How Do Large Banking Organizations Manage Their Capital Ratios?

Berger, Allen N.; DeYoung, Robert; Flannery, Mark J.; Lee, David; Öztekin, Özde

doi:10.1007/s10693-008-0044-5

Cited by 420 publications

(323 citation statements)

References 18 publications

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“…More specifically, U.S. banks change their bank credit standards depending on the current phase of the economic cycle, even after considering a loan demand (Berger et al, 2008). Similar findings apply to the European banks for the period 2003(Hempell and Sorensen, 2010.…”

Section: Demand and Supply Of Loansmentioning

confidence: 72%

“…U.S. banks tend to increase their leverage and investments in risky assets during the upturns of the business cycle and reduce them during recessions (see Berger et al, 2008 for commercial banks; Adrian and Shin, 2008 and 2012 for investment banks). In Europe, the leverage of (mainly) investment banks is procyclical while that of (mainly) commercial banks is not (Baglioni et al, 2012).…”

Section: The De Larosière Report (2009) Also States That the Global Fmentioning

confidence: 99%

“…Second, the banks' capital structures are determined based on specific cross-sectional determinants, which are similar to those of the non-financial business sector, except for banks with marginal capital adequacy ratios (Gropp and Heider, 2009). This is in conjunction with the fact that the U.S. banks appear to actively manage their leverage ratio (Berger et al, 2008). Third, this ratio is simple and increases transparency (Blum, 2008).…”

Section: Proposals Concerning Leverage Funding and Market Liquiditymentioning

confidence: 99%

See 2 more Smart Citations

Bank procyclicality and output: Issues and policies

Athanasoglou¹,

Daniilidis

Delis

2014

Journal of Economics and Business

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The recent global financial crisis has highlighted the importance of the procyclicality of the financial sector. The procyclicality has transformed banks from mitigation mechanisms to amplifiers of changes in economic activity, potentially affecting financial stability and economic growth. The causes of procyclicality can be attributed to market imperfections and deviations from the efficient market hypothesis, while other factors including the Basel-type regulations, accounting standards and leverage have exacerbated it. Several suggestions have been forwarded to attenuate procyclicality, in the form of rules and discretion. They are presented here according to the factors they aim to alleviate. Some of the suggestions have been adopted under the Basel III framework, which explicitly addresses the procyclicality issue.

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Section: Demand and Supply Of Loansmentioning

confidence: 72%

Section: The De Larosière Report (2009) Also States That the Global Fmentioning

confidence: 99%

Section: Proposals Concerning Leverage Funding and Market Liquiditymentioning

confidence: 99%

See 1 more Smart Citation

Bank procyclicality and output: Issues and policies

Athanasoglou¹,

Daniilidis

Delis

2014

Journal of Economics and Business

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“…Peura and Keppo (2006) report that differences in returns volatility and in the level of capital market imperfections are also important determinants of cross-section of banks' capital ratios. Berger et al (2008) investigate how bank holding companies manage their capital structure, and Gropp and Heider (2010) echo results in the corporate finance literature by showing that bank-fixed effects explain most of the variation in bank capital ratios. The role of regulatory innovation is investigated by Flannery and Rangan (2008).…”

Section: Introductionmentioning

confidence: 81%

Monitoring Matters: Debt Seniority, Market Discipline and Bank Conduct

et al. 2015

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We examine if junior debtholders monitor banks and if such monitoring constrains risk-taking. Leveraging an unexplored natural experiment in the U.S. that changes the priority structure of claims on failed banks' assets, we provide novel insights into the debate on market discipline. We document asymmetric effects for monitoring effort depending on whether a creditor class moves up or down the priority ladder. Conferring priority to all depositors causes declines in deposit interest rates but increases interest rates for non-deposit liabilities, suggesting greater incentives for junior debtholders to exert monitoring effort. Consistent with the idea that senior claims require lower risk premiums, banks increasingly rely on deposit funding following changes in priority structure. More intensive monitoring also influences conduct: subordinating non-depositor claims reduces risk taking. Our results inform the debate about bail-ins and highlight that changes in the priority structure are a complementary tool to regulation which has received little attention in prior work.

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“…Bank size can have a negative effect on capital (Berger et al, 2008), since larger banks have easier access to capital markets (Ahmad et al, 2009), a greater flexibility in the use of hybrid instruments or subordinated debt to increase their capital ratios (Heid et al, 2003) and might rely on public intervention (bail-out) in case of distress. A positive impact of size on capital can be found in case the asymmetries of information prevail (Gropp and Heider, 2010), inducing large banks to hold higher capital buffers to compensate for their increased complexity.…”

Section: Number Of Inspectionmentioning

confidence: 99%

The Effects of Bank Regulation on the Relationship Between Capital and Risk

Tanda

2015

Comp Econ Stud

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Capital regulation acts as an external force in the determination of bank capital and risk levels. Changes in the regulatory framework can influence banks' decisions. Starting from the debate of the prudential regulation after the financial crisis, this paper reviews the main empirical contributions on the role of capital regulation in the determination of banks' capital ratios and risk exposure to evaluate bank behavior. Capital and risk decisions seem to be effectively influenced by regulation, although results may vary according to factors such as time period, country, and the type of capital analyzed. Comparative Economic Studies (2015) 57, 31-54.

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How Do Large Banking Organizations Manage Their Capital Ratios?

Abstract: Banks, Capital management, Capital regulation, Partial adjustment models, G21, G28, G32,

Cited by 420 publications

References 18 publications

Bank procyclicality and output: Issues and policies

Bank procyclicality and output: Issues and policies

Monitoring Matters: Debt Seniority, Market Discipline and Bank Conduct

The Effects of Bank Regulation on the Relationship Between Capital and Risk

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