Firm credit risk in normal times and during the crisis: are banks less risky?

Bank solvency was a major issue during the financial crisis of 2007–2009, but bank credit default swap (CDS) spreads were almost always below nonbank CDS spreads. What is the reason for this gap? Are banks perceived to be less risky? This study empirically decomposes CDS premia for 45 major banks and 167 large industrial firms from Europe and the US. It turns out that expected losses are usually somewhat lower for banks than for nonbanks, but expected losses contribute relatively little to the observed CDS premia. CDS spreads for banks and nonbanks differ mainly because market participants require a lower compensation for bearing bank credit risk. The quite persistent difference in the credit risk premia for banks and nonbanks disappears only temporarily during the crisis.     

Does a one-size-fits-all approach to financial regulations alleviate default risk? The case of dual banking systems

Financial regulations are developed to curb financial and economic fragility costs without undermining the economic contributions of banks to economic development. To understand the impact financial regulations have on reducing the financial fragility of banks we use the probability-of-default of banks as a proxy for bank failure. After analyzing data collected from 15 countries with a dual banking system for the period 2000–2015, we find convincing evidence that not all financial regulations have risk-reducing benefits for banks and the impact of financial regulations on default risk is not the same for conventional banks (CBs) and Islamic banks (IBs). The empirical evidence suggests that regulations that lessen overall default risk have a greater impact on IBs while those increasing default risk have a greater impact on CBs. Based on our findings we recommend that regulators should consider the different natures of CBs and IBs and tailor financial regulations to suit these operationally distinct financial intermediaries.     

基于同业竞争的中小企业贷款定价模式设计

利率市场化改革备件下,本文站在银行的角度建立一个适合中小企业的贷款定价模型,以此帮助银行更好地为中小企业融资服务。本文首先基三种贷款定价模式的比较研究,归纳提出了适合区域性商业银行特征的中小企业贷款定价理念——“基于同业竞争的贷款定价法”;其次,探讨了影响商业银行贷款定价机制的微观因素,如资金成本、违约风险、预期收益等;第三,综合市场结构和风险度量两个主要因素,利用审断回归分析建立同业竞争贷款定价模型;最后,采用某区域性商业银行的数据来进行实证检验,从而说明使用这种基于同业竞争的贷款定价模型是解决目前中小企业融资难问题的一条可行的道路。     

风险厌恶测定与我国银行治理效率的实证研究

基于FDIC对商业银行贷款损失所设定的概率分布,本文利用VaR方法对商业银行风险厌恶程度进行了测定,并利用我国上市银行2004～2008年间的财务数据对商业银行的风险厌恶程度进行了实证分析,结果表明商业银行的风险控制可以反映其风险厌恶程度,风险厌恶程度在风险控制中得到充分体现.银行的风险厌恶程度越高,净资产回报率越高.     

Financial innovation,systematic risk and commercial banks’ stability in China: theory and evidence

We are dedicated to revealing the impacts of financial innovation and systematic risk on commercial banks’ stability in China, both theoretically and empirically. We established a theoretical model and derived a theoretical mechanism from this model revealing two distinctive patterns of the impacts determined by the profitability of financial derivatives: the impacts of financial innovation and systematic risk on banks’ stability in China are linear under the circumstances of a positive expected risk premium of financial derivatives; conversely, the impacts can be linear, U-shaped or cubic when the expected risk premium is negative. We make three propositions to analyse the patterns and conditions of these impacts in detail. In the empirical analysis, we do not focus only on the banking industry but also on individual commercial banks. The empirical results demonstrate that the impact of financial innovation on both the banking industry’s and most individual commercial banks’ stability are U-shaped, and the impact of systematic risk on the banking industry’s and on only one commercial bank’s stability are significantly linear, which confirms certain conditions mentioned in the theoretical propositions. Finally, the study’s conclusions are presented, and the contributions of the article to future study are also mentioned.     

中国银行业系统性风险研究*——宏观审慎视角下的三个压力测试

本文在传统网络模型中加入去杠杆—降价抛售机制,研究以下两类宏观经济冲击对银行体系系统性风险的影响。从房地产贷款违约压力测试看,房地产贷款违约引起的传染风险是系统性风险的重要来源;传染损失比重和去杠杆次数结果则表明,2007年我国银行面临的传染风险最高,之后呈现快速下降的趋势;参数敏感性结果表明,网络模型中去杠杆、降价抛售以及破产对传染风险的相对重要性依次递减。从地方政府融资平台贷款违约压力测试看,大型商业银行受平台贷款违约的影响小于股份制和城市商业银行。此外,平台贷款违约概率存在阈值,在阈值之上银行损失和倒闭急剧攀升。基于银行倒闭压力测试,量化出本文的网络模型相对于传统网络模型的优越性。本文还发现中国金融体系的系统重要性与系统脆弱性指标的“错配”对于维持金融体系稳定非常关键。     

The financial and economic performance of social banks

ABSTRACT

The financial crisis of 2008 provides evidence for the instability of the conventional banking system. Social banks may present a viable alternative for conventional banks. This article analyses the performance of social banks related to the bank business model, economic efficiency, asset quality, and stability by comparing social banks with banks where the difference is likely to be large, namely with the 30 global systemically important banks (G-SIBs) of the Financial Stability Board over the period 2000–2014. We also analyse the relative impact of the global financial crisis on the bank performance. The performance of social banks and G-SIBs is surprisingly similar.     

BANK PERFORMANCE,FINANCIAL STABILITY AND MARKET CONCENTRATION: EVIDENCE FROM COOPERATIVE AND NON‐COOPERATIVE BANKS

Relying upon highly territorially disaggregated data taken at labour market areas, the paper explores the relationship between bank performances and financial stability of the banking system taking into account the role of market concentration. The z‐score is used as financial stability indicator, while the performance of financial intermediaries is measured using a parametric method recently developed (Kumbhakar et al. 2014). The empirical evidence shows a positive relationship between bank performance and financial stability and supports the ‘concentration–stability’ view for non‐cooperative banks only when concentration is measured on the whole sample of banks. Differences in the performance–stability nexus seem to depend more on the type of banks rather than different levels of market concentration. Higher market concentration of cooperative banks affects systemic stability by reducing the z‐scores of non‐cooperative banks, supporting the hypothesis that the presence of non‐profit‐maximizing entities can pull down stability of other financial institutions.     

Unexpected loan losses and bank capital in an estimated DSGE model of the euro area

We present a stylized DSGE model in which banks face unexpected losses in their loan portfolios and are subject to capital regulation. The framework is used to explore the importance of the interaction between macroeconomic conditions, credit default and bank capitalization for the transmission of macroeconomic shocks. We fit the model to euro area data. Impulse response analysis shows that the aforementioned interaction substantially magnifies the responsiveness of the economy to demand side and monetary disturbances. The amplification is especially strong with respect to government spending shocks. The model is further capable of replicating two financial market characteristics that are documented in the empirical literature, i.e. the pro-cyclicality of bank profitability and the counter-cyclical response of firm default rates and credit spreads to monetary policy shocks.     

金融压力、所有制结构与银行风险承担——基于中国影子银行活动的实证研究*

2008年金融危机之后，监测与防范系统性金融风险、维护金融稳定成为各国监管机构的工作重点。本文构建了一个反映我国系统性金融风险的中国金融压力指数（FSIC）。基于此，本文研究不同所有制结构的商业银行将如何调整影子银行业务以应对系统性金融风险。实证结果表明，当金融压力上升时，相较于国有银行，非国有银行的风险承担水平显著上升。进一步研究发现，这一差异与两类银行对影子银行这一风险业务的调整有关。当金融压力上升时，国有银行会显著减少影子银行业务，而非国有银行的影子银行业务不会减少。本文提出了国有银行的双重职能这一观点来解释实证研究的发现。本文的研究结论对于指导我国金融市场化改革和防范系统性金融风险具有重要启示。     

To engage or not to engage in corporate social responsibility: Empirical evidence from global banking sector

Whether or not banks should engage in corporate social responsibility (CSR) activities is controversial because of the concomitant high cost even if banks could enjoy the benefits of a higher income as a result of their good reputation. Faced with this dilemma, bank managers are hesitant to engage in CSR. This study pursues this issue by examining whether or not banks engaging in CSR can bring profits and reduce non-performing loans. We apply three novel estimation methods to obtain the unbiased and full-blown CSR effect. The first two methods are matching methods, namely, conventional propensity score matching method and nearest-neighbor variance bias-corrected matching method (nn-VBC). The third method is Heckman's two-step method in switching regression. Regardless of the methods used, CSR banks overwhelmingly outperform non-CSR banks in terms of return on assets and return on equity. Our study offers policy suggestions for both government regulators and bank managers.     

我国林业上市公司信用风险研究——基于KMV模型

文章以我国沪深两市A股林业上市公司为研究对象,选取2007-2012年首次成为ST的8家公司和对应的8家非ST公司为研究样本,运用KMV模型研究我国林业上市公司信用风险。实证过程中,文章根据我国林业公司特点研究确定KMV模型中各参数的计算方法,计算出在不同违约点下各个样本的违约距离,主要结论:财务危机前非ST公司与ST公司的违约距离表现出显著差异,运用KMV模型能够有效识别我国林业上市公司的信用风险状况;我国林业上市公司的违约点应设定为短期负债加上50%长期负债;在研究连续两年违约距离的基础上,构建了我国林业上市公司两级信用风险预警体系。     

Ratings based Inference and Credit Risk: Detecting likely-to-fail Banks with the PC-Mahalanobis Method

This paper proposes a new approach of how to test the validity of bank ratings assigned by Rating Agencies. An innovative Early Warning System (EWS) is introduced that allows to unveil prodromic signals of instability for selected individual banks, and possibly forecast bank failures. A forward-looking, credit risk model that is based on financial ratios is designed to assess the financial position of rated banks. This approach allows to discriminate between banks that are in a stable, financially healthy position, and banks that are possibly going to become insolvent (likely-to-fail banks). Our empirical results are compared with the official ratings assigned by RAs to the same intermediaries. Our findings reveal incoherent positions and possibly incorrectly rated banks. We argue that our method can be easily implemented by financial regulators.     

Novel three-bank model for measuring the systemic importance of commercial banks

Relaxing the hypothesis on the scale level of a bank, the present paper develops an improved three-bank model for analyzing the relationship between the size and the systemic importance of a bank. The proposed model is more general and more operational compared with other models. By introducing the L function based on the multivariate extreme theory and the systemically important index, the effect of the size on the systemic importance of a bank is analyzed. The size is found to be a necessary but insufficient condition for measuring the systemic importance of a bank. The size of a bank plays a critical role in evaluating systemic importance, but when the size reaches a certain threshold, its effect is weakened. The current study has theoretical and practical significance for the recognition and supervision of the systemic importance of banks.     

Evaluating sovereign risk spillovers on domestic banks during the European debt crisis

Using a Markov-switching model with time-varying probabilities, spillovers from sovereign to domestic bank CDS spreads during the European debt crisis for a set of 14 European countries and 30 European banks are investigated. Our model is able to capture how the increased sovereign risk observed between 2010 and 2013 throughout Europe has impacted i) the probability that banks fall into a crisis regime and ii) the probability that banks stay in the crisis regime. The latter state is characterized by a high volatility and large positive returns of CDS spreads. Different regime-dependent indicators have been computed to assess heterogeneity within the region. The evidence indicates that the intensification of sovereign risk observed during the European debt crisis has positively and significantly driven the regime shifts in volatility of the bank CDS spreads due to increased risk aversion. The results show that the increase in sovereign credit risk seems to have generated second-round effects for some banks that have experienced a deterioration in their funding conditions due to a rise in the domestic sovereign default risk. Overall, our results suggest that sovereign CDS spreads can be considered good forewarning indicators for predicting the evolution of bank CDS spreads. We also find that the effects differ depending on the country and the financial institution. This result suggests that banks are heterogeneously exposed to sovereign credit risk within the same country. One argument relates to the size of these financial institutions and the domestic exposure to sovereign debt.     

货币政策对金融生态的影响机理及实证检验——基于上市商业银行面板数据的分析

传统的货币理论忽视了货币政策对银行风险承担及金融生态的影响,文章从商业银行的微观视角出发研究了货币政策对金融生态的影响机理。理论层面,金融生态与货币政策制度供给、传导机制和有效性相互关联,货币政策则通过资产价格或估值机制、收入及现金流机制、追求收益机制、杠杆调整机制、道德风险机制和风险转移机制影响商业银行的风险承担;实证层面,构建了货币政策影响商业银行信贷投放和风险承担的数理模型,选取国有和股份制两类共12家上市商业银行2008-2013年的面板数据进行固定效应模型实证检验。结果表明,宽松货币政策导致商业银行的信贷投放规模增加、风险承担意愿增强,有利于优化金融生态,反之则反是;国有商业银行对货币政策变化更敏感,而股份制商业银行对金融生态更敏感。因此,在我国宏观经济管理中,需要货币政策与宏观审慎政策相互协调配合。     

Sovereign default risk and state-owned bank fragility in emerging markets: evidence from China and Russia

In this paper we investigate the interdependence of the sovereign default risk and banking system fragility in two major emerging markets, China and Russia, using credit default swaps as a proxy for default risk. Both countries’ banking industries have strong ties with their governments and public sector, even after a series of significant reforms in the last two decades. Our analysis is built on the case studies of each country’s two biggest banks. We employ a bivariate vector autoregressive (VAR) and vector error correction (VECM) framework to analyse the short- and long-run dynamics of the chosen CDS prices. We use Granger causality to describe the direction of the discovered dynamics. We find evidence of a stable long-run relationship between sovereign and bank CDS spreads in the chosen time period. The more stable relationship is found in cases where the biggest state-owned universal banks in emerging markets are closely managed by the government. But the fragility of those banks does not directly affect the state of public finances. However, in cases where state-owned banks directly participate in large governmental projects, banking fragility may result in the deterioration of state funds, while raising the risk of sovereign default.     

Are Islamic Banks More Resilient During Financial Panics?

Islamic banking is one of the fastest growing segments of the financial sector in developing countries. Rapid growth of this segment is accompanied with claims about its relative resilience to financial crises as compared to conventional banking. However, little empirical evidence is available to support such claims. Using data from Pakistan, where Islamic and conventional banks co‐exist, we compare the behaviour of Islamic and conventional banks during a financial panic. Our results show that Islamic bank branches are less prone to deposit withdrawals during financial panics, both unconditionally and after controlling for bank characteristics. The Islamic branches of banks that have both Islamic and conventional operations tend to attract (rather than lose) deposits during panics, which suggests a role for religious branding. We also find that Islamic bank branches grant more loans during financial panics and that their lending decisions are less sensitive to changes in deposits. Our findings suggest that greater financial inclusion of faith‐based groups may enhance the stability of the banking system.     

Bank overall financial strength: Islamic versus conventional banks

A number of recent studies compare the performance of Islamic and conventional banks with the use of individual financial ratios or efficiency frontier techniques. The present study extends this strand of the literature, by comparing Islamic banks, conventional banks, and banks with an Islamic window with the use of a bank overall financial strength index. This index is developed with a multicriteria methodology that allows us to aggregate various criteria capturing bank capital strength, asset quality, earnings, liquidity, and management quality in controlling expenses. We find that banks differ significantly in terms of individual financial ratios; however, the difference of the overall financial strength between Islamic and conventional banks is not statistically significant. This finding is confirmed with both univariate comparisons and in multivariate regression estimations. When we look at the bank financial strength within regions, we find that conventional banks outperform both the Islamic banks and the banks with Islamic window in the case of Asia and the Gulf Cooperation Council; however, Islamic banks perform better in the MENA and Senegal region. Second stage regressions also reveal that the bank overall financial strength index is influenced by various country-specific attributes. These include control of corruption, government effectiveness, and operation in one of the seven countries that are expected to drive the next big wave in Islamic finance.     

Tail dependence risk exposure and diversification potential of Islamic and conventional banks

This paper undertakes a rolling window comparative analysis of risks for portfolios consisting of GCC Islamic and conventional bank indices. We draw our empirical results by employing canonical, drawable and regular vine copula models, as well as by implementing a portfolio optimization method with a conditional Value-at-Risk constraint. We find evidence of higher riskiness in the group of Islamic banks relative to the group of conventional banks across each of the financial rolling window scenarios under consideration. Specifically, a greater negative (nonlinear) tail asymmetric dependence is observed in the pairs of Islamic banks’ relationships. The results also show that the optimal portfolio model supports a clear preference towards the group of conventional banks in regard to risk minimization and diversification benefits.