Bank size, capital, and systemic risk: Some international evidence

Laeven, Luc; Ratnovski, Lev; Tong, Hui

doi:10.1016/j.jbankfin.2015.06.022

Cited by 368 publications

(141 citation statements)

References 44 publications

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“…In this scenario, stricter capital requirements could increase bank risk exposure. Laeven et al () provide empirical evidence on the role played by size. Specifically, they show that the level of risk is lower for better capitalized banks and that this effect is more pronounced for large financial institutions.…”

mentioning

confidence: 99%

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

Polizzi¹,

Scannella²,

Suárez

2020

Global Policy

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The aim of this paper is to examine whether and to what extent bank capital requirements and liquidity standards influence the level of bank stability. Our approach is that both capital and liquidity affect lending growth, which in turn affects bank stability. We construct a panel dataset on a sample of 2,054 commercial banks from 117 developed and developing countries during the 2000-16 period. By applying a two-stage least squares (2SLS) empirical methodology, our findings show that capital and liquidity have a negative direct impact on the level of bank stability. However, this influence is counteracted by an indirect positive effect through the increased level of credit. Our results are not homogeneous across legal and institutional environments. In particular, we provide evidence on more relevant relationships in countries with higher level of protection of creditor rights and lower restrictions on non-traditional banking activities. Our empirical findings are robust to different specifications of the empirical model and to potential endogeneity problems. Policy Implications• Notwithstanding the tightening Basel III regulation, lending has increased in the presence of higher capital requirements and liquidity coverage ratios. However, this increased in lending is not independent upon the legal and institutional setup.• Although it is fundamental to study the direct effects of capital and liquidity requirements on stability, policymakers should deal not only with these direct effects, but also with the different channels of this transmission mechanism and, specifically, with the lending channel.

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mentioning

confidence: 99%

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

Polizzi¹,

Scannella²,

Suárez

2020

Global Policy

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show abstract

“…Once the shock event emerges the freeze of credit sales starts. In addition, liquidity shortages and interbank linkages get broken (Laeven, Ratnovski and Tong, 2016).…”

Section: Resulting Outcomesmentioning

confidence: 99%

“…Another outcome is the occurrence of the inefficient government bailouts when banks are in distress (Laeven, Ratnovski and Tong, 2016) from previous incorrectly evaluated risk. These funds usually come from taxpayer money that cannot be further invested in improving health, education, transportation or other needs of the society.…”

Section: Resulting Outcomesmentioning

confidence: 99%

“…Excessive risk undertaking is further stimulated by behaviour of depositors. For instance, depositors in general are more lenient towards choosing banks to deposit funds if deposit insurance is in force (Laeven, Ratnovski and Tong, 2016). In addition, depositors are more careless for bank behaviour and their risk appetite when their domestic country is wealthy -high GDP per capita (Laeven, Ratnovski and Tong, 2016).…”

Section: Systemic Incentivesmentioning

confidence: 99%

“…For instance, depositors in general are more lenient towards choosing banks to deposit funds if deposit insurance is in force (Laeven, Ratnovski and Tong, 2016). In addition, depositors are more careless for bank behaviour and their risk appetite when their domestic country is wealthy -high GDP per capita (Laeven, Ratnovski and Tong, 2016). When depositors do not sufficiently supervise banks with their deposits and withdrawals, banks tend to be more careless towards depositors and undertake riskier assets.…”

Section: Systemic Incentivesmentioning

confidence: 99%

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Intermediary asset pricing in commodity futures returns

Yin

Nie

Han

2020

Journal of Futures Markets

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This paper assesses the extent to which intermediary capital (IC) risk contributes toward explaining commodity futures returns. We find that the IC effect is substantially positive and continues to grow as the financialization of commodities deepens. Positive and negative IC risks play asymmetric roles, with the effect of negative IC strengthening in recent subperiods. We further confirm the heterogeneous roles of IC across individual commodities by crosssection analyses. Overall, the effect of the positive IC risk factor varies significantly. Portfolios with low basis, low open interest, low momentum, and low liquidity earn significantly higher returns than counterparty portfolios.

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Bank size, capital, and systemic risk: Some international evidence

Cited by 368 publications

References 44 publications

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

The Role of Capital and Liquidity in Bank Lending: Are Banks Safer?

Untitled

Intermediary asset pricing in commodity futures returns

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