Prudential filters, portfolio composition at fair value and capital ratios in European banks

2018 ◽  
Vol 39 ◽  
pp. 187-208 ◽  
Author(s):  
Isabel Argimón ◽  
Michel Dietsch ◽  
Ángel Estrada
Keyword(s):  
Fair Value ◽  
Portfolio Composition ◽  
Capital Ratios ◽  
European Banks

scholarly journals Are Banks’ Below Par Own Debt Repurchases a Cause for Prudential Concern?

2018 ◽  
Vol 35 (3) ◽  
pp. 501-529
Author(s):  
Martien Lubberink ◽  
Annelies Renders
Keyword(s):  
Fair Value ◽  
Alternative Methods ◽  
Basel Iii ◽  
Regulatory Capital ◽  
Liability Management ◽  
Tier 1 ◽  
Capital Ratios ◽  
European Banks ◽  
Using Data ◽  
Tier 1 Capital

In the lead-up to the implementation of Basel III, European banks repurchased debt securities that traded below par. Banks engaged in these Liability Management Exercises (LMEs) to realize a fair value gain that prudential rules exclude from regulatory capital calculations. The LMEs enabled banks to augment Core Tier 1 capital, given that alternative methods to increase capital ratios were not feasible in practice. Using data of 720 European LMEs conducted between April 2009 and December 2013, we show that poorly capitalized banks repurchased securities and lost about €9.1bn in premiums to compensate their holders. Banks also repurchased the most loss-absorbing securities, for which they paid the highest premiums. These premiums increase with leverage and in times of stress. Hence debt repurchases are a cause for prudential concern.

scholarly journals What Influences Bank Stock Prices in Times of Crisis? An International Survey

2017 ◽  
Vol 9 (6) ◽  
pp. 1
Author(s):  
Elisabetta D’Apolito ◽  
Vincenzo Pacelli
Keyword(s):  
Stock Prices ◽  
Weighted Least Squares ◽  
Balance Sheet ◽  
Multiple Regression Model ◽  
Policy Implications ◽  
Capital Ratios ◽  
Bank Stock ◽  
Market Turbulence ◽  
European Banks ◽  
Asset Quality

The paper assesses whether the European banks’ stock prices are predicted or affected by changes in balance-sheet indicators and macroeconomic variables. The sample covers the time period from January 2007 to December 2013. Estimates use the multiple regression model based on the weighted least squares (WLS) estimator. Results show that the stock prices of European banks are positively related to asset quality, liquidity and banks’ capital ratios. However, in the same period, inflation rate and public debt exert a negative and significant effect on bank stock prices. Our findings are more significant in times of high market turbulence as have been experienced for almost a decade. These have provoked the investors’ perceptions to be more unstable and volatile. The availability of information remains limited and poor. Therefore, it is necessary to emphasize that identifying the causal determinants of stock prices in the markets could generate important practical and policy implications because of the role played by banks in financing the economic system, and will also attract investors (Note 1).

Do loans fair value affect market value? Evidence from European banks

2013 ◽  
Vol 21 (2) ◽  
pp. 108-120
Author(s):  
Danilo Drago ◽  
Maria Mazzuca ◽  
Renata Trinca Colonel
Keyword(s):  
Market Value ◽  
Fair Value ◽  
European Banks

Regulatory Capital Management: Fair Value Measurement and Regulatory Capital Ratios

2019 ◽  
Vol 52 (3) ◽  
pp. 375-421
Author(s):  
Felix Krauß
Keyword(s):  
Conflicts Of Interest ◽  
Fair Value ◽  
Capital Requirements ◽  
Jel Classification ◽  
Regulatory Capital ◽  
Tax Rate ◽  
Comprehensive Income ◽  
Capital Ratios ◽  
Value Changes ◽  
The Impact

Abstract The calculation of the regulatory capital ratios according to the Capital Requirements Regulation (CRR) is based on the IFRS consolidated financial statements. Therefore, banks are able to influence their regulatory capital ratios through discretionary powers when measuring with fair values according to IFRS 13. This paper analyzes the effects that discretionary fair value changes have on the regulatory capital ratios. Furthermore, the impact of the prudent valuation according to article 105 CRR on the regulatory capital ratios is examined. While the results depend on a multitude of factors and vary from case to case, there are situations in which the same fair value change of an identical financial asset can have opposing effects on certain regulatory capital ratios depending on bank specific factors like its regulatory capitalization or its tax rate. As a result, decreasing fair values can in some circumstances lead to higher regulatory capital ratios and thus, indicate a greater solvency. In order to identify possible conflicts of interest, the effects of fair value changes on the comprehensive income are also included in the analysis because the comprehensive income serves as an important target figure for banks in addition to the regulatory capital ratios. JEL Classification: F380, G380, M410, M480

The Determinants of Bank Capital for East Asian Countries

2019 ◽  
Vol 20 (6) ◽  
pp. 1311-1323
Author(s):  
Rubi Ahmad ◽  
Mohamed Albaity
Keyword(s):  
East Asian ◽  
Capital Requirements ◽  
Capital Adequacy ◽  
Bank Capital ◽  
Asian Countries ◽  
Management Quality ◽  
Risk Appetite ◽  
Capital Ratios ◽  
European Banks ◽  
Capital Regulations

This study identifies the determinants of bank capital ratios in eight East Asian countries using unbalanced panel data of 278 banks from 2004 to 2014. The results indicate that bank capital decisions are significantly driven by management quality, liquidity, leverage and bank size, as well as bank regulations, indicating that the determinants of bank capital are consistent with past findings for US and European banks. The capital adequacy ratios in East Asia are not linked with banks’ risk appetite. Given that our results show that bank managers generally react negatively to capital requirements, capital regulations should be followed with more rigorous supervisory oversight, to reduce the adverse effects of high capital requirements on bank safety.

Fair-Value

Controlling ◽  
2003 ◽  
Vol 15 (3-4) ◽  
pp. 209-210
Author(s):  
Reinhard Heyd
Keyword(s):  
Fair Value
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