We present a stochastic simulation forecasting model for stress testing aimed at assessing banks' capital adequacy, financial fragility and probability of default. The paper provides a theoretical presentation of the methodology and the essential features of the forecasting model on which it is...

An important question in banking is how strict supervision affects bank lending and in turn local business activity. Forcing banks to recognize losses could choke off lending and amplify local economic woes, especially after financial crises. But stricter supervision could also lead to changes...

An important question in banking is how strict supervision affects bank lending and in turn local business activity. Supervisors forcing banks to recognize losses could choke off lending and amplify local economic woes. But stricter supervision could also change how banks assess and manage...

We analyze how Credit Default Swaps (CDS) affect bank incentives and borrower outcomes in renegotiations after covenant violations. Using a regression-discontinuity design and within lender-borrower variation, we find that CDS firms maintain investment after control rights shift to the creditor,...

We investigate how idiosyncratic lender shocks impact corporate investment. Lenders with recent default experience write stricter loan contracts, leading to a reduction in real investment for borrowing firms. The decline in investment is not attributable to loan riskiness, borrower's agency...

For ten years interest rates in the Eurozone have been declining. This has created a situation where loan or bond prepayments and subsequent refinancing transactions are potentially beneficial for debtors. The advantageousness depends on the costs induced. We analyze the favorability of debt...

We present a stochastic simulation forecasting model to stress-test banks' capital adequacy and to estimate probability of infringement of regulatory capital ratios and default probability. The stochastic methodology proposed is based on a simplified reduced model that provides a manageable...

Using a unique bank-level dataset, we assess the impact of the Term Auction Facility program on bank liquidity risk. The change in the US housing price index at state levels between 2002:Q1 and 2006:Q3 is the exclusion restriction to control for potential selection bias. On average, TAF banks...

The banking sector is a complex system composed of a large number of stakeholders that interacts in a non-simple way continuously and which plays the key role in economic development of each country. The economies of developing countries like Albania are characterized by high demand for credit...

This paper examines the impact of the recent global financial crisis on the cost of debt capital (syndicated loans) in a leading emerging market, namely China, using difference-in-differences and GARCH approaches. Before the crisis China adopted banking reforms allowing entry of foreign banks...