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largest U.S. banks had their senior unsecured bonds ranked pari-passu with bank deposits under the market conditions from 2006 … to 2015. Since 1994 senior bank bonds are subordinated to bank deposits in the event of liquidation. And during the … financial crises of 2008-2009 and 2011, the maximum 5-year bank credit spread among the four largest banks was over 400 basis …
Persistent link: https://www.econbiz.de/10012956317
Credit risk arises because of the possibility that promised cash flows on financial claims held by banks and other financial institutions (BOFIs) will not be paid in full. Virtually all BOFIs face this risk. BOFIs are operating in markets with asymmetric information wherein prospective borrowers...
Persistent link: https://www.econbiz.de/10012961936
We examine the roles of information sharing, strength of legal rights and bank size on the procyclical effect of bank …
Persistent link: https://www.econbiz.de/10012936121
the corresponding impact on the bank's profitability and lending behavior. It also seeks to investigate the macroeconomic …
Persistent link: https://www.econbiz.de/10012826179
Since the 2008 Financial Crisis, stress tests based on extreme-yet-plausible scenarios have become a preferred method of assessing risk for large financial institutions, yet scenario choice has largely been ad-hoc. We propose a principled methodology to choose scenarios by minimizing the...
Persistent link: https://www.econbiz.de/10013238231
We review heterogeneous agent-based models of financial stability and their application in stress tests. In contrast to the mainstream approach, which relies heavily on the rational expectations assumption and focuses on situations where it is possible to compute an equilibrium, this approach...
Persistent link: https://www.econbiz.de/10011906282
The convention in calculating trading costs in corporate bond markets is to assume that dealers provide liquidity to non-dealers (customers) and calculate average bid-ask spreads that customers pay dealers. We show that customers often provide liquidity in corporate bond markets, and thus,...
Persistent link: https://www.econbiz.de/10011803677
scheme. Two forms of depositor market discipline were investigated – a quantity impact whereby an increase in bank risk leads … to lower deposit volumes, and a price impact whereby an increase in bank risk leads to higher deposit interest rates …
Persistent link: https://www.econbiz.de/10013121111
bank's financial condition deteriorates, depositors have an incentive to withdraw their funds, and corporations will find … over the last two decades to a deterioration in the performance of their bank. We find that during recessions, in … to borrower-, bank-, and credit-line-specific controls as well as bank-fixed effects, show that banks' provision of …
Persistent link: https://www.econbiz.de/10013096656
In this paper, we use U.S. commercial banks' data to investigate whether the effect of unexpected deposit flows on loan production depends on banks' exposure to off-balance sheet funding liquidity risk. We find that lending is sensitive to deposit shocks at small banks but not at large ones....
Persistent link: https://www.econbiz.de/10012838854