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| Author | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 36 |
| Release | : 2012-02-01 |
| Genre | : Business & Economics |
| ISBN | : 1463936478 |
Download Short-Term Wholesale Funding and Systemic Risk Book in PDF, ePub and Kindle
In this paper we identify some of the main factors behind systemic risk in a set of international large-scale complex banks using the novel CoVaR approach. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find no evidence that a larger size increases systemic risk within the class of large global banks. We also show that the sensitivity of system-wide risk to an individual bank is asymmetric across episodes of positive and negative asset returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee's proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
| 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 | : Mr.Francisco F. Vazquez |
| Publisher | : International Monetary Fund |
| Total Pages | : 33 |
| Release | : 2012-01-01 |
| Genre | : Business & Economics |
| ISBN | : 1463933142 |
Download Bank Funding Structures and Risk Book in PDF, ePub and Kindle
This paper analyzes the evolution of bank funding structures in the run up to the global financial crisis and studies the implications for financial stability, exploiting a bank-level dataset that covers about 11,000 banks in the U.S. and Europe during 2001?09. The results show that banks with weaker structural liquidity and higher leverage in the pre-crisis period were more likely to fail afterward. The likelihood of bank failure also increases with bank risk-taking. In the cross-section, the smaller domestically-oriented banks were relatively more vulnerable to liquidity risk, while the large cross-border banks were more susceptible to solvency risk due to excessive leverage. The results support the proposed Basel III regulations on structural liquidity and leverage, but suggest that emphasis should be placed on the latter, particularly for the systemically-important institutions. Macroeconomic and monetary conditions are also shown to be related with the likelihood of bank failure, providing a case for the introduction of a macro-prudential approach to banking regulation.
| Author | : Mr.Luc Laeven |
| Publisher | : International Monetary Fund |
| Total Pages | : 34 |
| Release | : 2014-05-08 |
| Genre | : Business & Economics |
| ISBN | : 1484363728 |
Download Bank Size and Systemic Risk Book in PDF, ePub and Kindle
The proposed SDN documents the evolution of bank size and activities over the past 20 years. It discusses whether this evolution can be explained by economies of scale or “too big to fail” subsidies. The paper then presents evidence on the extent to which bank size and market-based activities contribute to systemic risk. The paper concludes with policy messages in the area of capital regulation and activity restrictions to reduce the systemic risk posed by large banks. The analysis of the paper complements earlier Fund work, including SDN 13/04 and the recent GFSR chapter on “too big to fail” subsidies, and its policy message is in line with this earlier work.
| Author | : Mr.Lev Ratnovski |
| Publisher | : International Monetary Fund |
| Total Pages | : 30 |
| Release | : 2010-07-01 |
| Genre | : Business & Economics |
| ISBN | : 1455201812 |
Download The Dark Side of Bank Wholesale Funding Book in PDF, ePub and Kindle
Banks increasingly use short-term wholesale funds to supplement traditional retail deposits. Existing literature mainly points to the "bright side" of wholesale funding: sophisticated financiers can monitor banks, disciplining bad but refinancing good ones. This paper models a "dark side" of wholesale funding. In an environment with a costless but noisy public signal on bank project quality, short-term wholesale financiers have lower incentives to conduct costly monitoring, and instead may withdraw based on negative public signals, triggering inefficient liquidations. Comparative statics suggest that such distortions of incentives are smaller when public signals are less relevant and project liquidation costs are higher, e.g., when banks hold mostly relationship-based small business loans.
| Author | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 45 |
| Release | : 2014-06-11 |
| Genre | : Business & Economics |
| ISBN | : 1498342620 |
Download Staff Guidance Note on Macroprudential Policy Book in PDF, ePub and Kindle
This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries
| 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 | : Jeanne Gobat |
| Publisher | : International Monetary Fund |
| Total Pages | : 43 |
| Release | : 2014-06-12 |
| Genre | : Business & Economics |
| ISBN | : 1498358586 |
Download The Net Stable Funding Ratio Book in PDF, ePub and Kindle
As part of Basel III reforms, the NSFR is a new prudential liquidity rule aimed at limiting excess maturity transformation risk in the banking sector and promoting funding stability. The revised package has been issued for public consultation with a plan of making the rule binding in 2018. This paper complements earlier quantitative impact studies by discussing the potential impact of introducing the NSFR based on empirical analysis of end-2012 financial data for over 2000 banks covering 128 countries. The calculations show that a sizeable percentage of the banks in most countries would meet the minimum NSFR prudential requirement at end-2012, and, further, that larger banks tend to be more vulnerable to the introduction of the NSFR. Additionally, by comparing the NSFR to other structural funding mismatch indicators, we find that the NSFR is a relatively consistent regulatory measure for capturing banks’ funding risk. Finally, the paper discusses key policy issues for consideration in implementing the NSFR.
| Author | : International Monetary Fund |
| Publisher | : International Monetary Fund |
| Total Pages | : 36 |
| Release | : 2012-02-01 |
| Genre | : Business & Economics |
| ISBN | : 1463943679 |
Download Short-Term Wholesale Funding and Systemic Risk Book in PDF, ePub and Kindle
In this paper we identify some of the main factors behind systemic risk in a set of international large-scale complex banks using the novel CoVaR approach. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find no evidence that a larger size increases systemic risk within the class of large global banks. We also show that the sensitivity of system-wide risk to an individual bank is asymmetric across episodes of positive and negative asset returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee's proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
| Author | : José Vinãls |
| Publisher | : International Monetary Fund |
| Total Pages | : 27 |
| Release | : 2013-05-14 |
| Genre | : Business & Economics |
| ISBN | : 1484340949 |
Download Creating a Safer Financial System Book in PDF, ePub and Kindle
The U.S., the U.K., and more recently, the E.U., have proposed policy measures directly targeting complexity and business structures of banks. Unlike other, price-based reforms (e.g., Basel 3 and G-SIFI surcharges), these proposals have been developed unilaterally with material differences in scope, design and implementation schedules. This may exacerbate cross-border regulatory arbitrage and put a further burden on consolidated supervision and cross-border resolution. This paper provides an analysis of the potential implications of implementing different structural policy measures. It proposes a pragmatic and coordinated approach to development of these policies to reduce risk of regulatory arbitrage and minimize unintended consequences. In doing so, it also aims to identify a set of common policy measures that countries could adopt to re-scope bank business models and corporate structures.
