scholarly journals Inconsistent Regulators: Evidence from Banking *

2014 ◽  
Vol 129 (2) ◽  
pp. 889-938 ◽  
Author(s):  
Sumit Agarwal ◽  
David Lucca ◽  
Amit Seru ◽  
Francesco Trebbi
Keyword(s):  
Institutional Design ◽  
Regulatory Capital ◽  
Return On Assets ◽  
Time Intervals ◽  
Revolving Doors ◽  
Self Interest ◽  
Capital Ratios ◽  
State Regulator ◽  
Supervisory Ratings ◽  
Asset Quality

Abstract We find that regulators can implement identical rules inconsistently due to differences in their institutional design and incentives, and this behavior may adversely impact the effectiveness with which regulation is implemented. We study supervisory decisions of U.S. banking regulators and exploit a legally determined rotation policy that assigns federal and state supervisors to the same bank at exogenously set time intervals. Comparing federal and state regulator supervisory ratings within the same bank, we find that federal regulators are systematically tougher, downgrading supervisory ratings almost twice as frequently as do state supervisors. State regulators counteract these downgrades to some degree by upgrading more frequently. Under federal regulators, banks report worse asset quality, higher regulatory capital ratios, and lower return on assets. Leniency of state regulators relative to their federal counterparts is related to costly outcomes, such as higher failure rates and lower repayment rates of government assistance funds. The discrepancy in regulator behavior is related to different weights given by regulators to local economic conditions and, to some extent, differences in regulatory resources. We find no support for regulator self-interest, which includes “revolving doors” as a reason for leniency of state regulators.

Credit Default Swaps and Bank Regulatory Capital*

2020 ◽  
Author(s):  
Chenyu Shan ◽  
Dragon Yongjun Tang ◽  
Hong Yan ◽  
Xing (Alex) Zhou
Keyword(s):  
Credit Risk ◽  
Credit Default Swaps ◽  
Unintended Consequences ◽  
Government Support ◽  
Regulatory Capital ◽  
Credit Default ◽  
Capital Ratios

Abstract While credit default swaps (CDSs) can be used to hedge credit risk exposures or to speculate, we examine another use of them: banks buy CDS referencing their borrowers to obtain regulatory capital relief. Such capital relief activities have unintended consequences, as banks extend riskier loans when they buy CDS to boost capital ratios. While capital-induced CDS-user banks achieve higher profitability during normal times, they perform worse and request more government support in crisis periods than other banks that use CDS for trading or speculation. Our findings suggest that banks’ CDS trading for capital relief purposes may make these banks riskier.

ANALISIS TINGKAT KESEHATAN KOPERASI PADA KOPERASI SYARIAH BAITUL QIRADH SURYA MADINAH BANDA ACEH TAHUN BUKU 2009-2010

2014 ◽  
Vol 2 (1) ◽  
Author(s):  
Aliamin
Keyword(s):  
Small And Medium Enterprises ◽  
Health Assessment ◽  
Capital Adequacy ◽  
Financial Ratios ◽  
Microfinance Institutions ◽  
Descriptive Research ◽  
Capital Ratios ◽  
Capital Financing ◽  
Asset Quality ◽  
Medium Enterprises

             The health assessment of Microfinance Institutions (MFIs) is a cooperative incorporated descriptive research study that aims to get the description of health BQ Surya Madinah (Islamic MFIs). The period for this study was raised in 2009 and 2010. The guidelines for use of cooperative health assessment, formulated by the Ministry of Cooperatives and Small and Medium Enterprises Republic of Indonesia, which poured through the Minister's decision No. 35.3/Per/M.KUKM/X/2007 for cooperative health assessment sharia. In a co-operative health assessment consists of eight aspects of sharia that aspects of capital valuation, asset quality, management, efficiency, liquidity, and growth kemadirian, cooperative identity, sharia compliance. However, in this study only four financial ratios studied the aspects of capital, asset quality, liquidity, and the independence and growth.             The results calculation (score) of each component aspect ratio shows the ratio of the components are not all aspects can be expressed well, only three ratios that can yield the best assessment of the capital adequacy ratio of the given conclusion score "HEALTHY" financial ratios for the funds received were conclusions scores "LIQUID" profitability and capital ratios are given conclusion score "HIGH".To obtain better achievements in the future, it requires a proper measures to raise awareness of all members of the cooperative to jointly participate in the implementation of cooperative activities, either in the form of capital, financing and deposits. Key words: health assessment, Islamic MFIs, and BQ Surya Madinah 

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.

How Do Banks Use Bailout Money? Optimal Capital Structure, New Equity, and the TARP

2021 ◽  
pp. 2150008
Author(s):  
Ryan Taliaferro
Keyword(s):  
Capital Structure ◽  
The United States ◽  
United States Government ◽  
Regulatory Capital ◽  
Holding Companies ◽  
Optimal Capital Structure ◽  
States Government ◽  
Capital Ratios ◽  
Optimal Target ◽  
Optimal Capital

Between October 28, 2008 and June 30, 2009 over 600 banks and bank holding companies accepted money from the United States government in exchange for preferred shares and warrants. Based on a matched sample of banks participating and not participating in this Capital Purchase Program (CPP), of each dollar of new government equity, on average participants levered roughly 13 cents to support increased lending while they used roughly 60 cents to increase their regulatory capital ratios. Over the previous business cycle, 2000–2008, allocation of new capital to support lending was higher than in 2008–2009 by nearly 30 cents per dollar of new capital. Moreover, in the previous downturn, 2000–2001, allocation to new lending was higher by an even greater amount. Banks’ exposure to past-due loans, which was higher in 2008 than in 2000 or in any other sample year, negatively predicts allocation of new capital to new lending. Characteristics of CPP participants suggest they were of two types: those with high commitments and opportunities for new lending, and those with exposures to certain troubled loan classes. Banks with high leverage and high expected costs of regulatory downgrades also were more likely participants. All of these results are consistent with banks having an optimal, target capital structure based on some form of tradeoff theory.

Can Capital Structure Affect the Financial Performance of Banks in Turkey?

2018 ◽  
Author(s):  
Merve Tuncay
Keyword(s):  
Capital Structure ◽  
Financial Performance ◽  
Capital Adequacy ◽  
Return On Assets ◽  
Control Variables ◽  
Return On Equity ◽  
Independent Variables ◽  
Earnings Per Share ◽  
Asset Quality ◽  
The Capital Structure

<p>The aim of this study is to investigate the determinants of banks’ financial performance in terms of the capital structure. Annual financial statements of 11 banks traded in Borsa Istanbul are employed for the period of 2006-2016. Return on assets, return on equity and earnings per share are chosen for financial performance measures. The independent variables related to the capital structure are capital adequacy, equity-to-asset, and financial leverage ratios. In addition, macroeconomic variables and bank-specific variables are also considered as control variables for the analysis. The data are analyzed by the panel data regression analysis as it provides more informative finding and less multicollinearity among variables than time series and cross-sectional analyzes.</p><p>The Hausman test results indicate that the random effects model is appropriate for the whole dependent variables. According to the findings; while equity-to-asset ratio affects return on assets positively, amongst the control variables specific to firms, firm size, asset quality and asset growth variables have significant effects on return on assets. It is found no significant effect of independent variables on return on equity, however, it is seen that asset quality has a negative and significant effect. Inflation and interest rates have a significant effect on both variables. Finally, it is seen that equity-to-asset ratio has a positive and significant effect on earnings per share. Only the effect of asset quality on earnings per share is found to be significant among the control variables. Findings of the study are consistent with the previous studies. In addition, the M&amp;M views are not supported by the findings related to return on assets and earnings per share but the return on equity.</p>

The Use Of CAMELS In Detecting Financial Distress Of Islamic Banks In Malaysia

2014 ◽  
Vol 30 (2) ◽  
pp. 445 ◽  
Author(s):  
Rashidah Abdul Rahman ◽  
Mazni Yanti Masngut
Keyword(s):  
Neural Network ◽  
Quality Management ◽  
Financial Distress ◽  
Capital Adequacy ◽  
Advisory Council ◽  
Annual Reports ◽  
Islamic Banks ◽  
Return On Assets ◽  
Management Quality ◽  
Asset Quality

The current study uses CAMEL (Capital Adequacy, Asset Quality, Management Quality, Earnings Efficiency, and Liquidity) ratings system, with the addition of Shariah Compliance Ratio (CAMELS) in order to detect the financial distress of Islamic banks in Malaysia. Using neural network, the study analyses data collected from the 17 Islamic banks annual reports for the period 2006 to 2010. It was found that all Islamic banks have higher ETA ratios which portray a good performance of capital adequacy and are less likely to face financial distress. As for asset quality, all Islamic banks did not have the possibility to face financial distress as they are able to handle their non-performing loans throughout the years. Meanwhile for management quality, all Islamic banks show lower ratios in paying salaries to their employee. Earning efficiency for all Islamic banks show better performance and will be less likely to face financial distress in terms of return on assets but not for return of equity. Liquidity indicates that the Islamic banks have a large number of loans but they have sufficient liquid assets in order to cover their liabilities and commitments. Lastly for Shariah Compliance, Islamic banks have complied with all rules and regulations that have been regulated by Bank Negara Malaysias Shariah Advisory Council.

Institutional Design for Collective Action: Tweaking the Rules of the Game for the Common Good

2012 ◽  
Vol 11 (1) ◽  
pp. 64-87 ◽  
Author(s):  
Heinz-Dieter Meyer
Keyword(s):  
Social Sciences ◽  
Collective Action ◽  
Peer Review ◽  
Common Good ◽  
Institutional Design ◽  
The Social ◽  
Self Interest ◽  
Urban Safety ◽  
The Common ◽  
Rules Of The Game

Abstract At present, institutional design is an under-theorized and underdeveloped part of the social sciences. In this paper I focus on designs for situations of collective action where the outcome is controlled by the choices of several self-interested actors. In those situations the goal of institutional design is to alter the rules of the game so that self-interested actors find it rational to cooperate. I explore the viability of that definition by considering two examples of institutional design: urban safety and academic peer review. I discuss the implications of my findings for our conception of rational self-interest and propose that three design principles – publicity, boundaries, and contiguity – can be inferred from the analysis.

scholarly journals The Impact of Innovation on Banking Performance: Evidence from Lebanese Banking Sector

2020 ◽  
pp. 175-202
Author(s):  
Fatima Chalabi
Keyword(s):  
Cost Efficiency ◽  
Banking Sector ◽  
Weighted Least Squares ◽  
Computer Software ◽  
Mobile Banking ◽  
Return On Assets ◽  
Return On Equity ◽  
Asset Quality ◽  
The Impact ◽  
The Relationship

This study examines the impact of innovation on performance of the Lebanese banks during 7 years period from 2009 to 2015. Based on a sample of seventeen Lebanese owned commercial banks, a Weighted Least Squares model was employed to investigate the relationship between two banking innovations, namely mobile banking and investment in computer software and banks’ performance as measured by Return-On-Assets and Return-On-Equity. Four control variables were included in the study specifically bank’s capitalization, cost efficiency, asset quality and bank’s size. The findings of the study showed that the two innovations studied have both significant but opposite impact on banks’ performance.

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