A New Approach to Assessing Risks to Financial Stability

Haldane, Andrew; Hall, Simon; Pezzini, Silvia

doi:10.2139/ssrn.1447879

Cited by 38 publications

(20 citation statements)

References 18 publications

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“…However, in these studies the index is 4 In addition foreigners may cease to be willing to finance deficits in domestic currencies if they consider their assets are vulnerable to monetization via inflation, and such a cessation can disrupt asset markets and banks' funding. See Haldane et al (2007) for an assessment of the impact of such a hypothetical unwinding in the US 5 Fiscal difficulties were not present prior to the subprime crisis but emerged afterwards, as the economy slowed and authorities had to recapitalize banks.…”

Section: Banks and The Factors Driving Bank Crisesmentioning

confidence: 99%

Interest rate liberalization and capital adequacy in models of financial crises

Barrell

Karim

Ventouri

2017

Journal of Financial Stability

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Abstract:We characterize the effects of interest rate liberalization on OECD banking crises, controlling for the standard macro prudential variables that prevail in the current literature. We use the Fraser Institute's Economic Freedom of the World database. We test for the direct impacts of interest rate liberalization on crisis probabilities and their indirect effects via capital adequacy. Over the period 1980 -2012, we find that interest rate liberalization has a crises reducing effect, and it appears that the beneficial effects work by strengthening capital buffers. We also show that when controlling for liberalization, capital adequacy and liquidity, the main driver of financial crises is property price growth. Our results invariant when we control for alternative sensitivity tests for robustness purposes.JEL classification: C52; E58; G21; G28

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Section: Banks and The Factors Driving Bank Crisesmentioning

confidence: 99%

Interest rate liberalization and capital adequacy in models of financial crises

Barrell

Karim

Ventouri

2017

Journal of Financial Stability

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“…Regards emerging markets a recent study by Akhter and Daly (2009) suggests that financial sector reforms should be directed at not only easing credit availability for the poor but also aimed at eliminating financial repression by liberalizing interest rates. An aggregated approach to financial stability is also employed by the Bank of England as part of the IMF's Financial Sector Assessment Programme for the UK, Haldane, Hall, and Peziini (2007). Working on a similar concept, Pain (2003) investigated how the loan loss provision (LLP) parameter behaves around default events.…”

Section: Motivation For the Researchmentioning

confidence: 99%

Macroeconomic determinants of credit risk: Recent evidence from a cross country study

Ali

Daly

2010

International Review of Financial Analysis

100

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“…Relative to previous papers which rely on reduced form relationships to integrate credit and interest rate risk (e.g. Haldane et al, 2007), our contribution is to capture the complicated and fundamental relationship between interest rate changes and interest rate income. The most sophisticated stress testing framework developed so far (Elsinger et al, 2006) captures default and interest rate risk in an integrated fashion by conditioning both risks on the underlying systematic factors.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This constellation of shocks provides what was regarded as a severe but not too extreme scenario around the time when we implemented the stress scenario. A similar combination of shocks has, for example, also been applied to analyse financial stability risks in the UK (Haldane et al, 2007). For illustrative purposes, we therefore use this scenario for our simulations.…”

Section: The Scenariomentioning

confidence: 99%