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Basel III and CEO compensation: a new regulation attempt after the crisis

Eufinger, Christian; Gill, Andrej - Verein für Socialpolitik - VfS - 2012

The paper analyzes the interaction between an endogenous capital structure and investment decision, and the incentive scheme of bank executives. We show that the implementation of capital requirements, which are contingent on compensation schemes, drive a wedge between the interests of the...

Persistent link: https://www.econbiz.de/10010955171

Convert-to-Surrender Bonds: A Proposal of How to Reduce Risk-Taking Incentives in the Banking System

Berg, Tobias; Kaserer, Christoph - Verein für Socialpolitik - VfS - 2011

We argue that contingent convertible capital (CoCo-Bonds) might have perverse risk-taking incentives for banks (asset substitution problem) and discourage them from investing in positive NPV projects and issuing new equity in times of crisis (debt overhang problem). Whenever the conversion price...

Persistent link: https://www.econbiz.de/10010957293

Risk Sensitivity of Banks, Interbank Markets and the Effects of Liquidity Regulation

Pausch, Thilo - Verein für Socialpolitik - VfS - 2013

The industrial organization approach to banking is extended to analyze the effects of interbank market activity and regulatory liquidity requirements on bank behavior. A multi-stage decision situation allows for considering the interaction between credit risk and liquidity risk of banks. This...

Persistent link: https://www.econbiz.de/10010957919

Occupy Risk Weighting: How the Minimum Leverage Ratio dominates Capital Requirements - A Swiss Example

Kellermann, Kersten; Schlag, Carsten - Verein für Socialpolitik - VfS - 2013

In September 2009, G20 representatives called for introducing a minimum leverage ratio as an instrument of financial regulation. It is supposed to assure a certain degree of core capital for banks, independent of the controversial procedures used to assess risk. This paper discusses the...

Persistent link: https://www.econbiz.de/10010957944

Catharsis - The Real Effects of Bank Insolvency and Resolution

Korte, Josef - Verein für Socialpolitik - VfS - 2013

In general, banks play a growth-enhancing role for the real economy. However, distorted incentives of banks, depositors, and regulators around bank insolvency may corrupt banks' credit allocation and monitoring decisions, leading to suboptimal real economic outcomes. A rules-based prompt...

Persistent link: https://www.econbiz.de/10010958011

Implications of Bank Regulation for Credit Intermediation and Bank Stability: A Dynamic Perspective

Bucher, Monika; Dietrich, Diemo; Hauck, Achim - Verein für Socialpolitik - VfS - 2013

Business cycles imply liquidity risks for banks. This paper explores how these risks influence bank lending over the cycle. With forward-looking banks, lending cycles, credit booms and busts, or suppressed and highly fragile bank systems can emerge, depending on the magnitude of liquidity risks....

Persistent link: https://www.econbiz.de/10010958098

Regulatory Capture by Sophistication

Hakenes, Hendrik; Schnabel, Isabel - Verein für Socialpolitik - VfS - 2013

One explanation for the poor performance of regulation in the recent financial crisis is that regulators had been captured by the financial sector. We present a micro-founded model with rational agents in which banks may capture regulators due to their high degree of sophistication. Banks can...

Persistent link: https://www.econbiz.de/10010958106

Banks, Markets, and Financial Stability

Fecht, Falko; Eder, Armin; Pausch, Thilo - Verein für Socialpolitik - VfS - 2013

In a theoretical model of the Diamond-Dybvig style, in which deposit-taking banks and financial markets coexist, bank behavior is analyzed taking into account a positive ex-ante probability of a future financial crisis. We focus on the role of the interaction of market liquidity and banks'...

Persistent link: https://www.econbiz.de/10010958144

The light and dark side of TARP

Uhde, Andre; Farruggio, Christian; Michalak, Tobias C. - Verein für Socialpolitik - VfS - 2013

This paper empirically investigates the impact of the first announcement of TARP, the announcement of revised TARP, respective capital infusions under TARP-CPP and capital repayments on changes in shareholder value and the risk exposure of supported U.S. banks. Our analysis reveals a light and a...

Persistent link: https://www.econbiz.de/10010958182

A Model of Mortgage Losses and its Applications for Macroprudential Instruments

Hott, Christian - Verein für Socialpolitik - VfS - 2014

We develop a theoretical model of mortgage loss rates that evaluates their main underlying risk factors. Following the … model, loss rates are positively influenced by the house price level, the loan-to-value of mortgages, interest rates, and … mortgage loss rates. In addition, we show potential applications of the model for different macroprudential instruments: stress …

Persistent link: https://www.econbiz.de/10011164031