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Optimal bank transparency
Moreno, Diego; Takalo, Tuomas - Suomen Pankki - 2012
Consider a competitive bank whose illiquid asset portfolio is funded by short-term debt that has to be refinanced before the asset matures. We show that in this setting maximal transparency is not socially optimal, and that the existence of social externalities of bank failures further lowers...
Persistent link: https://www.econbiz.de/10009651893
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Bank safety under Basel II capital requirements
Vauhkonen, Jukka - Suomen Pankki - 2009
We consider the impact of mandatory information disclosure on bank safety in a spatial model of banking competition in which a bank’s probability of success depends on the quality of its risk measurement and management systems. Under Basel II capital requirements, this quality is either fully...
Persistent link: https://www.econbiz.de/10008509437
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Portfolio effects and efficiency of lending under Basel II
Jokivuolle, Esa; Vesala, Timo - Suomen Pankki - 2007
borrowers cross-subsidize high risk borrowers through the price system that is based on average success rates. We find that …
Persistent link: https://www.econbiz.de/10005648952
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Leverage ratio requirement, credit allocation and bank stability
Kiema, Ilkka; Jokivuolle, Esa - Suomen Pankki - 2011
We study the effects on credit allocation and bank stability of introducing a leverage ratio requirement (LRR) on top of risk-based capital requirements, as in Basel III. For the current 3% LRR, both low-risk and high-risk loan rates and volumes remain essentially unchanged, because banks...
Persistent link: https://www.econbiz.de/10009003108
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Credit allocation, capital requirements and output
Jokivuolle, Esa; Kiema, Ilkka; Vesala, Timo - Suomen Pankki - 2010
We show how banks’ excessive risk-taking, stemming from informational asymmetries in loan markets, can lead to an excessive output loss when a recession starts. Risk-based capital requirements can alleviate the output loss by reducing excessive risk-taking in ‘normal’ times. Model...
Persistent link: https://www.econbiz.de/10008774238
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Regional growth and finance in Europe: Is there a quality effect of bank efficiency?
Hasan, Iftekhar; Koetter, Michael; Wedow, Michael - Suomen Pankki - 2009
In this study, we test whether regional growth in 11 European countries depends on financial development and suggest the use of cost- and profit-efficiency estimates as quality measures for financial institutions. Contrary to the usual quantitative proxies for financial development, the quality...
Persistent link: https://www.econbiz.de/10004979445
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Bank efficiency in transition economies: recent evidence from South-Eastern Europe
Fang, Yiwei; Hasan, Iftekhar; Marton, Katherin - Suomen Pankki - 2011
This study examines the cost and profit efficiency of banking sectors in six transition countries of South-Eastern Europe over the period 1998–2008. Using the stochastic frontier approach, our analysis reveals that the average cost efficiency of SEE banks is 68.59% and the average profit...
Persistent link: https://www.econbiz.de/10008867450
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Inferring market power from retail deposit interest rates in the euro area
Vajanne, Laura - Suomen Pankki - 2009
This paper tests for the existence of market power in banking, using data on demand deposit rates of households and corresponding market rates in five euro area countries. An implicit measure for market power is based on a partial adjustment model that also allows for an asymmetric response of...
Persistent link: https://www.econbiz.de/10008509436
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Agency Cost of Debt and Lending Market Competition: A Re-Examination
Koskela, Erkki; Stenbacka, Rune - Suomen Pankki - 2000
We address how lending market competition, measured by banks’ bargaining power, affects the agency costs of debt finance. We show that the threshold for obtaining loan finance is independent of the relative bargaining power of the financier. Moreover, intensified lending market competition...
Persistent link: https://www.econbiz.de/10005190771
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Market power and merger simulation in retail banking
Molnár, József - Suomen Pankki - 2008
This paper tests market power in the banking industry. Price-cost margins predicted by different oligopoly models are … calculated using discrete-choice demand estimates of own-price and cross-price elasticities. These predicted price-cost margins … are then compared with price-cost margins computed using observed interest rates and estimates of marginal costs. This …
Persistent link: https://www.econbiz.de/10005648871