The determinants of bank interest rate margins: an international study

This paper studies the determinants of bank net interest margins (NIMs) in six selected European countries and the US during the period 1988–1995 for a sample of 614 banks. We apply the Ho and Saunders model (Ho, T., Saunders, A., 1981. The determinants of bank interest margins: theory and empirical evidence. Journal of Financial and Quantitative Analyses 16, 581–600) to a multicountry setting and decompose bank margins into a regulatory component, a market structure component and a risk premium component. The regulatory components in the form of interest-rate restrictions on deposits, reserve requirements and capital-to-asset ratios have a significant impact on banks NIMs. The empirical results suggest an important policy trade-off between assuring bank solvency—high capital-to-asset ratios—and lowering the cost of financial services to consumers—low NIMs. The more segmented or restricted the banking system—both geographically and by activity—the larger appears to be the monopoly power of existing banks, and the higher their spreads. Macro interest-rate volatility was found to have a significant impact on bank NIMs; this suggests that macro policies consistent with reduced interest-rate volatility could have a positive effect in reducing bank margins.     

异质预期条件下中央银行沟通对人民币汇率波动的影响

在外汇市场交易者预期异质性的假设条件下,以2005年7月至2015年12月中国人民银行沟通频数和人民币汇率数据为样本,采用异质预期汇率模型考察中央银行沟通对人民币汇率波动的总体影响。研究发现：在异质预期条件下,中央银行沟通通过信息机制和协调机制影响外汇市场交易者的异质预期,从而对人民币汇率波动产生较为显著的影响,但由于我国外汇交易者预期向基本面预期转换的发生概率小于技术分析交易者预期,中央银行沟通对人民币汇率波动的平稳作用效力受到一定的局限。     

负利率对银行净息差影响机制研究——基于欧洲主要上市银行的经验证据

净息差是反映银行经营效率的重要指标,负利率政策的实施对银行业净息差产生了显著的负面影响。基于2004—2017年欧洲负利率地区102家主要上市银行的年度非平衡面板数据,本文对负利率环境下银行净息差的调整机制进行了深入研究。研究结果表明:(1)政策利率降低(提高)会带动银行净息差下降(上升);(2)负利率环境下,银行净息差对政策利率调整,尤其是利率下调的敏感性明显增强;(3)不同特质性银行净息差对政策利率调整的敏感性存在明显差异,规模较大、国际化程度较高银行的净息差对政策利率变动的敏感性较低,以利息收入、零售业务为主银行的净息差对政策利率变动较为敏感。本文的研究丰富了负利率政策传导机制及影响领域的相关成果,探讨了负利率环境下不同特质性银行行为调整差异,为商业银行做好负利率环境下的息差管理提供了客观依据。     

Time-varying market,interest rate,and exchange rate risk premia in the US commercial bank stock returns

This paper examines the role of market, interest rate, and exchange rate risks in pricing a sample of the US Commercial Bank stocks by developing and estimating a multi-factor model under both unconditional and conditional frameworks. Three different econometric methodologies are used to conduct the estimations and testing. Estimations based on nonlinear seemingly unrelated regression (NLSUR) via GMM approach indicate that interest rate risk is the only priced factor in the unconditional three-factor model. However, based on ‘pricing kernel’ approach by Dumas and Solnik [(1995). J. Finance 50, 445–479], strong evidence of exchange rate risk is found in both large bank and regional bank stocks in the conditional three-factor model with time-varying risk prices. Finally, estimations based on the multivariate GARCH in mean (MGARCH-M) approach where both conditional first and second moments of bank portfolio returns and risk factors are estimated simultaneously show strong evidence of time-varying interest rate and exchange rate risk premia and weak evidence of time-varying world market risk premium for all three bank portfolios, namely those of Money Center bank, Large bank, and Regional bank.     

The impact of central bank digital currency news on the stock and cryptocurrency markets: Evidence from the TVP-VAR model

This study employs a non-linear framework to investigate the impacts of central bank digital currency (CBDC) news on the financial and cryptocurrency markets. The time-varying vector autoregressive (TVP-VAR) model developed by Primiceri (2005) is estimated based on weekly data from the first week of January 2015 to the last week of December 2021. The vector of endogenous variables in the VAR estimation contains the Central Bank Digital Currency uncertainty index (CBDCU), cryptocurrency policy uncertainty index, S&P 500 index, VIX, and Bitcoin price. The TVP-VAR model’s time-varying responses demonstrated that the reactions of the cryptocurrency market to central bank digital currency announcements vary remarkably over time. The impacts of the CBDC shocks on the financial market have been increasingly visible during the COVID-19 pandemic. According to the time-varying forecast error decompositions, CBDCU and VIX shocks have accounted for most of the variance in cryptocurrency uncertainty and Bitcoin return shocks, notably during the COVID-19 period.     

The channels of monetary policy triggered by central bank actions and statements in the Australian equity market

Owing to the discrete disclosure practices of the Reserve Bank of Australia, this paper provides new evidence on the channels of monetary policy triggered by central bank actions (monetary policy announcements) and statements (explanatory minutes releases), in the Australian equity market. Both monetary policy announcements and explanatory minutes releases are shown to have a significant and comparable impact on the returns and volatility of the Australian equity market. Further, distinct from US and European studies that find strong evidence of the interest rate, bank loan and balance sheet channels and no evidence of the exchange rate channel following central bank actions, this paper finds that monetary policy impacts the Australian equity market via the exchange rate, interest rate and bank loan channels of monetary policy, with only weak evidence of the balance sheet channel of monetary policy. These channels are found to be operating irrespective of the trigger (monetary policy announcements or explanatory minutes releases), though results are somewhat weaker when examining the explanatory minutes releases. These results have important implications for central bank officials and financial market participants alike: by confirming a comparable avenue to affect monetary policy; and providing an explication of its impact on the Australian equity market.     

Self-monitoring or reliance on media reporting: How do financial market participants process central bank news?

We study how financial market participants process news from four major central banks—the Bank of England (BoE), the Bank of Japan (BoJ), the European Central Bank (ECB), and the Federal Reserve (Fed)—using a novel survey of 195 financial market participants from around the world. Our results indicate that, first, respondents rely more on media reports of central bank events than they do on self-monitoring. The only exceptions are interest rate decisions in the respondent’s home region. In general, the Fed is watched most closely, followed by the ECB, the BoJ, and the BoE. Second, ordered probit estimations reveal that the perceived reliability of media coverage is negatively associated with degree of self-monitoring and positively related to the probability of using media reports, particularly in the case of asset managers. The perceived importance of central bank events is positively related to the degree of self-monitoring in the case of traders. Finally, portfolio managers tend to self-monitor their home central bank significantly more often than other central banks.     

Capital changes at large affiliated banks

The federal bank regulators imposed numerical capital guidelines in December 1981. If these guidelines are binding, then banking organizations may respond to the costs of regulation in various ways. If the regulations are not binding, then further reliance may be placed on market discipline. This study develops two models of changes in the equity capital to assets ratio of large banks affiliated with bank holding companies—a regulatory model in which capital regulations are a binding influence and a market model in which financial markets influence capital ratios. The two models are examined empirically through a disequilibrium framework and maximum likelihood estimation techniques. The results suggest that most banks are predominantly influenced by regulatory forces. Federal Reserve Bank of Atlanta Florida State University     

A re-examination of Libor rigging: a time-varying cointegration perspective

Using a time-varying cointegration framework, this paper examines the alleged manipulation of the London interbank offered rate (Libor) during the 2007–2009 financial crisis. Bank quotes are found to be poor indicators of their financing costs in the crisis period. The aberration in the estimated values of the cointegrating and error correction parameters governing the long-run equilibrium relationship between bank quotes and the final Libor suggests banks were submitting lower quotes. Further analysis which controls for an individual bank’s credit risk, market wide credit and liquidity risks, and a common market factor, demonstrate possible evidence of Libor rigging during the crisis period.     

Bond rating agencies and their role in bank market discipline

This study examines whether changes in the ratings of bank debt have any information content. Bank holding companies are monitored both by bank regulators and by debt rating agencies, leading to the view that duplication of effort may render superfluous the monitoring service of rating agencies. However, our results show that downgrades of bank debt are associated with statistically significant wealth losses, irrespective of whether the rating change is across rating classes or within a rating class. Moreover, the results hold even when observations with potentially confounding events are removed from the sample. These results suggest that rating agencies provide valuable information to the capital market regarding the risk exposure of bank holding companies.     

银行竞争提高了企业投资水平和资源配置效率吗？——基于分支机构空间分布的研究

银行贷款是我国企业融资的重要方式,在企业生产经营中发挥着举足轻重的作用。2006年和2009年,我国先后两次放松了商业银行分支机构市场准入规制,银行分支机构空间分布发生了较大变化,银行竞争水平和服务实体经济能力明显提升。本文利用2001-2012年国家统计局工业企业数据,以企业周边银行分支机构的数量衡量银行竞争水平,研究银行竞争对企业投资的影响。研究发现,银行分支机构数量的增加显著提高了企业投资水平和投资效率。进一步研究表明,银行分支机构数量增加对企业投资效率的提升作用主要表现在投资不足的企业和非国有企业中,企业融资约束降低和代理冲突减弱是银行竞争提高企业投资效率的主要原因。本研究拓展了银行竞争以及企业投资和资源配置效率的相关文献,对供给侧结构性改革和银行业高质量发展具有启示意义。     

Central Bank Intervention in USD/INR Market: Estimating Its Reaction Function and Impact on Volatility

Econometric evidence on why central banks intervene in the foreign exchange market and the impact of such intervention has remained inconclusive. We contribute to the literature with evidence from India, a managed float regime that sees consistent monitoring and intervention by Reserve Bank of India, India’s central bank. Estimation of the central bank reaction function shows that increased volatility in the foreign exchange market and misalignment from targeted rates are important objectives behind intervention. The paper further uses the GARCH framework to study how intervention influences exchange rate volatility. We find that intervention in the spot market increases volatility while that in the forward market reduces volatility.     

The relative contributions of equity and subordinated debt signals as predictors of bank distress during the financial crisis

Bank supervisors utilize early warning signals to predict which banks are likely to become distressed. Previous research has found that market discipline signals do not significantly improve out-of-sample forecasts relative to accounting-based signals. Most of that evidence, however, comes from periods in the 1990s when the U.S. economy and banking system were healthy, potentially neutralizing an advantage of market signals to incorporate new information quickly. For the period between the fourth quarters of 2006 and 2012, we assess the accuracy of two market signals – expected default frequency (EDF) and subordinated note and debenture (SND) yield spreads – relative to accounting-based signals in forecasting which publicly traded BHCs would become distressed. In 2008, EDF signals were relatively more accurate, but they did not lead to economically significant reductions in missed distress events relative to other signals. Supervisors would have been better off devoting slack resources to monitor BHCs with high commercial real estate concentrations. As the crisis subsided, a failure probability model developed from bank failures in the 1980s and early 1990s was consistently the most accurate signal. For the two dozen BHCs with actively traded SNDs, yield spreads over Treasuries were extremely poor predictors of distress because the spreads were distorted by too-big-to-fail subsidies. The Tier 1 leverage ratio was the most accurate distress signal for these large BHCs. In sum, the evidence to justify systematic reliance on market signals by supervisory agencies to forecast bank distress remains weak.     

Why do central banks intervene secretly?: Preliminary evidence from the BoJ

This paper empirically investigates the main determinants of secret interventions in the foreign exchange (FX) market. Using the recent experience of the Bank of Japan, we estimate a model that explains the share of secret to reported interventions in the FX market. Two sets of determinants are clearly identified: the first is related to the probability of detection of the central bank orders by market participants; the second to the central bank's internal decision to opt for secrecy. Our estimations support the arguments of current microstructure theories that rationalize the use of secret interventions.     

Cross-border banking,bank market structures and market power: Theory and cross-country evidence

Patterns in cross-border banking have changed since the global financial crisis. This may affect domestic bank market structures and macroeconomic stability in the longer term. In this study, I theoretically and empirically analyze how different modes of cross-border banking impact bank concentration and market power. I use a two-country general equilibrium model with heterogeneous banks developed by DeBlas and Russ (2010a) to grasp the effect of cross-border lending and foreign direct investment in the banking sector on bank market structures. The model suggests that both cross-border lending and bank FDI mitigate concentration. Empirical evidence from a panel dataset of 18 OECD countries supports the theoretical predictions: higher volumes of bank FDI and of cross-border lending coincide with lower Herfindahl-indexes in bank credit markets.     

Model uncertainty and systematic risk in US banking

This paper uses Bayesian Model Averaging to examine the driving factors of equity returns of US Bank Holding Companies. BMA has as an advantage over OLS that it accounts for the considerable uncertainty about the correct set (model) of bank risk factors. We find that out of a broad set of 12 risk factors only the market, real estate, and high-minus-low Fama–French factors are reliably related to US bank stock returns over the period 1986–2010. Other factors are either only relevant over specific subperiods or for subsets of bank holding companies. We discuss the implications of our findings for empirical banking research.     

积极支持银行间外汇市场建设

2008年2月26日,中国外汇交易中心发布2007年度银行间外汇市场优秀做市商、优秀会员和优秀交易员名单。根据此次评选,中国建设银行荣获最佳交易规范奖、交易优秀奖两个奖项,该行交易员张乐、刘汉涛被评为优秀交易员。该行在积极参与外汇市场发展的同时,也注重自身外汇业务核心竞争力的提升,将培养行内外汇业务人才和优化外汇业务系统作为塑造自身核心竞争力的重要方面。     

特许权价值、市场结构与银行风险承担

银行业的风险程度关系到整个经济体的稳定与发展,控制风险是银行经营的重要目标之一。目前对银行风险承担的研究主要从特许权价值和市场竞争的角度分别展开分析。本文以156家中国商业银行为研究对象,同时分析了银行特许权价值、市场竞争程度对银行风险的影响。通过实证分析,我们发现目前影响我国商业银行特许权价值的因素主要来自银行因素而非市场因素;在没有控制内生性的前提下,发现银行特许权价值有效地约束了银行风险,而市场竞争的加剧增加了银行风险行为;在控制银行风险和特许权价值内生性后,发现特许权价值对中国商业银行风险的约束效应基本不存在。因此,要维持银行业的稳定,需要规范银行的竞争行为,提高特许权价值的风险约束效应。     

Proprietary trading losses in banks: do banks invest sufficiently in control?

This paper analyzes management and control issues linked to the employment of traders who engage in proprietary trading activity for their employer (a bank). The bank can invest in control and monitoring of these traders, and the paper evaluates the profitability of such investments. We find that the investment in control is distorted due to interfering market microstructure effects. The bank is inclined to underinvest in control of its traders because traders who are not too closely monitored generate extra liquidity in the market. Bank supervision might be needed, therefore, to correct for such effects. We evaluate the effectiveness of the value-at-risk capital adequacy requirement proposed by the Bank for International Settlements, and find that this approach correctly targets the banks that are the most vulnerable, i.e. those that are the most at risk of underinvesting in its control and monitoring systems.      

The determinants of U.S. banks’ international activities

This paper develops a model and structural dynamic estimation of bank behavior to map the relationship between U.S. banks’ choices of foreign banking activities, and bank and foreign market traits. This estimation framework is applied to a unique bank-level dataset compiled from regulatory sources, covering U.S. banks’ foreign activities in 83 host markets over the 2003–2013 period. Bank traits are better able to explain the evolving patterns of foreign banking than host market characteristics. After controlling for these traits, the post-financial crisis period shows a structural shift away from cross-border claims towards foreign affiliate activities. Structural estimates of foreign market entry costs and regulatory attitudes towards risk are derived. Simulation exercises confirm the strong impact of banks’ and regulators’ risk stance on bank profits and portfolio composition.