This paper explores how banks adjust their risk-based capital ratios and asset allocations following an exogenous shock to their asset quality caused by Hurricane Katrina in 2005. We find that independent banks based in the disaster areas increase their risk-based capital ratios after the hurricane, while those part of a bank holding company do not. The effect on independent banks mainly comes from the subgroup of high-capitalized banks. These banks increase their holdings in government securities and reduce loans to non-financial firms. Hence, banks that become more stable achieve this at the cost of reduced lending.
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Non-Technical SummaryIn the course of the recent financial crisis and the ongoing sovereign debt crisis, understanding the design and consequences of deposit insurance schemes has anew become an important policy issue. Deposit insurance is a corner stone of many banking systems worldwide because it helps protect small savers and prevent bank runs. However, it also gives banks incentives for excessive risk-taking because, first, it weakens the market discipline carried out by creditors, and second, mispricings of the deposit insurance premium, which come from the regulators' limited ability to assess risks and to charge risk-adjusted premiums, make higher risk-taking attractive for shareholders. Whether deposit insurance impacted banks' risk-taking in the U.S. during the recent financial crisis is not yet explored. The effect of deposit insurance may be complementary to other important aspects of the financial crisis, such as the effect of bank CEO incentives, bank equity, and government bailout policies on banks' risk-taking.This paper explores how a bank's amount of insured deposits affects its stability and lending decisions during the recent financial crisis. We use variation introduced by the U.S. Emergency Economic Stabilization Act in October 2008, which increased the deposit insurance coverage from $100,000 to $250,000 per depositor and bank. This change increased the total sum of insured deposits in the U.S. from roughly $4,800 billion to roughly $5,300 billion. Importantly for our analysis, banks were affected differently. For some banks, this event significantly increased the amount of insured deposits (``affected banks''). For other banks, it only had a minor effect (``unaffected banks'').Our empirical analysis shows that an increase in the amount of insured deposits causes the affected banks to become more risky relative to the unaffected banks. This is reflected in estimations for two alternative risk measures: banks' predicted probabilities of default and banks' z-scores (a measure for a bank's ability to absorb losses by its bank capital). Further, our analysis shows that affected banks increase their investments in commercial real estate loans, which is considered a particularly risky loan category, relative to unaffected banks after the regulatory change. This presumably contributes to a relatively lower asset quality of affected banks following the increase of insured deposits, as reflected in a significantly ...
The project aimed at developing and testing a new payment system which provides financial incentives for rehabilitation centers to achieve the best outcomes possible for their patients but does not create additional costs for the insurance funds. The system is conceived as a "quality competition" organized by the centers among themselves with a scientific institute acting as a "referee". Centers with outcomes above average receive a bonus financed by a corresponding malus from the centers below average. In a stepwise process which started in 2001 and was continually accompanied by a scientific institute, we developed the methodological and organizational prerequisites for the new payment system and tested them in two multicentric studies with large case numbers (n=1,058 and n=700, respectively). As a first step, a new assessment instrument (SINGER) was developed and validated in order to measure the outcomes in a reliable, valid, and change-sensitive way. In the second phase, we developed a regression analytic model which predicted the central outcome variable with >84% variance explained. With this model, the different case-mix in the participating centers can be controlled, so that comparisons of outcomes across centers can take place under fair conditions. In the recently completed third phase, we introduced an internet-based programme SINGER-online into which the centers can enter all relevant data. This programme ensures a high quality of all data and makes comparisons of outcomes across all centers possible at any chosen time. The programme contains a special module accessible to the medical services of the health insurance only, which allows sample checks of the data entered by the clinics and helps to ensure that all centers keep to the principles of a fair competition for better quality for their patients. After successful testing of these elements, a functioning model of pay-for-performance in rehabilitation after stroke is now available.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
hi@scite.ai
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.