[PDF] A Theory Of Bank Capital eBook

Author : Douglas W. Diamond
Publisher :
Page : 58 pages
File Size : 16,40 MB
Release : 1999
Category : Bank capital
ISBN :

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Banks can create liquidity because their deposits are fragile and prone to runs. Increased uncertainty can make deposits excessively fragile in which case there is a role for outside bank capital. Greater bank capital reduces liquidity creation by the bank but enables the bank to survive more often and avoid distress. A more subtle effect is that banks with different amounts of capital extract different amounts of repayment from borrowers. The optimal bank capital structure trades off the effects of bank capital on liquidity creation, the expected costs of bank distress, and the ease of forcing borrower repayment. The model can account for phenomena such as the decline in average bank capital in the United States over the last two centuries. It points to overlooked side-effects of policies such as regulatory capital requirements and deposit insurance

Author : Allen N. Berger
Publisher : Academic Press
Page : 296 pages
File Size : 45,88 MB
Release : 2015-11-24
Category : Business & Economics
ISBN : 0128005319

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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

Author : Stuart I. Greenbaum
Publisher : Academic Press
Page : 490 pages
File Size : 45,81 MB
Release : 2019-05-14
Category : Business & Economics
ISBN : 0124059341

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Contemporary Financial Intermediation, 4th Edition by Greenbaum, Thakor, and Boot continues to offer a distinctive approach to the study of financial markets and institutions by presenting an integrated portrait that puts information and economic reasoning at the core. Instead of primarily naming and describing markets, regulations, and institutions as is common, Contemporary Financial Intermediation explores the subtlety, plasticity and fragility of financial institutions and credit markets. In this new edition every chapter has been updated and pedagogical supplements have been enhanced. For the financial sector, the best preprofessional training explains the reasons why markets, institutions, and regulators evolve they do, why we suffer recurring financial crises occur and how we typically react to them. Our textbook demands more in terms of quantitative skills and analysis, but its ability to teach about the forces shaping the financial world is unmatched. Updates and expands a legacy title in a valuable field Holds a prominent position in a growing portfolio of finance textbooks Teaches tactics on how to recognize and forecast fluctuations in financial markets

Author : Jihad Dagher
Publisher : International Monetary Fund
Page : 38 pages
File Size : 12,32 MB
Release : 2016-03-03
Category : Business & Economics
ISBN : 1513539337

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The appropriate level of bank capital and, more generally, a bank’s capacity to absorb losses, has been at the core of the post-crisis policy debate. This paper contributes to the debate by focusing on how much capital would have been needed to avoid imposing losses on bank creditors or resorting to public recapitalizations of banks in past banking crises. The paper also looks at the welfare costs of tighter capital regulation by reviewing the evidence on its potential impact on bank credit and lending rates. Its findings broadly support the range of loss absorbency suggested by the Financial Stability Board (FSB) and the Basel Committee for systemically important banks.

Author : Mr.Fabian Valencia
Publisher : International Monetary Fund
Page : 24 pages
File Size : 38,77 MB
Release : 2010-09-01
Category : Business & Economics
ISBN : 1455205397

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An important role for bank capital is that of a buffer against unexpected losses. As uncertainty about these losses increases, the theory predicts an increase in the optimal level of bank capital. This paper investigates this implication empirically with U.S. Commercial Banks data and finds statistically significant and robust evidence supporting it. A counterfactual experiment suggests that a decline in uncertainty to the lowest level measured in the sample generates an average reduction in bank capital ratios of slightly over 1 percentage point. However, I also find suggestive evidence that the intensity of this precautionary motive is stronger during recessions. From a policy perspective, these results suggest that the effectiveness of countercyclical capital requirements during bad times will be undermined by banks desire to hold more capital in response to increased uncertainty.

Author : William R. Cline
Publisher : Columbia University Press
Page : 357 pages
File Size : 10,39 MB
Release : 2017-05-23
Category : Business & Economics
ISBN : 0881327220

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The global financial crisis produced an important agreement among regulators in 2010–11 to raise capital requirements for banks to protect them from insolvency in the event of another emergency. In this book, William R. Cline, a leading expert on the global financial system, employs sophisticated economic models to analyze whether these reforms, embodied in the Third Basel Accord, have gone far enough. He calculates how much higher bank capital reduces the risk of banking crises, providing a benefit to the economy. On the cost side, he estimates how much higher capital requirements raise the lending rate facing firms, reducing investment in plant and equipment and thus reducing output in the economy. Applying a plausible range of parameters, Cline arrives at estimates for the optimal level of equity capital relative to total bank assets. This study also challenges the recent "too much finance" literature, which holds that in advanced countries banking sectors are already too large and are curbing growth.

Author : Nonna Y. Sorokina
Publisher :
Page : 191 pages
File Size : 49,25 MB
Release : 2014
Category : Bank capital
ISBN :

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Studies of capital structure constitute a significant part of the corporate finance literature. However, banks are routinely excluded from such studies, under the assumption that regulatory capital requirements are the most important determinant of bank leverage. Moreover, recent studies develop bank-specific capital structure theories that have not been tested empirically. I fill this void by empirically testing the determinants of bank capital structure in a large sample of the publicly traded U.S. commercial banks and bank holding companies during the period of 1973-2012. I find that the determinants of bank capital structure are similar to those identified in prior literature for non-financial firms. However, the determinants vary in different regulatory capital requirement regimes and in different macro-economic environments. Interestingly, I find evidence of moral hazard in the capital structure of systematically important financial institutions in that their capital structure is independent of their risk and collateral. I also find support for bank-specific theories of capital structure (Allen et al, 2009; Allen and Carletti, 2013; and, DeAngelo and Stulz, 2013). Bank leverage is negatively related to the level of competition in the industry and banks' loan portfolios diversification. Leverage is positively related to market liquidity. In addition, I test the determinants of excess bank leverage and short-term borrowing by banks, and find that they are well explained by the standard and bank-specific factors. Finally, I test the relation between bank capital structure and capital structure of firms in the broader economy. Consistent with the theoretical propositions of Diamond and Rajan (2000) and Shleifer and Vishny (2010), I find a negative relation between the leverage of firms and aggregate level of bank equity capital.