Basel III and recourse to Eurosystem monetary policy operations

Basel III and recourse to Eurosystem monetary policy operations

Date:	2016-04
By:	Bucalossi, Annalisa Fonseca Coutinho, Cristina Junius, Kerstin Luskin, Alaoishe Momtsia, Angeliki Rahmouni-Rousseau, Imene Sahel, Benjamin Scalia, Antonio Schmitz, Stefan Prior Soares, Rita Isabel Schobert, Franziska Wedow, Michael
URL:	http://d.repec.org/n?u=RePEc:ecb:ecbops:2016171&r=net
	Following the emergence of the financial crisis in August 2007, the Basel Committee on Banking Supervision established in 2010 a new global regulatory framework. In addition to raising capital requirements, it introduced three ratios, two of which set out minimum standards for liquidity and funding risk, i.e. the liquidity coverage ratio and the net stable funding ratio, and one which aims to limit leverage in the banking system, i.e. the leverage ratio. All three ratios can have a number of implications for monetary policy implementation, in particular the liquidity coverage ratio and the net stable funding ratio owing to the special role of central banks in providing liquidity. This paper investigates the extent to which the regulatory initiatives might have already had an impact on banks’ behaviour in Eurosystem monetary policy operations. It also provides an overview of the regulatory state of play and major recent advancements in banks’ compliance with the three Basel III ratios. Based on aggregate data, the empirical evidence generally supports some of the theoretically predicted effects of the three ratios. However, no firm conclusions can be drawn as to whether the introduction of the three ratios could cause a significant change in banks’ recourse to Eurosystem monetary policy operations. This is partly due to the fact that, in aggregate, major developments, such as substantial fluctuations in the recourse to Eurosystem refinancing operations in the years between 2012 and 2015, have been driven by the financial crisis and the gradual recovery from it, as well as by the accommodative stance of monetary policy. JEL Classification: G28, E58
Keywords:	Basel III, liquidity regulation, monetary policy implementation

On Freezing Depositor Funds at Financially Distressed Banks: An Experimental Analysis

On Freezing Depositor Funds at Financially Distressed Banks: An Experimental Analysis

Date:	2015-09
By:	Douglas D. Davis (Department of Economics, VCU School of Business) Robert Reilly (Department of Economics, VCU School of Business)
URL:	http://d.repec.org/n?u=RePEc:vcu:wpaper:1501&r=net
	This paper reports an experiment conducted to evaluate the effects of alterations in the terms of repayments to depositors following a liquidity suspension as well as the effect of alterations in the publicity of information about withdrawal behavior on the fragility of distressed banks. Results indicate that a ÒtoughÓ renegotiation stance, e.g. of protecting depositors who maintain their money in the bank, can quite effectively promote stability. Information provided to depositors regarding past withdrawal behavior weakens the effectiveness of a tough renegotiation policy, but reduces fragility somewhat for a more lenient rescheduling condition.
Keywords:	liquidity suspension, observability, bank runs, experimental economics
JEL:	G21 C9

Experiments in Financial Economics in the Special Issue: Research in Experimental Economics v. 16

財務實驗專刊

Experiments in Financial Economics, Series: Research in Experimental Economics v. 16

內容：

• Experiments in financial economics: An introduction
• Asymmetric information and bank lending: The role of formal and informal institutions (a survey of laboratory research)
• Divisible-good uniform price auctions: The role of allocation rules and communication among bidders
• Strategic default with social interactions: A laboratory experiment
• The dividend puzzle: A laboratory investigation
• An experimental analysis of myopic loss aversion
• Does everyone accept a free lunch? Decision-making under (almost) zero-cost borrowing
• List of contributors

Limited Deposit Insurance Coverage and Bank Competition

Limited Deposit Insurance Coverage and Bank Competition

Date:	2014-08-06
By:	Shy, Oz (Federal Reserve Bank of Boston) Stenbacka, Rune (Hanken School of Economics) Yankov, Vladimir (Board of Governors of the Federal Reserve System (U.S.))
URL:	http://d.repec.org/n?u=RePEc:fip:fedgfe:2014-53&r=net
	Deposit insurance schemes in many countries place a limit on the coverage of deposits in each bank. However, no limits are placed on the number of accounts held with different banks. Therefore, under limited deposit insurance, some consumers open accounts with different banks to achieve higher or full deposit insurance coverage. We compare three regimes of deposit insurance: No deposit insurance, unlimited deposit insurance, and limited deposit insurance. We show that limited deposit insurance weakens competition among banks and reduces total welfare relative to no or unlimited deposit insurance.
Keywords:	Limited deposit insurance coverage; deposit rates; bank competition
JEL:	G21

Bank Capital and Dividend Externalities

Bank Capital and Dividend Externalities

Date:	2013-05
By:	Acharya, Viral V Le, Hanh Shin, Hyun Song
URL:	http://d.repec.org/n?u=RePEc:cpr:ceprdp:9479&r=net
	While losses were accumulating during the 2007-09 financial crisis, many banks continued to maintain a relatively smooth dividend policy. We present a model that explains this behavior in a setting where there are financial externalities across banks. In particular, by paying out dividends, a bank transfers value to its shareholders away from its creditors, who in turn are other banks. This way, one bank’s dividend payout policy aects the equity value and risk of default of otther banks. When such negative externalities are strong and bank franchise values are not too low, the private equilibrium can feature excess dividends relative to a coordinated policy that maximizes the combined equity value of banks.
Keywords:	externalities; financial crises; franchise value; risk-shifting
JEL:	G01

A Classroom Financal Market Experiment

A Classroom Financal Market Experiment

Date:	2013-08
By:	Jonathan E. Alevy (Department of Economics, University of Alaska Anchorage) Paul Johnson (Department of Economics, University of Alaska Anchorage)
URL:	http://d.repec.org/n?u=RePEc:ala:wpaper:2013-01&r=net
	This computerized web experiment immerses students in an environment where they are in the role of bank managers, complementing existing experiments in which they act as depositors. The experiment is programmed to run on a variety of devices, including student’s phones and is suitable for use in intermediate macroeconomics or money and banking courses. Students learn the basic elements of bank balance sheets, the tradeoffs a bank makes when it hedges against liquidity risk, and the macroeconomic implications of the network aspects of the banking system. Key parameters are chosen by the instructor, and all results are saved as a spreadsheet data file. Early trials show that a team’s performance is positively correlated with its success in managing interbank deposits.
Keywords:	asset pricing, laboratory experiments, advice
JEL:	A22