scholarly journals Governing ‘too big to fail’ banks

2011 ◽  
Vol 1 (2) ◽  
pp. 56-64 ◽  
Author(s):  
Andy Mullineux
Keyword(s):  
Corporate Governance ◽  
Moral Hazard ◽  
Parallel Mechanism ◽  
Deposit Insurance ◽  
Current Level ◽  
Too Big To Fail ◽  
Insurance Scheme ◽  
Ex Post ◽  
The Us ◽  
The Uk

This paper considers possible and proposed responses to the “To Big (complex, interconnected, important) To Fail (TBTF) Problem”. It argues that the corporate governance of large shareholder owned deposit taking banks is particularly problematic because of the implicit insurance their shareholders and bondholders enjoy, at the taxpayers expense. This creates issues of moral hazard and also competitive inequality, because TBTF banks can raise funds more cheaply than non-TBTF banks. The US pre-funded deposit insurance scheme with risk-related premia does a pretty good job managing the moral hazard issues relating to non-TBTF banks. A parallel mechanism involving a special resolution regime for TBTF banks and the equivalent of deposit insurance with risk-related premia needs to be put in place. Whether the scheme should be pre-funded or operated on a ex post „polluter pays‟ basis, and the associated tax regime for TBTF banks needs further consideration. Bondholders should not enjoy the current level of protection and „Co-Co‟ bonds may be part of the solution. Consumer Protection is a good idea and deposit taking banks should be regulated as other „utilities‟ are in the UK. The corporate governance problem would be simpler if all retail deposit taking banks were mutuals

scholarly journals Dividend Policy in Indonesian Companies: Does Corporate Governance Matter?

2019 ◽  
Vol 8 (2S9) ◽  
pp. 825-830
Keyword(s):  
Corporate Governance ◽  
Dividend Policy ◽  
Resource Dependence ◽  
Secondary Data ◽  
Developed Countries ◽  
Resource Dependence Theory ◽  
Financial Statement ◽  
Finance Industry ◽  
The Us ◽  
The Uk

This study investigates whether corporate governance matters with regards to the dividend policy in Indonesian companies. Previous studies on this subject have mostly been done in developed countries, which have adopted the common law, such as in the US and the UK. This study uses 26 companies operating in the finance industry. Secondary data is used from several sources, such as the annual report and financial statement and related websites. This study uses an independent sample t-test to analyse the data. Corporate governance matters for dividend policy in Indonesian companies. It is evidenced by the fact that there is a significant differ ence in managerial ownership and board size between dividend paid and dividend not paid. Profitability also differs between dividend paid and dividend not paid companies; companies with higher profitability tend to pay dividend. This study provides empirical evidence that corporate governance matters for dividend policy in Indonesian companies. There are two contributions of this study: the result confirms the resource dependence theory and the convergence governance hypothesis.

13 Resolution in the UK and US: Variations to the Same Goals

2016 ◽  
Author(s):  
Krimminger Michael
Keyword(s):  
Deposit Insurance ◽  
Global Financial Crisis ◽  
Single Point ◽  
Insurance Fund ◽  
Troubled Asset Relief Program ◽  
Point Of Entry ◽  
The Us ◽  
The Uk ◽  
Federal Deposit Insurance ◽  
National Governments

This chapter explores the US and UK’s response to the 2007–9 Global Financial Crisis. In both cases, funding for the resolution and restructuring of failing financial companies came from public sources-generally national governments and central banks funded by the private creditors or other private sources. In the UK, the resolution actions relied solely on taxpayer financing. In the US, the government’s actions relied on Federal Reserve funding, Treasury funding through the Troubled Asset Relief Program (TARP), and Federal Deposit Insurance Corporation (FDIC) funding from the Deposit Insurance Fund. The chapter also assesses the role of bail-in under the Resolution Authorities and concludes with a brief summary of the UK and EU approach to single point of entry (SPOE) strategy.

scholarly journals Corporate Governance and Social Responsibility: a comparative analysis of the UK and the US*

2006 ◽  
Vol 14 (3) ◽  
pp. 147-158 ◽  
Author(s):  
Ruth V. Aguilera ◽  
Cynthia A. Williams ◽  
John M. Conley ◽  
Deborah E. Rupp
Keyword(s):  
Corporate Governance ◽  
Comparative Analysis ◽  
Social Responsibility ◽  
The Us ◽  
The Uk

scholarly journals KONSEP CROSS-GUARANTEE DALAM PROGRAM PENJAMINAN DAN KEMUNGKINAN PENERAPANNYA DI INDONESIA

2003 ◽  
Vol 1 (4) ◽  
pp. 31-43
Author(s):  
Maulana Ibrahim ◽  
Agusman Agusman
Keyword(s):  
Deposit Insurance ◽  
Too Big To Fail ◽  
Insurance Scheme ◽  
Sensitive Analysis ◽  
Risk Sensitive

Tulisan ini mencoba mengetengahkan salah satu bentuk pikiran alternatif dalam program penjaminan yang dikenal dengan konsep Cross-Guarantee. Sangat berbeda dengan konsep-konsep lainnya dalam program penjaminan, konsep ini sangat progresif dalam hal mempercayakan penyelenggaraan penjaminan kepada mekanisme pasar dan meniadakan intervensi pemerintah, sehingga mengarah sepenuhnya pada swastanisasi baik penyelenggaraan penjaminan maupun pelaksanaan pengaturan dan pengawasan bank yang menyertainya.Sebagai suatu konsep yang ditujukan untuk mengatasi berbagai kelemahan deposit insurance scheme yang berlaku sekarang ini, maka konsep Cross-Guarantee menekankan pentingnya penggunaan pendekatan risk-sensitive analysis dalam penetapan besarnya premi. Konsep ini juga mengupayakan adanya perlakuan yang sama untuk bank-bank besar dan bank-bank kecil dalam memper-oleh penjaminan. Pendekatan Too-Big-To-Fail (TBTF) yang sejak beberapa waktu terakhir telah menimbulkan inkonsistensi dalam proses penjaminan diharapkan dapat dihilangkan oleh konsep ini.Apabila diterapkan sepenuhnya, konsep Cross-Guarantee juga akan mengakibatkan perubahan yang sangat mendasar terhadap seluruh pola dan praktek penjaminan dan pengawasan bank yang sudah dijalankan selama ini. Dengan merujuk pada ide yang dilontarkan Bert Ely tentang Cross- Guarantee, dalam tulisan ini akan didalami prinsip-prinsip dasar yang terkandung dalam konsep tersebut beserta pengaruhnya terhadap pola penjaminan dan pengawasan bank, sekaligus mempelajari kemungkinan penerapannya di Indonesia.

scholarly journals The US banking system: does the size of the institution matter to its economic-financial situation?

2020 ◽  
pp. 19-19
Author(s):  
José Alejandro Fernández Fernández ◽  
Virginia Vázquez ◽  
Juan Antonio Vicente Virseda
Keyword(s):  
Neural Network ◽  
Moral Hazard ◽  
Deposit Insurance ◽  
Banking System ◽  
Factorial Analysis ◽  
Financial Situation ◽  
Financial Variables ◽  
The Us ◽  
Federal Deposit Insurance ◽  
The Relationship

This paper analyzes the relationship between the size of the entities in the US banking system and their economic-financial situation. The objective of this study is to group different economic and financial variables of the entities together into factors that characterize the US banking system and identify and identify how the factors vary according to the size of the entities. To do this, we start from the values taken by 32 economic-financial and regulatory ratios, obtained directly from the Federal Deposit Insurance Corporation (FDIC), for a period between the first quarter of 1990 and the penultimate of 2016. With this data it is performed a factorial analysis that allows synthesizing the 32 variables in 7 factors and, at the same time, obtaining relationships between these variables and the size and between themselves. Finally, through a neural network, the previous factors are hierarchized according to the influence that the size of the entities exerts on them. Among the conclusions reached, it should be noted that the loan structure is the factor that best classifies the size. It also determines the existence of a negative ?profitability-solvency? relationship with larger entities, (Assets> $ 250 B.) and smaller ones (Assets <$ 100 M.), as well as demonstrating the existence of moral hazard and the need for regulation that limits said risk (because the largest entities are the least solvent and assume the most risks).

scholarly journals Does a deposit insurance scheme induce moral hazard among bankers? Evidence from an experiment with bankers

2018 ◽  
Vol 20 (3) ◽  
pp. 353
Author(s):  
Gumilang Aryo Sahadewo ◽  
Bernardinus Maria Purwanto ◽  
Rimawan Pradiptyo
Keyword(s):  
Moral Hazard ◽  
Deposit Insurance ◽  
Empirical Studies ◽  
Credit Market ◽  
Bank Failures ◽  
Insurance Scheme ◽  
Deposit Rate ◽  
Trade Off ◽  
Bank Run ◽  
Do So

The implementation of a deposit insurance scheme entails a trade off. On one hand, as shown in theoretical and empirical studies, a deposit insurance scheme reduces the likelihood of a bank run. On the other hand, a deposit insurance scheme induces moral hazard among bankers that may lead to bank failures. We rigorously test the effect of different deposit coverage limit and the implementation of a differential premium treatment on bankers’ behaviors in the deposit and credit market. We do so by designing a laboratory experiment that involves real bankers as participants. We find that the coverage limit treatments do not have any effect on deposit rate offer. Nevertheless, we find that a high deposit coverage limit induces smaller banks to have a higher share of risky projects. This is evidence of moral hazard particularly among small banks.

scholarly journals European deposit insurance scheme and bank board composition

2020 ◽  
Vol 17 (4, Special Issue) ◽  
pp. 246-256
Author(s):  
Francesca Arnaboldi ◽  
Vincenzo Capizzi
Keyword(s):  
Corporate Governance ◽  
Fixed Effects ◽  
Deposit Insurance ◽  
Gender Composition ◽  
Bank Risk ◽  
European Level ◽  
Fixed Effects Model ◽  
Insurance Scheme ◽  
Regulatory Changes ◽  
And Gender

This paper investigates whether bank corporate governance can play a role in the aggregate risk score assigned to individual banks by regulators. We exploit regulatory changes at the European level and a fixed-effects model to reduce endogeneity issues. We contribute to the existing literature on bank corporate governance by showing that board age significantly increases bank risk. This may indicate that boards formed by older members are more entrenched and can also be less dynamic. Board size and gender composition of the board are risk-neutral.

2 The Limitations of Deposit Protection Systems

2015 ◽  
Author(s):  
Kleftouri Nikoletta
Keyword(s):  
Moral Hazard ◽  
Deposit Insurance ◽  
Banking Regulation ◽  
Internal Controls ◽  
Protection System ◽  
Market Incentives ◽  
Regulation And Supervision ◽  
Protection Systems ◽  
The Uk ◽  
Banking Regulation And Supervision

This chapter first analyses the moral hazard problem arising from the provision of deposit insurance. Moral hazard is a powerful force distorting market behaviour, which demands a variety of regulatory techniques, as well as market incentives, to neutralize its destabilizing effects. Corporate governance issues are also relevant, because banks’ internal controls and balances have a key impact on the extent of moral hazard. In addition to a well-designed deposit protection system, it is necessary to enlist the support of banking regulation and supervision to combat moral hazard. Drawing on the UK deposit protection system, the chapter presents a number of ambiguities inherent to the design and functions of a deposit guarantee scheme. It concludes that the existence of effective prudential regulation and supervision are prerequisites for deposit insurance.

scholarly journals The paradoxical genesis of too-big-to-fail

2014 ◽  
Vol 3 (1) ◽  
pp. 28-41
Author(s):  
Thomas Umlauft
Keyword(s):  
Financial Crisis ◽  
Deposit Insurance ◽  
Banking System ◽  
Political Support ◽  
Too Big To Fail ◽  
Small Unit ◽  
The Public ◽  
The Us ◽  
Small Banks ◽  
Federal Deposit Insurance

At least since the Global Financial Crisis of 2007-2009, the problem of too-big-to-fail (TBTF) has received widespread attention. The research conducted in this context has, however, generally focused on the econometric aspect and the contribution of the TBTF doctrine to the financial crisis of 2007-2009, while the economic historical approach has been confined to tracing the doctrine to its first appearance. This paper attempts to fill this gap in the academic literature by offering an explanation for why, as opposed to how, the TBTF doctrine has developed. This paper identifies the US population’s distrust and at times hostility against the prospect of concentration of power in large financial institutions as the causal factor leading to the TBTF phenomenon. The resulting socially non-optimal regulation favoured a fragmented and fragile banking system based on small unit banks at the cost of more diversified branch banks. The Great Depression impressively highlighted the deep structural flaws of the US banking system. At the same time, however, it caused a shift in the public opinion, which had generally been opposed to deposit insurance, and thereby aligned the public interest with that of small banks, which would profit most from deposit insurance. The newly acquired public and political support enabled weak unit banks to lobby successfully against reforming the banking structure and instead for the adaption of federal deposit insurance. However, the Federal Deposit Insurance Corporation (FDIC) only addressed the symptoms of the weak banking industry but not its causes. Moreover, the strongly biased FDIC policies have generally favoured creditors at large banks, which ultimately led to the TBTF doctrine which, in turn, provided banks with a non-technical incentive to grow in size in order to gain TBTF protection. Initially aimed at preserving the US financial landscape based on small unit banks, the FDIC as the main conduit for TBTF rescues thus became the main driver for big bank corporate welfare. Deposit insurance gave rise to TBTF and, at the same time, put small banks deemed “too-small-to-safe” at a competitive disadvantage, further accelerating the trend towards increasingly large and complex banks.

scholarly journals Corporate governance: A review of the fundamental practices worldwide

2022 ◽  
Vol 3 (2) ◽  
pp. 53-66
Author(s):  
Khaled Otman
Keyword(s):  
Corporate Governance ◽  
Board Of Directors ◽  
Cultural Norms ◽  
Legal Systems ◽  
International Organisations ◽  
Oecd Principles ◽  
The Us ◽  
The World ◽  
The Uk ◽  
Equitable Treatment

This paper focused on the concept of corporate governance based on shareholders’ and stakeholders’ perspectives and the development of corporate governance around the world, including the UK, the US, and Australia. The OECD Principles of Corporate Governance were presented, including shareholders’ rights, the equitable treatment of shareholders, disclosure and stakeholders’ rights and transparency practices, and the responsibilities of board of directors. Numerous corporate collapses have highlighted the call for the management and directors of companies to be more accountable, and they have led governments and international organisations such as the OECD to be more active in establishing principles of corporate governance. It was concluded that the system of corporate governance has increased in different countries in relation to the nature of the economy, legal systems, and cultural norms

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