The Right Balance for Banks

The Right Balance for Banks PDF

Author: William R. Cline

Publisher: Columbia University Press

Published: 2017-05-23

Total Pages: 248

ISBN-13: 0881327220

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The global financial crisis produced an important agreement among regulators in 2010–11 to raise capital requirements for banks to protect them from insolvency in the event of another emergency. In this book, William R. Cline, a leading expert on the global financial system, employs sophisticated economic models to analyze whether these reforms, embodied in the Third Basel Accord, have gone far enough. He calculates how much higher bank capital reduces the risk of banking crises, providing a benefit to the economy. On the cost side, he estimates how much higher capital requirements raise the lending rate facing firms, reducing investment in plant and equipment and thus reducing output in the economy. Applying a plausible range of parameters, Cline arrives at estimates for the optimal level of equity capital relative to total bank assets. This study also challenges the recent "too much finance" literature, which holds that in advanced countries banking sectors are already too large and are curbing growth.

Do Central Banks Need Capital?

Do Central Banks Need Capital? PDF

Author: Mr.Peter Stella

Publisher: International Monetary Fund

Published: 1997-07-01

Total Pages: 40

ISBN-13: 1451850506

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Central banks may operate perfectly well without capital as conventionally defined. A large negative net worth, however, is likely to compromise central bank independence and interfere with its ability to attain policy objectives. If society values an independent central bank capable of effectively implementing monetary policy, recapitalization may become essential. Proper accounting practice in determining central bank profit or loss and rules governing the transfer of the central bank’s operating result to the treasury are also important. A variety of country-specific central bank practices are reviewed to support the argument.

Interest Rate Risk in the Banking Book

Interest Rate Risk in the Banking Book PDF

Author: Beata Lubinska

Publisher: John Wiley & Sons

Published: 2021-11-01

Total Pages: 263

ISBN-13: 1119755018

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Introduces practical approaches for optimizing management and hedging of Interest Rate Risk in the Banking Book (IRRBB) driven by fast evolving regulatory landscape and market expectations. Interest rate risk in the banking book (IRRBB) gained its importance through the regulatory requirements that have been growing and guiding the banking industry for the last couple of years. The importance of IRRBB is shifting for banks, away from ‘just’ a regulatory requirement to having an impact on the overall profitability of a financial institution. Interest Rate Risk in the Banking Book sheds light on the best practices for managing this importance risk category and provides detailed analysis of the hedging strategies, practical examples, and case studies based on the author’s experience. This handbook is rich in practical insights on methodological approach and contents of ALCO report, IRRBB policy, ICAAP, Risk Appetite Statement (RAS) and model documentation. It is intended for the Treasury, Risk and Finance department and is helpful in improving and optimizing their IRRBB framework and strategy. By the end of this IRRBB journey, the reader will be equipped with all the necessary tools to build a proactive and compliant framework within a financial institution. Gain an updated understanding of the evolving regulatory landscape for IRRBB Learn to apply maturity gap analysis, sensitivity analysis, and the hedging strategy in banking contexts • Understand how customer behavior impacts interest rate risk and how to manage the consequences Examine case studies illustrating key IRRBB exposures and their implications Written by London market risk expert Beata Lubinska, Interest Rate Risk in the Banking Book is the authoritative resource on this evolving topic.

Cleaning-up Bank Balance Sheets

Cleaning-up Bank Balance Sheets PDF

Author: José Garrido

Publisher: International Monetary Fund

Published: 2016-09-08

Total Pages: 33

ISBN-13: 1475535163

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To stabilize and bring down nonperforming loans (NPLs) in the Italian banking system, the Italian authorities have been implementing a number of reforms, aimed among others at speeding up insolvency and enforcement proceedings, strengthening bank corporate governance, cleaning up balance sheets, and facilitating bank consolidation. This paper examines the Italian banking system’s NPL problem, which ties up capital, weighing on bank profitability and authorities’ economic reforms. It argues for a comprehensive approach, encompassing economic, supervisory, and legal measures. The authorities’ reforms are important steps toward this end. The paper describes measures that could further support their actions.

Revisiting Risk-Weighted Assets

Revisiting Risk-Weighted Assets PDF

Author: Vanessa Le Leslé

Publisher: International Monetary Fund

Published: 2012-03-01

Total Pages: 50

ISBN-13: 1475502656

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In this paper, we provide an overview of the concerns surrounding the variations in the calculation of risk-weighted assets (RWAs) across banks and jurisdictions and how this might undermine the Basel III capital adequacy framework. We discuss the key drivers behind the differences in these calculations, drawing upon a sample of systemically important banks from Europe, North America, and Asia Pacific. We then discuss a range of policy options that could be explored to fix the actual and perceived problems with RWAs, and improve the use of risk-sensitive capital ratios.

Leveraged

Leveraged PDF

Author: Moritz Schularick

Publisher: University of Chicago Press

Published: 2022-12-13

Total Pages: 318

ISBN-13: 022681694X

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An authoritative guide to the new economics of our crisis-filled century. Published in collaboration with the Institute for New Economic Thinking. The 2008 financial crisis was a seismic event that laid bare how financial institutions’ instabilities can have devastating effects on societies and economies. COVID-19 brought similar financial devastation at the beginning of 2020 and once more massive interventions by central banks were needed to heed off the collapse of the financial system. All of which begs the question: why is our financial system so fragile and vulnerable that it needs government support so often? For a generation of economists who have risen to prominence since 2008, these events have defined not only how they view financial instability, but financial markets more broadly. Leveraged brings together these voices to take stock of what we have learned about the costs and causes of financial fragility and to offer a new canonical framework for understanding it. Their message: the origins of financial instability in modern economies run deeper than the technical debates around banking regulation, countercyclical capital buffers, or living wills for financial institutions. Leveraged offers a fundamentally new picture of how financial institutions and societies coexist, for better or worse. The essays here mark a new starting point for research in financial economics. As we muddle through the effects of a second financial crisis in this young century, Leveraged provides a road map and a research agenda for the future.

Bank Size and Systemic Risk

Bank Size and Systemic Risk PDF

Author: Mr.Luc Laeven

Publisher: International Monetary Fund

Published: 2014-05-08

Total Pages: 34

ISBN-13: 1484363728

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The proposed SDN documents the evolution of bank size and activities over the past 20 years. It discusses whether this evolution can be explained by economies of scale or “too big to fail” subsidies. The paper then presents evidence on the extent to which bank size and market-based activities contribute to systemic risk. The paper concludes with policy messages in the area of capital regulation and activity restrictions to reduce the systemic risk posed by large banks. The analysis of the paper complements earlier Fund work, including SDN 13/04 and the recent GFSR chapter on “too big to fail” subsidies, and its policy message is in line with this earlier work.

The Bankers’ New Clothes

The Bankers’ New Clothes PDF

Author: Anat Admati

Publisher: Princeton University Press

Published: 2024-01-09

Total Pages: 624

ISBN-13: 0691251703

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A Wall Street Journal, Financial Times, and Bloomberg Businessweek Book of the Year Why our banking system is broken—and what we must do to fix it New bank failures have been a rude awakening for everyone who believed that the banking industry was reformed after the Global Financial Crisis—and that we’d never again have to choose between massive bailouts and financial havoc. The Bankers’ New Clothes uncovers just how little things have changed—and why banks are still so dangerous. Writing in clear language that anyone can understand, Anat Admati and Martin Hellwig debunk the false and misleading claims of bankers, regulators, politicians, academics, and others who oppose effective reform, and they explain how the banking system can be made safer and healthier. Thoroughly updated for a world where bank failures have made a dramatic return, this acclaimed and important book now features a new preface and four new chapters that expose the shortcomings of current policies and reveal how the dominance of banking even presents dangers to the rule of law and democracy itself.

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