Financial Crises and Bank Capital

2019 ◽  
pp. 139-155
Author(s):  
Robert Z. Aliber
Keyword(s):  
Financial Crises ◽  
Bank Capital

scholarly journals A Macroeconomic Model With Financially Constrained Producers and Intermediaries

Econometrica ◽  
2021 ◽  
Vol 89 (3) ◽  
pp. 1361-1418
Author(s):  
Vadim Elenev ◽  
Tim Landvoigt ◽  
Stijn Van Nieuwerburgh
Keyword(s):  
Financial Crises ◽  
Capital Requirements ◽  
Financial Fragility ◽  
Financial Intermediaries ◽  
Capital Regulation ◽  
Sharp Change ◽  
Bank Capital ◽  
Financial Firms ◽  
Bank Capital Regulation

How much capital should financial intermediaries hold? We propose a general equilibrium model with a financial sector that makes risky long‐term loans to firms, funded by deposits from savers. Government guarantees create a role for bank capital regulation. The model captures the sharp and persistent drop in macro‐economic aggregates and credit provision as well as the sharp change in credit spreads observed during financial crises. Policies requiring intermediaries to hold more capital reduce financial fragility, reduce the size of the financial and non‐financial sectors, and lower intermediary profits. They redistribute wealth from savers to the owners of banks and non‐financial firms. Pre‐crisis capital requirements are close to optimal. Counter‐cyclical capital requirements increase welfare.

Financial Crises and Bank Capital

2019 ◽  
Vol 47 (1) ◽  
pp. 1-11 ◽  
Author(s):  
Robert Z. Aliber
Keyword(s):  
Financial Crises ◽  
Bank Capital

scholarly journals Impact of Bank Capital and Monetary policy on Lending Behavior of USA Banking Sector Before and After Global Financial Crises

2021 ◽  
Vol 3 (1) ◽  
pp. 171-181
Author(s):  
Amna Kausar ◽  
Keyword(s):  
Monetary Policy ◽  
Real Estate ◽  
Capital Structure ◽  
Interest Rates ◽  
Financial Crises ◽  
Industrial Sector ◽  
Bank Capital ◽  
Before And After ◽  
Lending Behavior ◽  
The Impact

This study investigates the impact of bank capital, capital structure and monetary policy on the lending behavior of USA banks before and after global financial crises. For this purpose, sample data is collected from the annual reports of top ten banks of USA from 2001 to 2017. A panel unit root is applied to check the stationarity of variables. In order to explain the impact of bank capital, capital structure and monetary policy on lending behavior of USA banks, fixed effect and random effect model have been used. The sample data has been divided into two sets. First data set is taken from 2001 to 2008 before financial crises. Second data set is taken from 2009 to 2017 after financial crises and all above tests have been applied on these data sets. Furthermore, in order to measure the lending behavior three types of lending have been selected lending to consumers, lending to real estate and lending to commercial & industrial sector of USA banks. In order to get the better picture of lending behavior of USA banks before and after financial crises: paired sample T-test has been applied on the data of lending before and after financial crises. Results of paired sample T-test showed there is significant difference in lending to consumers, lending to commercial & industrial sector and lending to real estate before and after financial crises of USA banks because of the implementation of Basel III. So, we accept the alternative hypothesis for our second research question. Findings suggested that impact of bank capital, capital structure and monetary policy has significant impact on the lending behavior before and after the global financial crises with the positive change of sixteen percent in R-squared value. So, we accept the alternative hypothesis for our first research question. The results of coefficients shows that before financial crises (2001 to 2008) discounted interest rates have more significant impact on the lending made to consumers but after the global financial crises (2009 to 2017) discounted interest rates, capital structure and tier 1 capital ratio have more significant impact on the loan made to consumers. The results of coefficients shows that before the financial crises (2001 to 2008) discounted interest rates have more significant impact on the loan made to commercial and industrial sector but after the global financial crises (2009 to 2017) discounted interest rates, capital structure and tier 1 capital ratio have more significant impact on the loan made to commercial and industrial sector. The results of coefficients shows that before financial crises (2001 to 2008) discounted interest rates have more significant impact on the loan made to real estate but after the global financial crises (2009 to 2017) discounted interest rates and capital structure have more significant impact on the loan made to real estate. Findings of our study are aligned with Swamy (2015), who investigated the impact of bank capital on lending spreads and found that increase in capital ratio of banks would also increase their lending spreads. Our results are also matched with the findings of (Kosak et al., 2015), those concluded that capital structure significantly affect the loan growth of banks. Our results are also aligned with Chami & Cosimano (2010), they found that change in monetary policy due to Basel Accord would lead to a change in bank capital and bank loans.

Financial Risk Capacity

2021 ◽  
Vol 13 (4) ◽  
pp. 142-181
Author(s):  
Saki Bigio ◽  
Adrien d’Avernas
Keyword(s):  
Adverse Selection ◽  
Economic Activity ◽  
Financial Crises ◽  
Financial Risk ◽  
Bank Capital ◽  
Information Asymmetries ◽  
Coordination Failure ◽  
Slow Recovery ◽  
Profit Margins

Financial crises are particularly severe and lengthy when banks fail to recapitalize after bearing large losses. We present a model that explains the slow recovery of bank capital and economic activity. Banks provide intermediation in markets with information asymmetries. Large equity losses force banks to tighten intermediation, which exacerbates adverse selection. Adverse selection lowers bank profit margins, which slows both the internal growth of equity and equity injections. This mechanism generates financial crises characterized by persistent low growth. The lack of equity injections during crises is a coordination failure that is solved when the decision to recapitalize banks is centralized. (JEL D82, E32, E44, G01, G21, G32, L25)

scholarly journals Bank Capital Redux: Solvency, Liquidity, and Crisis

2020 ◽  
Author(s):  
Òscar Jordà ◽  
Björn Richter ◽  
Moritz Schularick ◽  
Alan M Taylor
Keyword(s):  
Financial Crisis ◽  
Capital Structure ◽  
Financial Crises ◽  
Lower Risk ◽  
Comprehensive Analysis ◽  
Financial Instability ◽  
Bank Capital ◽  
Balance Sheets ◽  
Long Run ◽  
The Relationship

Abstract What is the relationship between bank capital, the risk of a financial crisis, and its severity? This article introduces the first comprehensive analysis of the long-run evolution of the capital structure of modern banking using newly constructed data for banks’ balance sheets in 17 countries since 1870. In addition to establishing stylized facts on the changing funding mix of banks, we study the nexus between capital structure and financial instability. We find no association between higher capital and lower risk of banking crisis. However, economies with better capitalized banking systems recover faster from financial crises as credit begins to flow back more readily.

Antitrust Law Amidst Financial Crises

2009 ◽  
Author(s):  
Ioannis Kokkoris ◽  
Rodrigo Olivares-Caminal
Keyword(s):  
Financial Crises ◽  
Antitrust Law

Basel Capital Adequacy Ratio Standard in The Light of Islamic Law Perspective

2016 ◽  
Vol 1 ◽  
pp. 308-317
Author(s):  
Adi Rahmanur Ibnu
Keyword(s):  
Financial Crises ◽  
Global Economy ◽  
Banking Sector ◽  
Islamic Law ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Minimum Capital ◽  
Capital Adequacy Ratio ◽  
Global Banking ◽  
Banking Development

Bank is one of the most important pillars of economy activities. However, banking sector has a real potential crisis threat. Alongside with the steady current global banking development, financial crises that have happened clearly affected global economy. Based on that situation, BIS (Bank for International Settlement) – an international financial standard setting organization, realizes the urgency to establishan international financial standard and supervision to anticipate future potential financial crises. This research aims to identify how Capital Adequacy Ratio Standard in Basel Capital Accord (II) based on Islamic law perspective. The research is conducted by analyzing Basel Capital Accord published by BIS. The research uses library research method to find out the aimed result. The focus is on the 1st pillar of Basel II publication that is Minimum Capital Requirements (CAR) policy. CAR, as an Islamic economics policy, will be analyzed using falāḥ approach. Falāḥ is an Islamic economics objective that consists of happiness, success, accomplishment or good luck concept. The earthly dimension of falāḥ has some parameters that can be used to analyze Islamic economics policy. Additionally, the Islamic fiqh maxim takes part in analyzing the policy. The maṣlaḥat concept in fiqh maxim approach shares aim with falāḥ concept in the sense that all of sharia law aims for success, happiness, eternal survival etc. The maṣlaḥat can be accomplished by extinguishing mafsadat or seizing maṣlaḥat. The maṣlaḥat aspect is essential to determine the compatibility Basel Capital Accord with jurisprudential maxim i.e harm must be dispelled (al-dharāru yuzāl). The conclusion results are, 1) Basel Capital Accord focuses on macro-prudential aspect in order to anticipate potential financial crises, 2) beneficial/interest (maṣlaḥat) aspects of the hereafter, cooperation principle, justice, fairness and the prohibition of exploitation are not the core value of Basel Capital Accord frame work, thus 3) the achievement of maslahat as intended by sharia i.e. jurisprudential maxim are not convincing. Therefore, 4) Basel Capital Accord as a regulation basis is not in line with jurisprudential maxim i.e harm must be dispelled (al-dharāru yuzāl).

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