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Loan loss reserves, accounting constraints, and bank ownership structure

Balla, Eliana; Rose, Morgan J. - Federal Reserve Bank of Richmond - 2011

impacted the loan loss reserve policies of banks differently based on ownership structure. The SunTrust case, the result of an … indicates that publicly held banks, which fall directly under the SECs purview, reduced their loan loss reserve and provisions … relative to privately held banks. Evidence also indicates that the positive relationship between bank earnings and provisions …

Persistent link: https://www.econbiz.de/10010551312

Fiscal rules and the sovereign default premium

Hatchondo, Juan Carlos; Martinez, Leonardo; Roch, Francisco - Federal Reserve Bank of Richmond - 2012

We find the optimal target values for fiscal rules and measure their aggregate effects using a model of sovereign default. We calibrate the model to an economy that pays a significant sovereign default premium when the government is not constrained by fiscal rules. For different levels of the...

Persistent link: https://www.econbiz.de/10010551313

Contingent capital: the trigger problem

Prescott, Edward S. - Federal Reserve Bank of Richmond - 2011

Price triggers in contingent capital bonds are analyzed. Pervasiveness of multipleequilibria and nonexistence of equilibrium in theoretical models is illustrated. Evidence of these problems from market experiments is summarized. Possible solutions are evaluated.

Persistent link: https://www.econbiz.de/10010551315

The adverse selection approach to financial intermediation: some characteristics of the equilibrium financial structure

Weinberg, John A. - Federal Reserve Bank of Richmond - 1995

This paper examines an adverse selection economy in which efficient resource allocation is supported by intermediary contracts (coalitions). Agents differ along an ex ante publicly observable dimension, so that the equilibrium arrangement yields a diverse set of financial arrangements among...

Persistent link: https://www.econbiz.de/10004993866

Challenges and choices in post-crisis East-Asia: simulations of investment policy reform in an intertemporal, global model

Diao, Xinshen; Li, Wenli; Yeldan, Erinc - Federal Reserve Bank of Richmond - 1998

The East Asian financial crisis exposed the problems of excessive government intervention in credit allocation and poor supervision of the banking system. We argue that the crisis is an opportunity to reformulate the strategies of growth by way of eliminating politicized intervention on...

Persistent link: https://www.econbiz.de/10004993870

Should the FDIC worry about the FHLB? The impact of Federal Home Loan Bank advances on the Bank Insurance Fund

Bennett, Rosalind L.; Vaughan, Mark D.; Yeager, Timothy J. - Federal Reserve Bank of Richmond - 2005

-given-default by estimating resolution costs in two scenarios: the liquidation of all banks with failure probabilities above two … percent and the liquidation of all banks with advance-to-asset ratios above 15 percent. The evidence points to non …

Persistent link: https://www.econbiz.de/10004994026

Financial innovation in the United States -- background, current and prospects

Broaddus, Alfred - Federal Reserve Bank of Richmond - 1985

The purpose of this paper is to describe recent financial innovation in the United States, outline its principal implications with regard to (1) the structure and behavior of financial markets and (2) the conduct of monetary policy, and speculate on the likely character of further innovation in...

Persistent link: https://www.econbiz.de/10004994042

Debt dilution and sovereign default risk

Hatchondo, Juan Carlos; Martinez, Leonardo - Federal Reserve Bank of Richmond - 2012

We measure the effects of debt dilution on sovereign default risk and show how these effects can be mitigated with debt contracts promising borrowing-contingent payments. First, we calibrate a baseline model à la Eaton and Gersovitz (1981) to match features of the data. In this model, bonds'...

Persistent link: https://www.econbiz.de/10008498240

An experimental analysis of contingent capital triggering mechanisms

Davis, Douglas; Prescott, Edward S.; Korenok, Oleg - Federal Reserve Bank of Richmond - 2011

This paper reports an experiment that evaluates three regimes for triggering the conversion of contingent capital bonds into equity: (a) a “regulator” regime, where socially motivated regulators make conversion decisions based on observed prices, (b) a “fixed trigger” regime where a...

Persistent link: https://www.econbiz.de/10008917672

On the optimality of Ramsey taxes in Mirless economies

Grochulski, Borys - Federal Reserve Bank of Richmond - 2010

In this paper, we show that a simple, linear capital tax— the kind used in the Ramsey analysis— can be optimal in a Mirrlees economy with private information. We extend the Mirrlees approach to optimal taxation by studying taxes side-by-side with another institution, rather than in...

Persistent link: https://www.econbiz.de/10008764358