Why Do Bank Dependent Firms Bear Interest Rate Risk PDF Download
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| Author | : Divya Kirti |
| Publisher | : International Monetary Fund |
| Total Pages | : 56 |
| Release | : 2017-01-18 |
| Genre | : Business & Economics |
| ISBN | : 1475568975 |
Download Why Do Bank-Dependent Firms Bear Interest-Rate Risk? Book in PDF, ePub and Kindle
I document that floating-rate loans from banks (particularly important for bank-dependent firms) drive most variation in firms' exposure to interest rates. I argue that banks lend to firms at floating rates because they themselves have floating-rate liabilities, supporting this with three key findings. Banks with more floating-rate liabilities, first, make more floating-rate loans, second, hold more floating-rate securities, and third, quote lower prices for floating-rate loans. My results establish an important link between intermediaries' funding structure and the types of contracts used by non-financial firms. They also highlight a role for banks in the balance-sheet channel of monetary policy.
| Author | : |
| Publisher | : Lulu.com |
| Total Pages | : 294 |
| Release | : 2004 |
| Genre | : Bank capital |
| ISBN | : 9291316695 |
Download International Convergence of Capital Measurement and Capital Standards Book in PDF, ePub and Kindle
| Author | : Mr.Giovanni Dell'Ariccia |
| Publisher | : International Monetary Fund |
| Total Pages | : 41 |
| Release | : 2013-06-06 |
| Genre | : Business & Economics |
| ISBN | : 1484381130 |
Download Bank Leverage and Monetary Policy's Risk-Taking Channel Book in PDF, ePub and Kindle
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 | : Filippo Ippolito |
| Publisher | : |
| Total Pages | : 43 |
| Release | : 2013 |
| Genre | : Bank loans |
| ISBN | : |
Download Is Bank Debt Special for the Transmission of Monetary Policy? Book in PDF, ePub and Kindle
We combine existing balance sheet and stock market data with two new datasets to study whether, how much, and why bank lending to firms matters for the transmission of monetary policy. The first new dataset enables us to quantify the bank dependence of firms precisely, as the ratio of bank debt to total assets. We show that a two standard deviation increase in the bank dependence of a firm makes its stock price about 25% more responsive to monetary policy shocks. We explore the channels through which this effect occurs, and find that the stock prices of bank-dependent firms that borrow from financially weaker banks display a stronger sensitivity to monetary policy shocks. This finding is consistent with the bank lending channel, a theory according to which the strength of bank balance sheets matters for monetary policy transmission. We construct a new database of hedging activities and show that the stock prices of bank-dependent firms that hedge against interest rate risk display a lower sensitivity to monetary policy shocks. This finding is consistent with an interest rate pass-through channel that operates via the direct transmission of policy rates to lending rates associated with the widespread use of floating-rates in bank loans and credit line agreements.
| Author | : Mark Carey |
| Publisher | : University of Chicago Press |
| Total Pages | : 669 |
| Release | : 2007-11-01 |
| Genre | : Business & Economics |
| ISBN | : 0226092984 |
Download The Risks of Financial Institutions Book in PDF, ePub and Kindle
Until about twenty years ago, the consensus view on the cause of financial-system distress was fairly simple: a run on one bank could easily turn to a panic involving runs on all banks, destroying some and disrupting the financial system. Since then, however, a series of events—such as emerging-market debt crises, bond-market meltdowns, and the Long-Term Capital Management episode—has forced a rethinking of the risks facing financial institutions and the tools available to measure and manage these risks. The Risks of Financial Institutions examines the various risks affecting financial institutions and explores a variety of methods to help institutions and regulators more accurately measure and forecast risk. The contributors--from academic institutions, regulatory organizations, and banking--bring a wide range of perspectives and experience to the issue. The result is a volume that points a way forward to greater financial stability and better risk management of financial institutions.
| Author | : |
| Publisher | : |
| Total Pages | : 60 |
| Release | : 2016 |
| Genre | : |
| ISBN | : 9789295081406 |
Download Banks' Exposure to Interest Rate Risk and the Transmission of Monetary Policy Book in PDF, ePub and Kindle
We show that the cash-flow exposure of banks to interest rate risk, or income gap, affects the transmission of monetary policy shocks to bank lending and real activity. We first use a large panel of U.S. banks to show that the sensitivity of bank profits to interest rates increases significantly with measured income gap, even when banks use interest rate derivatives. We then document that, in the cross-section of banks, income gap predicts the sensitivity of bank lending to interest rates. The effect of income gap is larger or similar in magnitudes to that of previously identified factors, such as leverage, bank size or even asset liquidity. To alleviate the concern that this result is driven by the endogenous matching of banks and firms, we use loan-level data and compare the supply of credit to the same firm by banks with different income gap. This analysis allows us to trace the impact of banks' income gap on firm borrowing capacity, investment and employment, which we find to be significant.
| Author | : Lawrence D. Cluff |
| Publisher | : DIANE Publishing |
| Total Pages | : 187 |
| Release | : 2000 |
| Genre | : |
| ISBN | : 0788186701 |
Download Risk-Based Capital Book in PDF, ePub and Kindle
| Author | : Ms.TengTeng Xu |
| Publisher | : International Monetary Fund |
| Total Pages | : 54 |
| Release | : 2019-01-11 |
| Genre | : Business & Economics |
| ISBN | : 1484393805 |
Download Bank Profitability and Financial Stability Book in PDF, ePub and Kindle
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.
| Author | : Andreas Jobst |
| Publisher | : International Monetary Fund |
| Total Pages | : 70 |
| Release | : 2012-08-01 |
| Genre | : Business & Economics |
| ISBN | : 1475505590 |
Download Measuring Systemic Risk-Adjusted Liquidity (SRL) Book in PDF, ePub and Kindle
Little progress has been made so far in addressing—in a comprehensive way—the externalities caused by impact of the interconnectedness within institutions and markets on funding and market liquidity risk within financial systems. The Systemic Risk-adjusted Liquidity (SRL) model combines option pricing with market information and balance sheet data to generate a probabilistic measure of the frequency and severity of multiple entities experiencing a joint liquidity event. It links a firm’s maturity mismatch between assets and liabilities impacting the stability of its funding with those characteristics of other firms, subject to individual changes in risk profiles and common changes in market conditions. This approach can then be used (i) to quantify an individual institution’s time-varying contribution to system-wide liquidity shortfalls and (ii) to price liquidity risk within a macroprudential framework that, if used to motivate a capital charge or insurance premia, provides incentives for liquidity managers to internalize the systemic risk of their decisions. The model can also accommodate a stress testing approach for institution-specific and/or general funding shocks that generate estimates of systemic liquidity risk (and associated charges) under adverse scenarios.
| Author | : Guillaume Vuillemey |
| Publisher | : |
| Total Pages | : 50 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
Download Interest Rate Risk in Banking Book in PDF, ePub and Kindle
This paper surveys the theoretical and empirical literature on interest rate risk in banking. Theoretically, it considers the origins of interest rate risk and its allocation. Interest rate risk is non-diversifiable and does not originate from the banking sector, but from the potential time inconsistency between future aggregate demand and supply of consumption goods. Empirically, we discuss measurement and stylized facts. Banks bear part of total interest rate risk, but also engage in risk management and risk-sharing with non-financial agents. They transfer large amounts of risk to households and firms, by writing interest rate-contingent loan and deposit contracts. We consider the determinants of the aggregate exposure to interest rate risk and the pricing of marginal units of risk. Finally, interest rate policy, both conventional and non-conventional, is discussed.
