Bank Transparency and Deposit Flows

Chen, Qi; Goldstein, Itay; Huang, Zeqiong; Vashishtha, Rahul

doi:10.2139/ssrn.3212873

Cited by 25 publications

(35 citation statements)

References 64 publications

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“…For example, we do not evaluate the impact of the regulation on the stability of the financial system. Similarly, enhancing bank transparency could increase the sensitivity of depositor flows to performance, creating challenges on the funding side of the balance sheet (Chen et al 2018). Accordingly, our conclusions on the LLD Initiative should not be interpreted as more mandated disclosure regulations are desirable for bank shareholders, depositors, or the overall economy.…”

Section: Introductionmentioning

confidence: 88%

“…Our conversations with regulators also reveal that banks were not willing to disclose their loan portfolios unilaterally, due mainly to competitive concerns. 11 Further, we note that some banks may find it optimal to remain opaque to reduce the sensitivity of depositor flows to bank performance (Chen et al 2018). Finally, even in the absence of these factors, agency problems and various other frictions may have prevented the disclosure equilibrium pre-regulation.…”

Section: Introductionmentioning

confidence: 94%

“…On credit markets, researchers have examined the role of borrowers' financial information in credit contracting (e.g., Armstrong, Guay, and Weber 2010;Christensen, Nikolaev, and Wittenberg-Moerman 2016). The focus on the effects of lenders' transparency, however, is relatively new (e.g., Balakrishnan and Ertan 2018;Chen et al 2018;Dou, Ryan, and Xie 2018;Granja 2018). To our knowledge, the only study that directly examines the effect of banks' accounting practices on their overall lending is by Beatty and Liao (2011), who document the role of timely loan loss provisioning in bank lending when macroeconomic conditions are tough.…”

Section: Introductionmentioning

confidence: 99%

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Bank asset transparency and credit supply

Balakrishnan

Ertan

2019

Rev Account Stud

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Section: Introductionmentioning

confidence: 88%

Section: Introductionmentioning

confidence: 94%

Section: Introductionmentioning

confidence: 99%

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Bank asset transparency and credit supply

Balakrishnan

Ertan

2019

Rev Account Stud

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“…According to banks' size, we first regress banks' deposit flows on variables known to affect them in prior works (see e.g. Chen et al, 2019;Acharya and Mora, 2015;Nys et al, 2015;Finger and Hesse, 2009;etc.) through the following model:…”

Section: Unexpected Deposit Flowsmentioning

confidence: 99%

Unexpected Deposit Flows, Off-Balance Sheet Funding Liquidity Risk and Bank Loan Production

2020

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In this paper, we use U.S. commercial banks' data to investigate whether the effect of unexpected deposit flows on loan production depends on banks' exposure to off-balance sheet funding liquidity risk. We find that lending is sensitive to deposit shocks at small banks but not at large ones. Furthermore, for small banks, the increase in lending explained by unexpected deposit inflows depends on how much they are exposed to funding liquidity risk stemming from their off-balance sheets, as measured by the level of unused commitments. Small banks more exposed to such funding liquidity risk tend to extend fewer new loans. Our results indicate that unexpected deposit inflows from, for instance, the failure of other banks or market disruptions might not as easily be fueled again to borrowers. JEL Classification: G21, G28Abstract:In this paper, we use U.S. commercial banks' data to investigate whether the effect of unexpected deposit flows on loan production depends on banks' exposure to off-balance sheet funding liquidity risk. We find that lending is sensitive to deposit shocks at small banks but not at large ones. Furthermore, for small banks, the increase in lending explained by unexpected deposit inflows depends on how much they are exposed to funding liquidity risk stemming from their off-balance sheets, as measured by the level of unused commitments. Small banks more exposed to such funding liquidity risk tend to extend fewer new loans. Our results indicate that unexpected deposit inflows from, for instance, the failure of other banks or market disruptions might not as easily be fueled again to borrowers.

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“…Due to coordination issues, it might not be socially desirable to make transaction data public (see in particular Morris and Shin (2018) for payments, Dang et al (2017) for banks, Goldstein and Leitner (2018) for stress tests and information disclosure, and the empirical treatise on bank transparency and deposit flows by Chen et al (2018)).…”

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confidence: 99%

Embedded Supervision: How to Build Regulation into Blockchain Finance

Auer

2019

gwp

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The spread of distributed ledger technology (DLT) in finance could help to improve the efficiency and quality of supervision. This paper makes the case for embedded supervision, i.e., a regulatory framework that provides for compliance in tokenised markets to be automatically monitored by reading the market's ledger, thus reducing the need for firms to actively collect, verify and deliver data. After sketching out a design for such schemes, the paper explores the conditions under which distributed ledger data might be used to monitor compliance. To this end, a decentralised market is modelled that replaces today's intermediary-based verification of legal data with blockchain-enabled data credibility based on economic consensus. The key results set out the conditions under which the market's economic consensus would be strong enough to guarantee that transactions are economically final, so that supervisors can trust the distributed ledger's data. The paper concludes with a discussion of the legislative and operational requirements that would promote low-cost supervision and a level playing field for small and large firms.

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Bank Transparency and Deposit Flows

Cited by 25 publications

References 64 publications

Bank asset transparency and credit supply

Bank asset transparency and credit supply

Unexpected Deposit Flows, Off-Balance Sheet Funding Liquidity Risk and Bank Loan Production

Embedded Supervision: How to Build Regulation into Blockchain Finance

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