Bank Profitability And Financial Stability

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Bank Profitability and Financial Stability

Ms.TengTeng Xu,Kun Hu,Mr.Udaibir S Das
Bank Profitability and Financial Stability Book PDF

Author : Ms.TengTeng Xu,Kun Hu,Mr.Udaibir S Das
Publisher : International Monetary Fund
Page : 54 pages
File Size : 46,9 Mb
Release : 2019-01-11
Category : Business & Economics
ISBN : 9781484390078

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Bank Profitability and Financial Stability by Ms.TengTeng Xu,Kun Hu,Mr.Udaibir S Das Pdf

We analyze how bank profitability impacts financial stability from both theoretical and empirical perspectives. We first develop a theoretical model of the relationship between bank profitability and financial stability by exploring the role of non-interest income and retail-oriented business models. We then conduct panel regression analysis to examine the empirical determinants of bank risks and profitability, and how the level and the source of bank profitability affect risks for 431 publicly traded banks (U.S., advanced Europe, and GSIBs) from 2004 to 2017. Results reveal that profitability is negatively associated with both a bank’s contribution to systemic risk and its idiosyncratic risk, and an over-reliance on non-interest income, wholesale funding and leverage is associated with higher risks. Low competition is associated with low idiosyncratic risk but a high contribution to systemic risk. Lastly, the problem loans ratio and the cost-to-income ratio are found to be key factors that influence bank profitability. The paper’s findings suggest that policy makers should strive to better understand the source of bank profitability, especially where there is an over-reliance on market-based non-interest income, leverage, and wholesale funding.

Breaking the Bank? A Probabilistic Assessment of Euro Area Bank Profitability

Selim Elekdag,Sheheryar Malik,Ms.Srobona Mitra
Breaking the Bank A Probabilistic Assessment of Euro Area Bank Profitability Book PDF

Author : Selim Elekdag,Sheheryar Malik,Ms.Srobona Mitra
Publisher : International Monetary Fund
Page : 38 pages
File Size : 53,7 Mb
Release : 2019-11-22
Category : Business & Economics
ISBN : 9781513516141

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Breaking the Bank? A Probabilistic Assessment of Euro Area Bank Profitability by Selim Elekdag,Sheheryar Malik,Ms.Srobona Mitra Pdf

This paper explores the determinants of profitability across large euro area banks using a novel approach based on conditional profitability distributions. Real GDP growth and the NPL ratio are shown to be the most reliable determinants of bank profitability. However, the estimated conditional distributions reveal that, while higher growth would raise profits on average, a large swath of banks would most likely continue to struggle even amid a strong economic recovery. Therefore, for some banks, a determined reduction in NPLs combined with cost efficiency improvements and customized changes to their business models appears to be the most promising strategy for durably raising profitability.

Bank Profitability and Risk-Taking

Natalya Martynova
Bank Profitability and Risk Taking Book PDF

Author : Natalya Martynova
Publisher : International Monetary Fund
Page : 43 pages
File Size : 42,7 Mb
Release : 2015-11-25
Category : Business & Economics
ISBN : 9781513565811

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Bank Profitability and Risk-Taking by Natalya Martynova 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.

Banking in Europe

Mariarosa Borroni,Simone Rossi
Banking in Europe Book PDF

Author : Mariarosa Borroni,Simone Rossi
Publisher : Springer
Page : 118 pages
File Size : 49,5 Mb
Release : 2019-04-09
Category : Business & Economics
ISBN : 9783030150136

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Banking in Europe by Mariarosa Borroni,Simone Rossi Pdf

This Palgrave Pivot provides a comprehensive overview of the dynamics that are affecting the profitability of European banks since the recent crisis period. More specifically, it sheds light on the most crucial changes in profit generation and on the consequential changes in banking strategies due to fiercer competition, reduced margin and changing regulation. The work is divided in four main parts. The first section introduces the changes in bank management policies, considering the periods before and since the crisis. In the second section, the authors review the literature on bank profitability and outline the main determinants of profit generation, and in the third section they provide a cross-country analysis of profitability for a wide sample of European banks during the great financial crisis. In the last section, the authors discuss the results of the quantitative analysis under the new regulatory and competitive framework that is progressively affecting the banking sector (fintech, Basel regulations, etc.). This book will be of interest to academics, researchers and students of European banking.

New Challenges in Banking and Finance

NESRIN ÖZATAÇ,Korhan K. GÖKMENOGLU
New Challenges in Banking and Finance Book PDF

Author : NESRIN ÖZATAÇ,Korhan K. GÖKMENOGLU
Publisher : Springer
Page : 184 pages
File Size : 55,6 Mb
Release : 2017-11-03
Category : Business & Economics
ISBN : 9783319668727

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New Challenges in Banking and Finance by NESRIN ÖZATAÇ,Korhan K. GÖKMENOGLU Pdf

This volume presents current developments in the fields of banking and finance from an international perspective. Featuring contributions from the 2nd International Conference on Banking and Finance Perspectives (ICBFP), this volume serves as a valuable forum for discussing current issues and trends in the banking and financial sectors, especially in light of the global economic challenges triggered by financial institutions. Using the latest theoretical models, new perspectives are brought to topics such as e-finance and e-banking, Islamic banking, international cross-border regulatory cooperation, bank fraud, the global financial crisis, microfinance, and corporate control transactions. Offering an opportunity to explore the challenges of a rapidly changing industry, this volume will be of interest to academics, policy makers, and scholars in the fields of banking, insurance, and finance.

Banking in a Steady State of Low Growth and Interest Rates

Qianying Chen,Mitsuru Katagiri,Jay Surti
Banking in a Steady State of Low Growth and Interest Rates Book PDF

Author : Qianying Chen,Mitsuru Katagiri,Jay Surti
Publisher : International Monetary Fund
Page : 37 pages
File Size : 42,8 Mb
Release : 2018-08-27
Category : Business & Economics
ISBN : 9781484373873

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Banking in a Steady State of Low Growth and Interest Rates by Qianying Chen,Mitsuru Katagiri,Jay Surti Pdf

A prolonged low-interest-rate environment presents a significant challenge to banks and is likely to entail major changes to their business models over the long-run. Lower returns to maturity transformation in the face of flatter yield curves and an inability to offer deposit rates significantly below zero combine to compress bank earnings in this environment. Smaller, deposit-funded, less diversified banks are hurt most, increasing consolidation pressures and reach-for-yield incentives, presenting new financial stability challenges.To the extent that such an economic environment reflects a new, steady-state with lower equilibrium growth driven by population aging and slower productivity growth, lower credit demand is likely to drive banking toward provision of fee-based, utility services.

Bank Funding Costs for International Banks

MissRita Babihuga,Marco Spaltro
Bank Funding Costs for International Banks Book PDF

Author : MissRita Babihuga,Marco Spaltro
Publisher : International Monetary Fund
Page : 38 pages
File Size : 44,5 Mb
Release : 2014-04-30
Category : Business & Economics
ISBN : 9781475517910

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Bank Funding Costs for International Banks by MissRita Babihuga,Marco Spaltro Pdf

This paper investigates the determinants of bank funding costs for a sample of internationally active banks from 2001–12. We find that changes in banks’ unsecured funding costs are associated with bank-specific characteristics such as an institution’s credit worthiness and the return on its market value, and importantly, on the level and quality of capital. Similarly, market factors such as the level of investor risk appetite, as well as shocks to financial markets—notably the US subprime crisis and the Euro Area sovereign debt crisis—have also been key drivers of the sharp rise in bank funding costs. We also find evidence that large systemically important institutions have enjoyed a funding advantage, and that this advantage has risen since the onset of the two crises. With the exception of Euro Area periphery banks, by end-2012 the rise in funding costs had generally been reversed for most major banks as a result of improvments in bank asset quality as well as steps taken to increase resilience, notably higher capitalization. Our results suggest increased capital buffers may potentially support bank lending to the real economy by reducing bank funding costs.

Achieving Financial Stability and Growth in Africa

Stephany Griffith-Jones,Ricardo Gottschalk
Achieving Financial Stability and Growth in Africa Book PDF

Author : Stephany Griffith-Jones,Ricardo Gottschalk
Publisher : Routledge
Page : 186 pages
File Size : 52,6 Mb
Release : 2016-03-24
Category : Business & Economics
ISBN : 9781317301691

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Achieving Financial Stability and Growth in Africa by Stephany Griffith-Jones,Ricardo Gottschalk Pdf

This book explores how the financial system should be regulated and structured to achieve the twin goals of inclusive growth and financial stability, with a focus on African low-income countries (LICs). The subject and content of this book is original in that it attempts to draw on the lessons and radical rethinking on the financial sector in developed and middle income countries, arising in the wake of the international financial crisis. It includes four in- depth country case studies, of Kenya, Ghana, Nigeria and Ethiopia, but also analyses the empirical evidence for Sub-Saharan Africa as a whole, evaluating the relevance (or not) of such major changes for the very different financial sectors and economies in low income countries. Achieving Financial Stability and Growth in Africa has major academic and policy implications, especially for low income countries, but also more generally, on broader issues. These include the desirable size of the financial sector, as well as more specific issues, such as the high cost of borrowing of small and medium enterprises in LICs, and possible measures to reduce it. Highly topical subjects like the appropriate regulation of the financial sector and management of capital flows are discussed in depth. Though drawing on comprehensive reviews of the literature, this volume has the virtue of the large comparative academic and policy experience of researchers, as well as in-depth case studies, that take account of institutional and economic features of low- income countries. Written by senior academics and policy-makers, this book is a must read for those researching or participating in the financial sectors of low-income countries, as well as in developed economies. It is also suitable for those who study political economy and public finance.

Global Approaches in Financial Economics, Banking, and Finance

Hasan Dincer,Ümit Hacioglu,Serhat Yüksel
Global Approaches in Financial Economics Banking and Finance Book PDF

Author : Hasan Dincer,Ümit Hacioglu,Serhat Yüksel
Publisher : Springer
Page : 483 pages
File Size : 45,8 Mb
Release : 2018-06-12
Category : Business & Economics
ISBN : 9783319784946

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Global Approaches in Financial Economics, Banking, and Finance by Hasan Dincer,Ümit Hacioglu,Serhat Yüksel Pdf

This volume discusses the impact of Financial Economics, Growth Dynamics, and the Finance & Banking sector in the economies of countries. The contributors analyse and discuss the effects of the recent financial crises on the economic growth and performance in various countries. The volume covers aspects like foreign borrowing, impact on productivity and debt crises that are strongly affected by the financial volatility of recent years and includes examples from Europe and Asia. In addition, the authors give particular attention to the private sector of Finance and Banking, which is deeply interwoven with the financial performance of a country’s economy. Examples such as bank profitability and troubled loans are covered and the volume also discusses the economic impact of banks such as the Ottoman Bank in a national economy. The book also explores the importance of financial stability, intellectual capital and bank performance for a stable economic environment.

Canada

International Monetary Fund. Monetary and Capital Markets Department
Canada Book PDF

Author : International Monetary Fund. Monetary and Capital Markets Department
Publisher : International Monetary Fund
Page : 85 pages
File Size : 52,8 Mb
Release : 2019-06-24
Category : Business & Economics
ISBN : 9781498321112

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Canada by International Monetary Fund. Monetary and Capital Markets Department Pdf

This Financial System Stability Assessment paper discusses that Canada has enjoyed favorable macroeconomic outcomes over the past decades, and its vibrant financial system continues to grow robustly. However, macrofinancial vulnerabilities—notably, elevated household debt and housing market imbalances—remain substantial, posing financial stability concerns. Various parts of the financial system are directly exposed to the housing market and/or linked through housing finance. The financial system would be able to manage severe macrofinancial shocks. Major deposit-taking institutions would remain resilient, but mortgage insurers would need additional capital in a severe adverse scenario. Housing finance is broadly resilient, notwithstanding some weaknesses in the small non-prime mortgage lending segment. Although banks’ overall capital buffers are adequate, additional required capital for mortgage exposures, along with measures to increase risk-based differentiation in mortgage pricing, would be desirable. This would help ensure adequate through-the cycle buffers, improve mortgage risk-pricing, and limit procyclical effects induced by housing market corrections.

Bank Performance, Risk and Firm Financing

P. Molyneux
Bank Performance Risk and Firm Financing Book PDF

Author : P. Molyneux
Publisher : Springer
Page : 295 pages
File Size : 55,6 Mb
Release : 2011-07-26
Category : Business & Economics
ISBN : 9780230313873

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Bank Performance, Risk and Firm Financing by P. Molyneux Pdf

This text comprises a selection of papers that provide state of the art insights into bank performance, risk and firm financing post crisis that were presented at the European Association of University Teachers of Banking and Finance Conference (otherwise known as the Wolpertinger Conference) held at Bangor University, Wales, 2010.

When They Go Low, We Go High? Measuring Bank Market Power in a Low-for-Long Environment

International Monetary Fund
When They Go Low We Go High Measuring Bank Market Power in a Low for Long Environment Book PDF

Author : International Monetary Fund
Publisher : International Monetary Fund
Page : 26 pages
File Size : 43,5 Mb
Release : 2021-05-27
Category : Business & Economics
ISBN : 9781513573526

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When They Go Low, We Go High? Measuring Bank Market Power in a Low-for-Long Environment by International Monetary Fund Pdf

We examine trends in bank competition since the early 2000s. The Lerner index—arguably the most commonly used measure—shows evidence of a marked increase in market power in advanced economies, especially after the global financial crisis. But other frequently used indicators of banking sector competition seem much more muted. We show that the significant drop in policy rates that occurred in the aftermath of the crisis could explain the seeming disconnect. Adjusting the Lerner index for the impact of policy rates reveals that market power has been fairly constant in advanced economies—consistent with the other signals and similar to the pattern observed in emerging markets.

JGB Yield Curve and Macro-Financial Stability

Mr. Salih Fendoglu
JGB Yield Curve and Macro Financial Stability Book PDF

Author : Mr. Salih Fendoglu
Publisher : International Monetary Fund
Page : 13 pages
File Size : 42,5 Mb
Release : 2023-05-18
Category : Business & Economics
ISBN : 9798400244032

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JGB Yield Curve and Macro-Financial Stability by Mr. Salih Fendoglu Pdf

Given that there is exceptionally high uncertainty around the domestic inflation outlook, allowing for greater flexibility in long-term Japanese Government Bond (JGB) yields by the Bank of Japan (BoJ) could be considered going forward. Against this background, this study empirically finds that a steeper JGB yield curve helps improve banks’ profitability, especially after a year lag, and the overall impact hinges on macroeconomic and financial market responses. A steeper JGB yield curve could also have spillovers on global yields. Financial sector policies to mitigate short-term vulnerabilities in case the JGB yield curve steepens could be considered, including by further strengthening engagement with financial institutions with relatively high exposure to interest rate movements, to better harness the benefits in the medium term.

Crisis, Risk and Stability in Financial Markets

Juan Fernández de Guevara Radoselovics,José Pastor Monsálvez
Crisis Risk and Stability in Financial Markets Book PDF

Author : Juan Fernández de Guevara Radoselovics,José Pastor Monsálvez
Publisher : Springer
Page : 234 pages
File Size : 50,6 Mb
Release : 2012-11-29
Category : Business & Economics
ISBN : 9781137001832

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Crisis, Risk and Stability in Financial Markets by Juan Fernández de Guevara Radoselovics,José Pastor Monsálvez Pdf

This book presents an in-depth appreciation of key topics related to the behaviour of financial institutions in the crisis and stresses areas of major research interest. It covers a selection of papers specialising ranging from the analysis of bank and stock market performance in the crisis, to other areas such as microinsurance and social lending.

Where Have All the Profits Gone? European Bank Profitability Over the Financial Cycle

Ms.Enrica Detragiache,Mr.Thierry Tressel,Rima Turk-Ariss
Where Have All the Profits Gone European Bank Profitability Over the Financial Cycle Book PDF

Author : Ms.Enrica Detragiache,Mr.Thierry Tressel,Rima Turk-Ariss
Publisher : International Monetary Fund
Page : 34 pages
File Size : 47,9 Mb
Release : 2018-05-09
Category : Business & Economics
ISBN : 9781484354544

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Where Have All the Profits Gone? European Bank Profitability Over the Financial Cycle by Ms.Enrica Detragiache,Mr.Thierry Tressel,Rima Turk-Ariss Pdf

The paper investigates EU banks’ profitability through the recent financial cycle using banklevel balance sheet and income statement data. We find that banks that were more successful at protecting their profits had a less pronounced deterioration in loan quality and a larger improvement in cost efficiency. They also downsized their assets more aggressively during the crisis, and reduced reliance on wholesale funding more markedly post-crisis. Net interest margins remained broadly stable over the financial cycle, including post-crisis, and there is no clear evidence that aspects of bank business model, such as higher reliance on fees and commission income, were associated with better profitability post-crisis.