Bank Efficiency, Risk-Based Capital, and Real Estate Exposure: The Credit Crunch Revisited

The turbulent real estate market during the early 1990s coincided with the implementation of risk-based capital standards for commercial banks. In this study we use non-parametric linear programming techniques to identify the lost real estate lending due to bank inefficiency. Inefficiency may arise from one of three sources: risk-based capital standards which constrain bank real estate lending, inefficiency stemming from managerial oversight of real estate lending, and scale inefficiency which arises from banks not operating at constant returns to scale. The results indicate that the lost real estate lending associated with risk-based capital standards averaged 2.7% of total bank assets. However, banks could compensate by exercising better managerial oversight of real estate lending and by operating at constant returns to scale.     

Bank Real Estate Lending and the New England Capital Crunch

The stock of real estate loans held by New England banks has declined dramatically. Given the limited potential for real estate investments, weak demand for real estate loans is to be expected. However, supply as well as demand factors may account for some of the decline in bank real estate loans. This paper documents that bank lending for real estate may have been constrained by a capital crunch, whereby poorly capitalized banks shrank their assets, including real estate loans, to satisfy capital requirements. Because the loss of bank capital is so widespread in New England, bank-dependent borrowers may have difficulty obtaining real estate financing.     

Bank Capital and the Credit Crunch: The Roles of Risk-Weighted and Unweighted Capital Regulations

We investigated whether in recent years banks have increased their holdings of securities at the expense of their holdings of business loans in response to shortfalls of their capital relative to risk-weighted capital standards and relative to a capital standard that made no explicit allowance for credit risk. We estimated that bank credit fell by about $4.50 for each $1 that a bank's capital fell short of the unweighted capital standard. Banks that had less capital than required by the risk-weighted standard appear to have shifted away from assets with low risk weights (securities and single-family mortgages) and to have shifted toward assets with higher risk weights (commercial real estate and commercial and industrial loans). When we included both shortfall variables in a regression, shortfalls relative to the unweighted capital standard significantly affected bank credit, while shortfalls of capital relative to the risk-weighted standard did not. We found no significant effects of capital shortfalls at other, local-competitor banks on bank portfolios. Delinquencies in a given category of a bank's loans generally had significantly negative effects on that bank's holdings of loans in that category. In contrast, banks tended to increase holdings of loans in categories in which local-competitor banks were experiencing higher delinquency rates.     

Credit Availability and the Structure of the Homebuilding Industry

We investigate the role of disruptions to the structure of the homebuilding industry due to fluctuations in the availability of bank credit. We find a sustained decline in the large private homebuilder market share series over the period from 1988 to 1993 when many banks with deteriorated health reduced their lending in order to raise capital ratios. Regression analysis at the metropolitan statistical area level supports the hypothesis that, in areas where banks were less well capitalized and had more problem construction loans, the market shares of large private homebuilders that relied primarily on bank credit to finance their production suffered at the expense of the public homebuilders that had better access to external funds, in large part due to their direct access to public capital markets.     

商业银行房地产项目放贷初始决策研究

信贷业务是商业银行利润的主要来源,也是银行管理和决策中最复杂、最困难的金融业务之一,具备一个良好贷款资产结构和拥有大量较强盈利能力贷款资产是商业银行核心竞争力的重要体现之一.文章从银行视角出发,对房地产项目的放贷问题进行投资分析,由于该决策具有刚性,故传统投资分析方法足够对其评价;对某房地产新项目实例进行计算分析,采用以资本资产定价模型为基础的适用新模型确定折现率,取得了较好的效果,具有一定的现实应用意义.     

On the Design and Pareto-Optimality of Participating Mortgages

This paper develops a micro-economic model and proceeds with numerical simulation to demonstrate that participating mortgages can improve social welfare when the real estate ownership is shared among the different taxable entities. The optimal distribution of real estate ownership and lending will tend to be concentrated in taxable and nontaxable hands, respectively, with lending conducted via participating mortgages. This paper also demonstrates the violation of the well-known, risk-neutral valuation argument of the Black and Scholes (1973) model because of the lack of a riskless hedge due to the uniqueness of real estate.     

Real Estate Values, Federal Income Taxation, and the Importance of Local Market Conditions

This article develops an income property valuation model that explicitly incorporates the effects of local market conditions. In particular, the model allows real rents to respond to a change in tax law, or to any exogenous shock to the system, with the dynamics of the rent change over time dependent upon current local supply and demand conditions and on the expected rate of economic growth in the local economy. Application of the model to an analysis of reduced capital gain taxation demonstrates that a partial reversal of TRA86's real estate provisions would disproportionately benefit those markets, and related lending institutions, which are most in need of a bolstering of real estate values.     

Subprime Lending and Real Estate Prices

This article establishes a theoretical and empirical link between the use of aggressive mortgage lending instruments, such as interest‐only, negative‐amortization or subprime mortgages, and the underlying house prices. Such instruments, which come into existence through innovation or financial deregulation, allow more borrowing than otherwise would occur in previously affordability‐constrained markets. Within the context of a model with an endogenous rent‐buy decision, we demonstrate that the supply of aggressive lending instruments temporarily increases the asset prices in the underlying market because agents find it more attractive to own or because their borrowing constraint is relaxed, or both. This result implies that the availability of aggressive mortgage lending instruments magnifies the real estate cycle and the effects of fundamental demand shocks. We empirically confirm the predictions of the model using recent subprime origination experience. In particular, we find that regions that receive a high concentration of aggressive lending instruments experience larger price increases and subsequent declines than areas with low concentration of such instruments. This result holds in the presence of various controls and instrumental variables.     

政府监管对银行稳健性的影响研究——基于中国上市商业银行的实证检验

以2006～2012年16家上市银行为样本,实证分析了特许权价值、资本监管、隐性保险对银行稳健性的影响。研究结果表明：特许权价值对银行风险存在自律效应,对银行绩效和银行流动性没有显著影响;资本监管能够降低银行风险,然而却降低了银行流动性,对银行盈利性没有显著影响;隐性保险制度对于稳健性差的银行保护较多;银行规模越大,银行稳健性越好,即存在“大而不倒”的情况;资本杠杆和经营杠杆对银行稳健性的影响不大：次贷危机对银行稳健性的影响不大,但金融危机对银行稳健性的影响依然存在。     

Throwing Good Money After Bad? Cash Infusions and Distressed Real Estate

When a leveraged real estate project experience cash-flow problems, the owner must either inject additional cash or default on the mortgage. We show that it is not optimal for the owner to default as soon as net cash flow becomes negative. Surprisingly, the owner can expropriate some of the mortgage lender's wealth by injecting cash and continuing to pay interest. When the owner has cash constraints, outside investors may be able to extract significant economic rents by financing distressed real estate projects. These results have interesting implications for mortgage lending and the pattern of real estate transaction volume.     

The 1989–92 Credit Crunch for Real Estate: A Retrospective

This study surveys a broad range of information to establish the degree to which real estate lending and construction activity decreased in the 1989–92 period owing to a "credit crunch." It reviews the conditions that led up to the contraction in mortgage lending and construction and then documents the extent to which the evidence is consistent with a credit crunch in lending for residential and nonresidential construction, permanent financing of income properties, and residential mortgage lending. Also, this study weighs the relative importance of the credit crunch and other factors that contributed to the falloff in real estate lending and contrasts the recent period with earlier credit crunch episodes.     

REIT Dividend Determinants: Excess Dividends and Capital Markets

The determinants of excess dividend payments above mandatory requirements in real estate investment trusts (REITs) are evaluated. Payment of excess dividends is related to factors associated with reduced agency costs, strong operating performance, the implementation of a stock repurchase plan and an ability to access short-term bank debt. Recognizing that access to external capital is essential for long-term growth, REITs manage dividend policy to allow for capital acquisition in the form of both equity and debt. The acquisition and use of short-term bank debt provides REIT management flexibility in determining dividend policy.     

房地产的虚拟性与宏观经济稳定

本文从虚拟经济的角度深入剖析了房地产的虚拟资产特性，指出房地产是一种虚拟资产．房地产这种虚拟资产的特性是其虚拟性介于普通商品和金融资产之间。文章同时指出．正是房地产的这种虚拟资产特性使其成为联系实体经济和虚拟经济的纽带。除了扰动作用以外，房地产更能起到稳定经济的作用。这表现在两个方面：一方面。与金融资产相比．房地产价格具有相对的稳定性．这使其成为商业银行发放贷款的重要的抵押品；另一方面，房地产价格的长期稳定增长对货币发行量的稳定增长有重要影响。可见，房地产的虚拟资产特性对于银行贷款和货币供给的稳定增长．从而对整个经济的稳定增长具有重要意义。     

Determinants of capital structure of australian trading banks

Using pooled time series/cross section data of Australian trading banks over the 1967–1988 period, this study examines the determinants of bank capital ratios. Little evidence is found to support the tax benefit/bankruptcy cost trade-off, whereas evidence is broadly consistent with the predictions of Myers' pecking order theory in the presence of transactions costs and asymmetric information. Institutional factors, including bank deregulation and type of bank, are also significant determinants of capital management of Australian trading banks.The author is from the University of New South Wales, Kensington, N.S.W. Thanks are due to Neil Esho, Paul Gatward, Warren Hogan, Michael Skully and two anonymous referees for helpful comments on earlier drafts of this paper.     

The Effects of the Real Estate Crisis on Institutional Stock Prices

This article investigates the contagious movement of financial institutions' common stock prices in response to real estate news. The basic hypothesis is that because real estate assets are traded infrequently, the market has incomplete information about their true value. The stock price reaction by banks, thrifts and insurance companies to announcements of poorly performing real estate portfolios is studied. Consistent with the hypothesis, significantly negative reactions obtain, both within and across industries, to these announcements. Reflecting the differential regulatory environment and disclosure policies, insurance companies, in general, react more strongly to adverse real estate news. Also, the price reaction of an individual firm is significantly associated with the level of its real estate exposure.     

Is There a Risk Premium Puzzle in Real Estate?

This paper is based on my Presidential Address to the American Real Estate and Urban Economics Association delivered at Washington, D.C., in January 2003. The paper asks whether there is a risk premium puzzle in real estate. I examine this question by reporting on an empirical investigation of real estate investors' expectations over the last 15 years. The results suggest that ex ante expected risk premiums on real estate are quite large for their risk, too large to be explained by standard economic models. Further, the results suggest that ex ante expected returns are higher than average realized equity returns over the past 15 years because realized returns have included large unexpected capital losses. The latter conclusion suggests that using historical averages to estimate the risk premium on real estate is misleading.     

Real Estate,the External Finance Premium and Business Investment: A Quantitative Dynamic General Equilibrium Analysis

This article studies the connection between the capital market and the real estate market. Empirically, we find that positive real house price shocks lower the external finance premium and stimulate nonresidential investment and real gross domestic product (GDP). Our theoretical framework is able to mimic the volatility of the external finance premium, the relative price of real estate and capital and the investment in real estate and capital. It also captures the cyclicality of the external finance premium and of real estate prices. The contribution of real estate price fluctuations to the variability of the external finance premium and the GDP is confirmed to be significant.     

Banking Relationships and REIT Capital Structure

This article examines the evolution of real estate investment trust (REIT) capital structure in the new REIT era with a focus on the effects of banking relationships on REIT capital structure. Using a unique sample of REITs from 1992 to 2003, we find that, after controlling for firm characteristics, REITs with banking relationships are more likely to obtain long‐term debt ratings and subsequently issue public debt. Moreover, REITs with banking relationships tend to use less secured debt and have lower leverage. These findings support the notion that banking relationships facilitate REITs' access to the public debt markets and help explain why REITs shift from traditional mortgage financing to bank debt and public capital market financing. The results also support the proposition that firm leverage should be positively related to the amount of a firm's secured debt.     

宏观调控下房地产业的融资对策研究

与几年前相比，房地产市场相对显得比较低迷，成交量大幅减少，一些开发商的资金链紧绷，而资金链一旦断裂将给房地产企业和相关的金融机构带来很大的风险，因此融资问题已成为房地产企业争取生存和发展的核心问题。鉴于此，通过对房地产融资现状以及相关房地产金融政策的经济效应分析，以期提出较为合理的房地产融资建议，促进房地产业健康持续的发展。     

An Analysis of Market Segmentation in Mortgage Lending Between a Commercial Bank and a Mutual Savings Bank*

This paper is concerned with determining whether commercial banks and mutual savings banks serve separable clienteles in the mortgage market. In order to test the hypothesis, determinants of mortgage lending terms at a major commercial bank and a large mutual savings bank were analyzed. The results indicate that market segmentation does exist. However, some variable signs were other than anticipated. Nevertheless, the significance level of the summary statistic shows that the overall population was separable for the two institutions. Thus, the results of this paper are preliminary. To draw general conclusions, additional data from a larger sample must be obtained.