Funding advantage and market discipline in the Canadian banking sector

Beyhaghi, Mehdi; D'Souza, Chris; Roberts, Gordon S.

doi:10.1016/j.jbankfin.2013.08.006

Cited by 33 publications

(19 citation statements)

References 16 publications

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“…Market discipline refers to the process in which debtholders, such as depositors, require higher returns when the probability increases that they incur losses in case of, for example, a bank default. In general, bank risk and the deposit rate are positively related (e.g., Park and Peristiani ; Mondschean and Opiela ; Martinez Peria and Schmukler ; Demirgüç‐Kunt and Huizinga ; Imai ; Murata and Hori ; Hori et al ; Beyhaghi et al ), despite the fact that deposit insurance weakens this relation (e.g., Mondschean and Opiela ; Demirgüç‐Kunt and Huizinga )…”

Section: Introductionmentioning

confidence: 99%

Determinants of Interest Rates on Time Deposits and Savings Accounts: Macro Factors, Bank Risk, and Account Features

Bikker

Gerritsen

2017

Int Rev Finance

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Using a novel dataset from the Netherlands' banking sector, we examine how macroeconomic, bank-specific, and account-specific characteristics affect the interest rates of banking products. Our results show that interest rates have become more sensitive to bank risk since the onset of the global financial crisis. More generally, we show that time deposits reflect more closely the economic environment than bank interest rates on savings accounts do. Interest rates on deposit products vary not only across, but also within banks (i.e., across account of individual banks). We find that maturity-increasing conditions (i.e., withdrawal fees for savings accounts and product maturity for time deposits) positively influence a product's interest rate.

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Section: Introductionmentioning

confidence: 99%

Determinants of Interest Rates on Time Deposits and Savings Accounts: Macro Factors, Bank Risk, and Account Features

Bikker

Gerritsen

2017

Int Rev Finance

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“…More recently, Beyhaghi et al . () note that large Canadian banks have funding advantage over small banks and that market discipline is evident for subordinated debt but not for senior debt.…”

Section: Literature Reviewmentioning

confidence: 99%

Does market discipline impact bank charter value? The case for Australia and Canada

Haq

Avkiran

Tarazi

2016

Accounting & Finance

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This study analyses the relation between market discipline and bank charter value using a panel data set of publicly listed domestic banks in Australia and Canada over the period of 1995-2011, with a focus on the 2007-2008 global financial crisis (GFC). Overall, the results show a positive relation between market discipline and bank charter value, but this relation is weaker in the post-GFC period. Our findings reveal that in the presence of market discipline, bank capital, contingent liabilities and non-interest income are important sources of charter value. These findings have important policy implications related to bank stability. The results are robust to several model specifications. Accounting and Finance 59 (2019) 253-276 © 2016 AFAANZ © 2016 AFAANZ 12 Banks tend to trade-off high interest rate with low fee income and vice versa in Australia (Liu and Roca, 2015.). 13 Hagendorff and Keasey (2009) show that US banks, in particular, raised their noninterest income in the post-merger period.

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“…Empirical evidence is broadly consistent with this hypothesis. For example, recent research shows that market discipline initiates where the probability increases that bank debt holders will incur losses as banks take higher risks, while senior bank debt seems not to be subject to market disciplining effects (Beyhaghi, D'Souza and Roberts, 2013).…”

Section: The Role Of Market Discipline Is Diminishedmentioning

confidence: 99%

Policy responses to the issue of implicit bank debt guarantees

Schich¹,

Aydin²

2014

OECD Journal: Financial Market Trends

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Bank regulatory reform is expected to limit the value of implicit bank debt guarantees, even if not plainly targeting such values. According to the responses from 35 countries to a survey on implicit bank debt guarantees, there is however no one specific policy capable of fully eliminating the market perception that bank debt is "special". A mixture of several different and complementary policy measures is considered more helpful, with recurrent elements including the implementation of internationally agreed capital and liquidity standards, the tightening of micro-and macro-prudential supervision and making bank failure resolution more effective. As regards the overall thrust of bank regulatory reform efforts, most respondents suggest "strengthening banks" and "strengthening the capacity to withdraw the guarantee function" describes best their own efforts. By contrast, labelling certain policy measures as "effectively charging a user fee" is considered problematic as it might make explicit what currently is at most implicit.

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Funding advantage and market discipline in the Canadian banking sector

Cited by 33 publications

References 16 publications

Determinants of Interest Rates on Time Deposits and Savings Accounts: Macro Factors, Bank Risk, and Account Features

Determinants of Interest Rates on Time Deposits and Savings Accounts: Macro Factors, Bank Risk, and Account Features

Does market discipline impact bank charter value? The case for Australia and Canada

Policy responses to the issue of implicit bank debt guarantees

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