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Does Competition Reduce the Risk of Bank Failure?

Martinez-Miera, David; Repullo, Rafael - C.E.P.R. Discussion Papers - 2008

A large theoretical literature shows that competition reduces banks' franchise values and induces them to take more risk. Recent research contradicts this result: When banks charge lower rates, their borrowers have an incentive to choose safer investments, so they will in turn be safer. However,...

Persistent link: https://www.econbiz.de/10005124382

Economic and Regulatory Capital: What is the Difference?

Elizalde, Abel; Repullo, Rafael - C.E.P.R. Discussion Papers - 2004

This Paper analyses the determinants of regulatory capital (the minimum required by regulation) and economic capital (the capital that shareholders would choose in absence of regulation) in the context of the single risk factor model that underlies the New Basel Capital Accord (Basel II). The...

Persistent link: https://www.econbiz.de/10005123827

The Macroeconomic Implications of Financial Deregulation

Bordes, Christian; Melitz, Jacques - C.E.P.R. Discussion Papers - 1989

This paper explores the possible macroeconomic consequences of financial deregulation in an institutional environment where deregulation raises risks in banking. The central bank is assumed to maximize an objective function an argument of which is the probability of bank failure. It is then...

Persistent link: https://www.econbiz.de/10005792448

Sovereign CDS and Bond Pricing Dynamics in the Euro-area

Palladini, Giorgia; Portes, Richard - C.E.P.R. Discussion Papers - 2011

This analysis tests the price discovery relationship between sovereign CDS premia and bond yield spreads on the same … verified. Then, we examine whether the non-stationary CDS and bond spreads series are bound by a cointegration relationship … cash and synthetic market's valuation of credit risk differ to various degrees. The VECM analysis suggests that the CDS …

Persistent link: https://www.econbiz.de/10009365646

When Is There a Strong Transfer Risk from the Sovereigns to the Corporates? Property Rights Gaps and CDS Spreads

Bai, Jennie; Wei, Shang-Jin - C.E.P.R. Discussion Papers - 2012

strong property rights protection. Using a novel credit default swaps (CDS) dataset covering both government and corporate … influence on corporate credit risks. All else equal, a 100 basis points increase in the sovereign CDS spread leads to an … increase in corporate CDS spreads by 71 basis points. (2) The sovereign-corporate relation varies across corporations, with …

Persistent link: https://www.econbiz.de/10011084446

Does Interbank Borrowing Reduce Bank Risk?

Dinger, Valeriya; von Hagen, Jürgen - C.E.P.R. Discussion Papers - 2008

In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks which allows us to explore the impact of interbank lending when exposures are long-term and interbank borrowers are small banks....

Persistent link: https://www.econbiz.de/10005504249

Do we need big banks? Evidence on performance, strategy and market discipline

Demirguc-Kunt, Asli; Huizinga, Harry - C.E.P.R. Discussion Papers - 2011

For an international sample of banks, we construct measures of a bank’s absolute size and its systemic size defined as size relative to the national economy. We then examine how a bank’s risk and return, its activity mix and funding strategy, and the extent to which it faces market...

Persistent link: https://www.econbiz.de/10008854499

Robust Capital Regulation

Acharya, Viral V; Mehran, Hamid; Schuermann, Til; … - C.E.P.R. Discussion Papers - 2012

We address the following questions concerning bank capital: why are banks so highly levered, what are the consequences of this leverage for the economy as a whole, and how can robust capital regulation be designed to restrict bank leverage to levels that do not generate excessive systemic risk?...

Persistent link: https://www.econbiz.de/10011083636

Caught between Scylla and Charybdis? Regulating bank leverage when there is rent-seeking and risk-shifting

Acharya, Viral V; Mehran, Hamid; Thakor, Anjan - C.E.P.R. Discussion Papers - 2012

We consider a model in which banks face two moral hazard problems: 1) asset substitution by shareholders, which can occur when banks make socially-inefficient, risky loans; and 2) managerial under-provision of effort in loan monitoring. The privately-optimal level of bank leverage is neither too...

Persistent link: https://www.econbiz.de/10011084299

Towards a Lender of First Resort

Cohen, Daniel; Portes, Richard - C.E.P.R. Discussion Papers - 2004

If interest rates (country spreads) rise, debt can rapidly be subject to a snowball effect, which then becomes self-fulfilling with regard to the fundamentals themselves. This is a market imperfection, because we cannot be confident that the unaided market will choose the ‘good equilibrium’...

Persistent link: https://www.econbiz.de/10005662255