Bank Leverage And Monetary Policy S Risk Taking Channel

Author : Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez
Publisher : International Monetary Fund
Page : 41 pages
File Size : 41,9 Mb
Release : 2013-06-06
Category : Business & Economics
ISBN : 9781484333730

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Bank Leverage and Monetary Policy's Risk-Taking Channel by Mr.Giovanni Dell'Ariccia,Mr.Luc Laeven,Mr.Gustavo Suarez Pdf

We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on the internal ratings of U.S. banks on loans to businesses over the period 1997 to 2011 from the Federal Reserve’s survey of terms of business lending. We find that ex-ante risk taking by banks (as measured by the risk rating of the bank’s loan portfolio) is negatively associated with increases in short-term policy interest rates. This relationship is less pronounced for banks with relatively low capital or during periods when banks’ capital erodes, such as episodes of financial and economic distress. These results contribute to the ongoing debate on the role of monetary policy in financial stability and suggest that monetary policy has a bearing on the riskiness of banks and financial stability more generally.

Author : Giovanni Dell'Ariccia,Luc Laeven,Gustavo A. Suarez
Publisher : Unknown
Page : 67 pages
File Size : 40,8 Mb
Release : 2016
Category : Bank loans
ISBN : OCLC:946890600

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Bank Leverage and Monetary Policy's Risk-taking Channel by Giovanni Dell'Ariccia,Luc Laeven,Gustavo A. Suarez Pdf

We present evidence of a risk-taking channel of monetary policy for the U.S. banking system. We use confidential data on banks' internal ratings on loans to businesses over the period 1997 to 2011 from the Federal Reserve's survey of terms of business lending. We find that ex-ante risk taking by banks (measured by the risk rating of new loans) is negatively associated with increases in short-term interest rates. This relationship is more pronounced in regions that are less in sync with the nationwide business cycle, and less pronounced for banks with relatively low capital or during periods of financial distress.

Author : Mr.Luc Laeven,Mr.Giovanni Dell'Ariccia,Mr.Robert Marquez
Publisher : International Monetary Fund
Page : 38 pages
File Size : 42,6 Mb
Release : 2010-12-01
Category : Business & Economics
ISBN : 9781455210831

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Monetary Policy, Leverage, and Bank Risk Taking by Mr.Luc Laeven,Mr.Giovanni Dell'Ariccia,Mr.Robert Marquez Pdf

We provide a theoretical foundation for the claim that prolonged periods of easy monetary conditions increase bank risk taking. The net effect of a monetary policy change on bank monitoring (an inverse measure of risk taking) depends on the balance of three forces: interest rate pass-through, risk shifting, and leverage. When banks can adjust their capital structures, a monetary easing leads to greater leverage and lower monitoring. However, if a bank's capital structure is fixed, the balance depends on the degree of bank capitalization: when facing a policy rate cut, well capitalized banks decrease monitoring, while highly levered banks increase it. Further, the balance of these effects depends on the structure and contestability of the banking industry, and is therefore likely to vary across countries and over time.

Author : Mr.Giovanni Dell'Ariccia
Publisher : International Monetary Fund
Page : 23 pages
File Size : 41,9 Mb
Release : 2010-07-27
Category : Business & Economics
ISBN : 9781455253234

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Monetary Policy and Bank Risk-Taking by Mr.Giovanni Dell'Ariccia Pdf

This paper contributes to the current debate on what role financial stability considerations should play in monetary policy decision and how best to integrate macro-prudential and monetary policy frameworks. The paper broadly supports the view that monetary policy easing induces greater risk-taking by banks but also shows that the relationship between real interest rates and banking risk is more complex. Ultimately, it depends on how much skin in the game banks have. The central message of the paper is broadly complementary to those in the recent MCM board paper “Central Banking Lessons from the Crisis.”

Author : Mr.Fabian Valencia
Publisher : International Monetary Fund
Page : 39 pages
File Size : 49,8 Mb
Release : 2011-10-01
Category : Business & Economics
ISBN : 9781463923235

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Monetary Policy, Bank Leverage, and Financial Stability by Mr.Fabian Valencia Pdf

This paper develops a model to assess how monetary policy rates affect bank risk-taking. In the model, a reduction in the risk-free rate increases lending profitability by reducing funding costs and increasing the surplus the monopolistic bank extracts from borrowers. Under limited liability, this increased profitability affects only upside returns, inducing the bank to take excessive leverage and hence risk. Excessive risk-taking increases as the interest rate decreases. At a broader level, the model illustrates how a benign macroeconomic environment can lead to excessive risk-taking, and thus it highlights a role for macroprudential regulation.

Author : Ignazio Angeloni,Ester Faia,Marco Lo Duca
Publisher : Unknown
Page : 128 pages
File Size : 48,7 Mb
Release : 2013
Category : Electronic
ISBN : OCLC:872518622

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Monetary Policy and Risk Taking by Ignazio Angeloni,Ester Faia,Marco Lo Duca Pdf

We assess the effects of monetary policy on bank risk to verify the existence of a risk-taking channel - monetary expansions inducing banks to assume more risk. We first present VAR evidence confirming that this channel exists and tends to concentrate on the bank funding side. Then, to rationalize this evidence we build a macro model where banks subject to runs endogenously choose their funding structure (deposits vs. capital) and risk level. A monetary expansion increases bank leverage and risk. In turn, higher bank risk in steady state increases asset price volatility and reduces equilibrium output.

Author : Mr.Giovanni Dell'Ariccia,Caio Ferreira,Nigel Jenkinson,Mr.Luc Laeven,Alberto Martin,Ms.Camelia Minoiu,Alex Popov
Publisher : International Monetary Fund
Page : 54 pages
File Size : 45,7 Mb
Release : 2018-09-07
Category : Business & Economics
ISBN : 9781484359624

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Managing the Sovereign-Bank Nexus by Mr.Giovanni Dell'Ariccia,Caio Ferreira,Nigel Jenkinson,Mr.Luc Laeven,Alberto Martin,Ms.Camelia Minoiu,Alex Popov Pdf

This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.

Author : Seung Jung Lee,Lucy Qian Liu,Viktors Stebunovs
Publisher : International Monetary Fund
Page : 47 pages
File Size : 55,6 Mb
Release : 2017-01-27
Category : Business & Economics
ISBN : 9781475572377

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Risk Taking and Interest Rates by Seung Jung Lee,Lucy Qian Liu,Viktors Stebunovs Pdf

We study how low interest rates in the United States affect risk taking in the market of crossborder leveraged corporate loans. To the extent that actions of the Federal Reserve affect U.S. interest rates, our analysis provides evidence of a cross-border spillover effect of monetary policy. We find that before the crisis, lenders made ex-ante riskier loans to non- U.S. borrowers in response to a decline in short-term U.S. interest rates, and, after it, in response to a decline in longer-term U.S. interest rates. Economic uncertainty and risk appetite appear to play a limited role in explaining ex-ante credit risk. Our results highlight the potential policy challenges faced by central banks in affecting credit risk cycles in their own jurisdictions.

Author : Lucio Sarno,Mark P. Taylor
Publisher : Unknown
Page : 344 pages
File Size : 52,7 Mb
Release : 2002
Category : Business & Economics
ISBN : STANFORD:36105025930772

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The Economics of Exchange Rates by Lucio Sarno,Mark P. Taylor Pdf

Table of contents

Author : Margherita Bottero,Ms.Camelia Minoiu,José-Luis Peydro,Andrea Polo,Mr.Andrea F Presbitero,Enrico Sette
Publisher : International Monetary Fund
Page : 59 pages
File Size : 46,7 Mb
Release : 2019-02-28
Category : Business & Economics
ISBN : 9781498300858

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Negative Monetary Policy Rates and Portfolio Rebalancing: Evidence from Credit Register Data by Margherita Bottero,Ms.Camelia Minoiu,José-Luis Peydro,Andrea Polo,Mr.Andrea F Presbitero,Enrico Sette Pdf

We study negative interest rate policy (NIRP) exploiting ECB's NIRP introduction and administrative data from Italy, severely hit by the Eurozone crisis. NIRP has expansionary effects on credit supply-- -and hence the real economy---through a portfolio rebalancing channel. NIRP affects banks with higher ex-ante net short-term interbank positions or, more broadly, more liquid balance-sheets, not with higher retail deposits. NIRP-affected banks rebalance their portfolios from liquid assets to credit—especially to riskier and smaller firms—and cut loan rates, inducing sizable real effects. By shifting the entire yield curve downwards, NIRP differs from rate cuts just above the ZLB.

Author : Angela Abbate,Dominik Thaler
Publisher : Unknown
Page : 0 pages
File Size : 41,9 Mb
Release : 2021
Category : Electronic
ISBN : OCLC:1373820019

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Optimal Monetary Policy with the Risk-taking Channel by Angela Abbate,Dominik Thaler Pdf

Author : Angela Abbate
Publisher : Unknown
Page : 56 pages
File Size : 50,7 Mb
Release : 2018
Category : Electronic
ISBN : OCLC:1293393467

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Monetary Policy and the Asset Risk-taking Channel by Angela Abbate Pdf

¿Cuánto importa el canal de toma de riesgos (risk-taking channel) para la política monetaria? Para responder a esta pregunta, desarrollamos y estimamos un modelo cuantitativo macroeconómico DSGE, en el que los bancos eligen inversiones excesivamente arriesgadas, debido a un problema de agencia que distorsiona los incentivos de los bancos. Cuando el tipo de interés real baja, el peso de esas distorsiones aumenta y los bancos toman más riesgos, lo cual tiene un impacto negativo sobre la efi ciencia de sus inversiones. Demostramos que este nuevo canal de transmisión genera un nuevo y cuantitativamente significativo trade-off entre la estabilización de la infl ación y los tipos de interés: para el banco central resulta deseable aceptar más volatilidad de infl ación a cambio de menos toma de riesgos.

Author : Iwan J. Azis,Hyun Song Shin
Publisher : Springer
Page : 124 pages
File Size : 48,6 Mb
Release : 2014-12-11
Category : Business & Economics
ISBN : 9789812872845

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Managing Elevated Risk by Iwan J. Azis,Hyun Song Shin Pdf

This book discusses the risks and opportunities that arise in Emerging Asia given the context of a new environment in global liquidity and capital flows. It elaborates on the need to ensure financial and overall economic stability in the region through improved financial regulation and other policy measures to minimize the emergent risks. "Managing Elevated Risk: Global Liquidity, Capital Flows, and Macroprudential Policy—An Asian Perspective" also explores the range of policy options that may be deployed to address the impact of global liquidity on domestic financial and socio-economic conditions including income inequality. The book is primarily aimed at policy makers, financial market regulators and supervisory agencies to help them improve national regulatory systems and to promote harmonization of national regulations and practices in line with global standards. Scholars and researchers will also gain important information and knowledge about the overall impacts of changing global liquidity from the book.

Author : Natalya Martynova,Mr.Lev Ratnovski,Mr.Razvan Vlahu
Publisher : International Monetary Fund
Page : 44 pages
File Size : 52,9 Mb
Release : 2015-11-25
Category : Business & Economics
ISBN : 9781513517582

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Bank Profitability and Risk-Taking by Natalya Martynova,Mr.Lev Ratnovski,Mr.Razvan Vlahu Pdf

Traditional theory suggests that more profitable banks should have lower risk-taking incentives. Then why did many profitable banks choose to invest in untested financial instruments before the crisis, realizing significant losses? We attempt to reconcile theory and evidence. In our setup, banks are endowed with a fixed core business. They take risk by levering up to engage in risky ‘side activities’(such as market-based investments) alongside the core business. A more profitable core business allows a bank to borrow more and take side risks on a larger scale, offsetting lower incentives to take risk of given size. Consequently, more profitable banks may have higher risk-taking incentives. The framework is consistent with cross-sectional patterns of bank risk-taking in the run up to the recent financial crisis.

Author : Tobias Adrian
Publisher : Unknown
Page : 128 pages
File Size : 49,9 Mb
Release : 2015
Category : Electronic
ISBN : OCLC:1306323355

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Financial Stability Monitoring by Tobias Adrian Pdf

We present a forward-looking monitoring program to identify and track the sources of systemic risk over time and to facilitate the development of preemptive policies to promote financial stability. We offer a framework that distinguishes between shocks, which are difficult to prevent, and vulnerabilities, which amplify shocks. Building on substantial research, we focus on leverage, maturity transformation, interconnectedness, complexity, and the pricing of risk as the primary vulnerabilities in the financial system. The monitoring program tracks these vulnerabilities in four areas: the banking sector, shadow banking, asset markets, and the nonfinancial sector. The framework also highlights the policy trade-off between reducing systemic risk and raising the cost of financial intermediation by taking preemptive actions to reduce vulnerabilities.