Basel III: Is the cure worse than the disease?

Allen, Bill; Chan, Ka Kei; Milne, Alistair; Thomas, Steve

doi:10.1016/j.irfa.2012.08.004

Cited by 142 publications

(33 citation statements)

References 5 publications

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“…To illustrate the influence of banks' capital basis on systemic risk, we plot the average steady state CCQ obtained from step 1 against the average relative number of BAs that survive the first 40000 periods in step 2 (Figure 15). The results are in line with Hannoun (2010), Allen et al (2012) and also Arnold et al (2012) who state that banks' capital basis were too low in the pre-crisis period, i.e. we show that a larger capital basis (larger CCQ) has a positive effect on stability.…”

Section: Microprudential Bank Regulationsupporting

confidence: 92%

Money Creation and Financial Instability: An Agent-Based Credit Network Approach

2013

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The authors develop a simple agent-based and stock flow consistent model of a monetary economy. Their model is well suited to explain money creation along the lines of mainstream theory. Additionally it uncovers a potential instability that follows from a maturity mismatch of assets and liabilities. The authors analyze the impact of interbank lending on the stability of the financial sector and find that an interbank market stabilizes the economy during normal times but amplifies systemic instability, contagion and bankruptcy cascades during crises. But even with no interbank market, indirect contagion can lead to bankruptcy cascades. The authors also find that the existence of large banks threatens stability and that regulatory policy should target large banks more strictly than small.

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Section: Microprudential Bank Regulationsupporting

confidence: 92%

Money Creation and Financial Instability: An Agent-Based Credit Network Approach

2013

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“…Two major examples of such legislation are the Payments Service Directive that aims to modernize cross-border EU-wide payments (Donnelly, 2016), and Basel III that aims to improve the banking sector's stability, risk management, and transparency (Allen et al, 2012). In response to this, banks have to re-assess their business model to remain profitable and adapt current processes in order to comply with these new regulations.…”

Section: Organizing For Change Within the Financial Industrymentioning

confidence: 99%

Barriers to innovation within large financial services firms

Das

Verburg

Verbraeck

et al. 2018

EJIM

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Purpose Since the 2008 financial crisis, the financial industry is in need of innovation to increase stability and improve quality of services. The purpose of this paper is to explore internal barriers that influence the effectiveness of projects within large financial services firms focussing on potentially disruptive and radical innovations. While literature has generally focused on barriers within traditional technology and manufacturing firms, few researchers have identified barriers for these type of firms. Design/methodology/approach A framework of internal barriers was developed and validated by means of an explorative case study. Data were collected at a European bank by exploring how innovation is organized and what barriers influence effectiveness of eight innovation projects. Findings Six items were identified as key barrier for potentially disruptive and radical innovations (e.g. traditional risk-avoidance focus, and inertia caused by systems architecture). As such, in the sample these were more important than traditionally defined barriers such as sources of finance, and lacking exploration competences. Research limitations/implications Based on a small number of projects within one firm, the results highlight the need for more in-depth research on the effects of barriers and how barriers can be overcome within this industry. Originality/value The results show that there is a discrepancy between the societal demand for radical change within the financial industry and the ability of large financial services firms to innovate. The study identifies which unique internal barriers hamper potentially disruptive and radical innovation in large financial services firms.

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“…For instance, for the full implementation of other capital standards (Tier 2 capital and Leverage ratio) and liquidity standards (LCR-liquidity coverage ratio and NSFR-net stable funding ratio) there is still more than 950 billion EUR missing. With reference to that, Allen et al (2012) emphasize the existence of trade-off between high costs of adjustments to the new reforms and financial stability. Also, they highlight the negative consequences of the new reform on bank liquidity management and the necessity of changing the regulatory definition of liquid assets.…”

Section: Literature Reviewmentioning

confidence: 99%

Solvency and Liquidity Level Trade-off: Does it Exist in Croatian Banking Sector?

Novokmet

Marinović

2016

Scientific Annals of Economics and Business

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We focus on 32 Croatian banks in the period 2002-2010 in order to investigate the solvency-liquidity nexus. Dynamic panel data analysis is applied on two basic models in which current liquidity ratio and equity to assets ratio are set as dependent variables, interchangeably, and other explanatory variables employed to capture the effect of bank size, profitability and asset quality as well as macroeconomic environment. We found two-way positive relationship between bank solvency and liquidity. However, bank size plays an important role in the capital and liquidity management, and trade-off between the solvency and liquidity level is found for the larger banks. Therefore, policymakers should take into consideration capital and liquidity interdependence, as well as the bank size effect when designing capital and liquidity requirements in order to downsize the regulatory burden for smaller banks, and increase them for larger banks. Namely, larger banks tend to minimize regulatory costs by avoiding simultaneous increase of liquidity and solvency. Small banks do exactly the opposite and stock both, capital and liquidity, what potentially makes their funds allocation sub-optimal, from their own as well as social point of view. Altogether, the paper contributes to scarce empirical evidence regarding bank solvency and liquidity interdependence, particularly when the post-transitional banking sectors are taken into consideration. It adds to knowledge on bank financial management in praxis, and bank managers and prudential authorities might find it relevant for their policies design and implementation.

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Basel III: Is the cure worse than the disease?

Cited by 142 publications

References 5 publications

Money Creation and Financial Instability: An Agent-Based Credit Network Approach

Money Creation and Financial Instability: An Agent-Based Credit Network Approach

Barriers to innovation within large financial services firms

Solvency and Liquidity Level Trade-off: Does it Exist in Croatian Banking Sector?

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