : International Monetary Fund
Page : 38 pages
File Size : 41,6 Mb
Release : 2014-11-19
Category : Business & Economics
ISBN : 9781498352888

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The Transmission of Liquidity Shocks by Mr.Philippe D Karam,Ouarda Merrouche,Moez Souissi,Rima Turk Pdf

We analyze the transmission of bank-specific liquidity shocks triggered by a credit rating downgrade through the lending channel. Using bank-level data for US Bank Holding Companies, we find that a credit rating downgrade is associated with an immediate and persistent decline in access to non-core deposits and wholesale funding, especially during the global financial crisis. This translates into a reduction in lending to households and non-financial corporates at home and abroad. The effect on domestic lending, however, is mitigated when banks (i) hold a larger buffer of liquid assets, (ii) diversify away from rating-sensitive sources of funding, and (iii) activate internal liquidity support measures. Foreign lending is significantly reduced during a crisis at home only for subsidiaries with weak funding self-sufficiency.