[PDF] Deposit Insurance Bank Capital Structures And The Demand For Liquidity eBook

Author : José Gabilondo
Publisher : Edward Elgar Publishing
Page : 170 pages
File Size : 16,25 MB
Release : 2016-09-28
Category : Business & Economics
ISBN : 1783479175

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Focusing primarily on the banking system in the United States, this book offers an innovative framework that integrates a depository bank’s liquidity and its capital adequacy into a unified notion of funding that helps to explain how the 2007–2008 crisis unfolded, why central banks succeeded in resolving the crisis, and how the conceptual legacy of the crisis and its resolution led to lasting changes in bank funding regulation, including new objective requirements for bank liquidity. To provide a comparative context, the book also examines the funding models of non-bank intermediaries like dealer banks and insurers.

Author : Douglas W. Diamond
Publisher :
Page : 58 pages
File Size : 26,40 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 : Constantin Charles
Publisher :
Page : pages
File Size : 10,14 MB
Release : 2016
Category :
ISBN :

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In 2008, deposit insurance was increased from $100,000 to $250,000 for all FDIC-insured US banks. Since the increase affected banks differently, a difference-in-difference estimation is employed to identify the effect of deposit insurance on bank capital structure. The results indicate that affected banks reduce their capital ratios significantly. To offset this, affected banks expand their position in other borrowed funds. The higher leverage increases bank risk, but despite this, affected banks pay slightly lower interest rates on domestic deposits. The results further show that banks anticipate the increase in insurance before it is actually signed into Public Law.

Author : Mr.Philippe D Karam
Publisher : International Monetary Fund
Page : 38 pages
File Size : 21,92 MB
Release : 2014-11-19
Category : Business & Economics
ISBN : 1498348394

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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.

Author : Allen N. Berger
Publisher : Academic Press
Page : 296 pages
File Size : 28,22 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 : François Marini
Publisher :
Page : pages
File Size : 25,44 MB
Release : 2010
Category :
ISBN :

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This paper constructs a theoretical model that integrates the two objectives of capital adequacy requirements and deposit insurance, namely avoiding banking crises and protecting small depositors. The paper also addresses the related question: why do banks fund loans with both equity and demand deposits? The model determines the optimal bank capital structure. In comparison with a Diamond-Dybvig bank which funds loans with demand deposits only, a capitalized financial intermediary provides liquidity to its depositors at a lower cost, and channels more funds to the most efficient investments. The model identifies the sources of market failure that may justify banking regulation.

Author : Xiaozhong Liang
Publisher :
Page : 109 pages
File Size : 23,13 MB
Release : 2006
Category :
ISBN : 9781109878455

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The second chapter examines the Value at Risk (VaR) based risk exposure for banks and the corresponding costs for regulators. A closed-form solution of VaR is provided based on the valuation results in the first chapter. It is found that banks can offset the risk associated with volatile assets by choosing a suitable proportion of debt. In addition, banks may shift risk to deposit insurance to decrease their own risk exposure under less stringent capital requirements. Being a risk lover does not stop banks from shifting risk to deposit insurance. Regulators can lower down banks risk exposure by imposing more stringent capital requirements.