Financial Opening Deposit Insurance And Risk In A Model Of Banking Competition

Author : Mr.Tito Cordella,Mr.Eduardo Levy Yeyati
Publisher : International Monetary Fund
Page : 46 pages
File Size : 40,9 Mb
Release : 1998-06-01
Category : Business & Economics
ISBN : 9781451851991

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Financial Opening, Deposit Insurance, and Risk in a Model of Banking Competition by Mr.Tito Cordella,Mr.Eduardo Levy Yeyati Pdf

This paper studies the impact of competition on the determination of interest rates and banks’ risk-taking behavior under different assumptions about deposit insurance and the dissemination of financial information. It finds that lower entry costs foster competition in deposit rate sand reduce banks’ incentives to limit risk exposure. Although higher insurance coverage amplifies this effect, two alternative arrangements (risk-based contributions to the insurance fund and public disclosure of financial information) help to reduce it. Moreover, uninsured but fully informed depositors and risk-based full deposit insurance yield the same equilibrium risk level, which is independent of entry costs. The welfare implications of the different arrangements are also explored.

Author : Tito Cordella
Publisher : Unknown
Page : 45 pages
File Size : 42,5 Mb
Release : 2006
Category : Electronic
ISBN : OCLC:1291214866

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Financial Opening, Deposit Insurance, and Risk in a Model of Banking Competition by Tito Cordella Pdf

This paper studies the impact of competition on the determination of interest rates and banks` risk-taking behavior under different assumptions about deposit insurance and the dissemination of financial information. It finds that lower entry costs foster competition in deposit rate sand reduce banks` incentives to limit risk exposure. Although higher insurance coverage amplifies this effect, two alternative arrangements (risk-based contributions to the insurance fund and public disclosure of financial information) help to reduce it. Moreover, uninsured but fully informed depositors and risk-based full deposit insurance yield the same equilibrium risk level, which is independent of entry costs. The welfare implications of the different arrangements are also explored.

Author : Mr.Gianni De Nicolo,John H. Boyd
Publisher : International Monetary Fund
Page : 25 pages
File Size : 50,8 Mb
Release : 2003-06-01
Category : Business & Economics
ISBN : 9781451853810

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Bank Risk-Taking and Competition Revisited by Mr.Gianni De Nicolo,John H. Boyd Pdf

This study reinvestigates the theoretical relationship between competition in banking and banks' exposure to risk of failure. There is a large existing literature that concludes that when banks are confronted with increased competition, they rationally choose more risky portfolios. We briefly review this literature and argue that it has had a significant influence on regulators and central bankers, causing them to take a less favorable view of competition and encouraging anti-competitive consolidation as a response to banking instability. We then show that existing theoretical analyses of this topic are fragile, since they do not detect two fundamental risk-incentive mechanisms that operate in exactly the opposite direction, causing banks to aquire more risk per portfolios as their markets become more concentrated. We argue that these mechanisms should be essential ingredients of models of bank competition.

Author : Jack Carr,G. Frank Mathewson,Neil Clayton Quigley,C.D. Howe Institute
Publisher : Unknown
Page : 134 pages
File Size : 43,8 Mb
Release : 1994
Category : Deposit insurance
ISBN : UOM:35128001586971

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Ensuring Failure by Jack Carr,G. Frank Mathewson,Neil Clayton Quigley,C.D. Howe Institute Pdf

Federal deposit insurance in Canada is provided by the Canada Deposit Insurance Corporation (CDIC), created by an act of Parliament in 1967 to guarantee certain types of deposits of member institutions up to a limit currently set at $60,000 for each account. This document examines this question and looks at financial system stability and deposit insurance in Canada. More precisely, it focuses on efficiency and political explanations for deposit insurance; the banking system before 1967; the effect of deposit insurance on the banking system; and regulations and depositor compensation.

Author : United States. Department of the Treasury
Publisher : Unknown
Page : 776 pages
File Size : 54,6 Mb
Release : 1991
Category : Banking law
ISBN : PURD:32754061746289

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Modernizing the Financial System by United States. Department of the Treasury Pdf

Author : Ahmad Peivandi
Publisher : Unknown
Page : 55 pages
File Size : 50,7 Mb
Release : 2017
Category : Electronic
ISBN : OCLC:1305158431

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Aggregate Risk, Bank Competition and Regulation in General Equilibrium by Ahmad Peivandi Pdf

We develop a general equilibrium model of competitive banks to examine the optimal design of bank regulation. There is a continuum of equilibria of the unregulated economy that feature varying relative sizes of the financial and real sectors. The unregulated economy underinvests (overinvests) in production when aggregate risk is below (above) a threshold. An efficient allocation is implemented by a range of regulatory policies comprising of capital and liquidity requirements, deposit insurance, and bailouts financed by taxes, but there is a unique regulated equilibrium for a given regulatory policy. Capital and liquidity requirements move in opposing directions; an optimal regulatory policy that features a stricter capital requirement has a looser liquidity requirement. When aggregate risk is low, the efficient allocation can be implemented via deposit insurance and taxation, but capital and liquidity requirements are necessary to ensure a unique regulated equilibrium. When aggregate risk is high, all four regulatory tools are essential components of an optimal regulatory policy. Capital and liquidity requirements that implement efficient regulatory policies do not vary with aggregate risk when it is below a threshold, but become tighter as aggregate risk increases above the threshold. Depositor subsidies via deposit insurance and tax shields are efficient when aggregate risk is low, but inefficient when it is high.

Author : S. Kerry Cooper,Donald R. Fraser
Publisher : Unknown
Page : 396 pages
File Size : 48,9 Mb
Release : 1986
Category : Banking law
ISBN : UOM:39076000794227

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Banking Deregulation and the New Competition in Financial Services by S. Kerry Cooper,Donald R. Fraser Pdf

Author : Christopher Gan
Publisher : MDPI
Page : 142 pages
File Size : 55,5 Mb
Release : 2021-09-03
Category : Technology & Engineering
ISBN : 9783036509402

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Commercial Banking by Christopher Gan Pdf

The existence of financial intermediaries is arguably an artifact of information asymmetry. Beyond simple financial transactions, financial intermediation provides a mechanism for information transmission, which can reduce the degree of information asymmetry and consequently increase market efficiency. During the process of information transmission, the bank is able to provide unique services in the production and exchange of information. Therefore, banks have comparative advantages in information production, transmission, and utilisation. This book provides an overview of commercial banking and includes empirical methods in banking such risk and bank performance, capital regulation, bank competition and foreign bank entry, bank regulation on bank performance, and capital adequacy and deposit insurance.

Author : Robert Cull
Publisher : Unknown
Page : 47 pages
File Size : 54,5 Mb
Release : 2003
Category : Electronic
ISBN : OCLC:1291246086

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Deposit Insurance and Financial Development by Robert Cull Pdf

This paper provides empirical evidence on the impact of deposit insurance on financial development and stability, broadly defined to include the level of banking activity and the stability of the banking sector. We use a unique dataset capturing a variety of deposit insurance features across countries, such as coverage, premium structure, etc. and synthesize available information by means of principal component indices. This paper is the first in this field of the literature to specifically address sample selection concerns by estimating a generalized Tobit model both via maximum likelihood and the Heckman 2-step method. The empirical construct is guided by recent theories of banking regulation that employ an agency framework. The basic moral hazard problem is the incentive for depository institutions to engage in excessively high-risk activities, relative to socially optimal outcomes, in order to increase the option value of their deposit insurance guarantee. The overall empirical evidence is consistent with the likelihood that generous government-funded deposit insurance might have a negative impact on financial development and growth in the long run, except in countries where the rule of law is well established and bank supervisors are granted sufficient discretion and independence from legal reprisals. Insurance premium requirements on member banks, even when risk-adjusted, are instead found to have little effect in restraining banks' risk-taking behavior.

Author : Sangkyun Park
Publisher : Routledge
Page : 218 pages
File Size : 44,7 Mb
Release : 2012-05-25
Category : Business & Economics
ISBN : 9780415528757

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Contagion of Bank Failures by Sangkyun Park Pdf

This volume examines the vulnerability of sound banks during financial crises helps understand the nature of financial crises and other banking issues traces the history of banking reform in the United States from 1933 until 1992 discusses deregulation in the US banking system

Author : Mr.Lev Ratnovski
Publisher : International Monetary Fund
Page : 20 pages
File Size : 52,9 Mb
Release : 2013-05-23
Category : Business & Economics
ISBN : 9781484354728

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Competition Policy for Modern Banks by Mr.Lev Ratnovski Pdf

Traditional bank competition policy seeks to balance efficiency with incentives to take risk. The main tools are rules guiding entry/exit and consolidation of banks. This paper seeks to refine this view in light of recent changes to financial services provision. Modern banking is largely market-based and contestable. Consequently, banks in advanced economies today have structurally low charter values and high incentives to take risk. In such an environment, traditional policies that seek to affect the degree of competition by focusing on market structure (i.e. concentration) may have limited effect. We argue that bank competition policy should be reoriented to deal with the too-big-to-fail (TBTF) problem. It should also focus on the permissible scope of activities rather than on market structure of banks. And following a crisis, competition policy should facilitate resolution by temporarily allowing higher concentration and government control of banks.

Author : Alexander F. Tieman,Wilko Bolt
Publisher : INTERNATIONAL MONETARY FUND
Page : 0 pages
File Size : 43,5 Mb
Release : 2004-01-01
Category : Business & Economics
ISBN : 1451842813

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Banking Competition, Risk, and Regulation by Alexander F. Tieman,Wilko Bolt Pdf

In a dynamic theoretical framework, commercial banks compete for customers by setting acceptance criteria for granting loans, taking regulatory requirements into account. By easing its acceptance criteria a bank faces a trade-off between attracting more demand for loans, thus making higher per period profits, and a deterioration of the quality of its loan portfolio, thus tolerating a higher risk of failure. Our main results state that more stringent capital adequacy requirements lead banks to set stricter acceptance criteria, and that increased competition in the banking industry leads to riskier bank behavior. In an extension of our basic model, we show that it may be beneficial for a bank to hold more equity than prescribed by the regulator, even though holding equity is more expensive than attracting deposits.

Author : United States. Department of the Treasury
Publisher : Unknown
Page : 738 pages
File Size : 48,7 Mb
Release : 1991
Category : Banking law
ISBN : STANFORD:36105043593446

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Modernizing the Financial System by United States. Department of the Treasury Pdf

Author : Marcel Canoy
Publisher : Unknown
Page : 174 pages
File Size : 47,7 Mb
Release : 2001
Category : Banks and banking
ISBN : IND:30000082631064

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Competition and Stability in Banking by Marcel Canoy Pdf

The banking sector in Europe is subject to continuous change. Banks are taking up new types of business in order to diversify their risk; new players such as insurance companies, credit card providers, and non-financial companies enter market segments which used to be the territory of commercial banks; and banks increasingly operate outside their home country or merge with cross-border partners. These developments, triggered by new information technology, disintermediation, deregulation, and the arrival of the Euro, change the landscape in the banking sector and raise a number of policy issues. What are the implications for competition among banks? How can financial stability best be maintained in this changing market? Is there a conflict between increasing competition among banks and stability?

Author : Anonim
Publisher : Unknown
Page : 680 pages
File Size : 41,6 Mb
Release : 1988
Category : Banks and banking
ISBN : NWU:35556019697291

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Proceedings of a Conference on Bank Structure and Competition by Anonim Pdf