Showing 1 - 10 of 443
The results of this paper provide empirical evidence that regulatory capital ratios drive bank Credit Default Swaps (CDS) and that markets react more to changes in capital requirements if implemented via direct adjustments to Pillar 1 risk weights than imposed as a percentage of Risk-Weighted...
Persistent link: https://www.econbiz.de/10015199475
We study the effect of changes to bank-specific capital requirements on mortgage loan supply with a new loan-level dataset containing all mortgages issued in the UK between 2005Q2 and 2007Q2. We find that a rise of a 100 basis points in capital requirements leads to a 5.4% decline in individual...
Persistent link: https://www.econbiz.de/10011804376
This paper reexamines from a theoretical perspective the role of monetary and macroprudential policies in addressing the build-up of risks in the financial system. We construct a stylized general equilibrium model in which the key friction comes from a moral hazard problem in firms' financing...
Persistent link: https://www.econbiz.de/10012142141
Recent empirical studies have documented two remarkable patterns shown by euro area banks in the aftermath of the Great Recession: (i) their tendency to boost capital ratios by shrinking assets (contraction of loans supply), and (ii) their reluctance to cut back on dividends (fall in retained...
Persistent link: https://www.econbiz.de/10012422095
The paper evaluates the impact of a phased-in introduction of capital requirements on equity, risk-taking, and probability of default for a sample of European systemically important banks. Contrary to the case of a one-off introduction of capital requirements, this study does not find evidence...
Persistent link: https://www.econbiz.de/10012422111
This paper simulates the minimum capital requirements for the wholesale exposures of a medium-sized bank in each EMU country depending on the credit rating agencies chosen by the bank to risk-weight its exposures in the standardised approach to credit risk in Basel II. Three main results emerge...
Persistent link: https://www.econbiz.de/10011604563
This paper investigates the costs and benefits of liquidity regulation. We find that liquidity tools are beneficial but cannot completely remove the need for Lender of Last Resort (LOLR) interventions by the central bank. Full compliance with current Liquidity Coverage Ratio (LCR) and Net Stable...
Persistent link: https://www.econbiz.de/10011916873
Basel III has introduced a non-risk-weighted leverage ratio requirement (LRR) which complements the internal ratings based (IRB) capital requirements. It provides a backstop against model risk which arises if some loans get incorrectly rated and become toxic. We study the effects of the LRR on...
Persistent link: https://www.econbiz.de/10011605721
Following the financial crisis, the share of non-performing loans has significantly increased, while the regulatory guidelines on the Internal-Ratings Based (IRB) approach for capital adequacy calculation related to defaulted exposures remains too general. As a result, the high-risk nature of...
Persistent link: https://www.econbiz.de/10012916067
In this paper, we investigate how the introduction of sophisticated, model-based capital regulation affected the measurement of credit risk by financial institutions. Model-based regulation was meant to enhance the stability of the financial sector by making capital charges more sensitive to...
Persistent link: https://www.econbiz.de/10012987539