Market Structure, Capital Regulation and Bank Risk Taking

This paper discusses the effect of capital regulation on the risk taking behavior of commercial banks. We first theoretically show that capital regulation works differently in different market structures of banking sectors. In lowly concentrated markets, capital regulation is effective in mitigating risk taking behavior because banks’ franchise values are low and banks have incentives to pursue risky strategies in order to increase their franchise values. If franchise values are high, on the other hand, the effect of capital regulation on bank risk taking is ambiguous. We then test the model predictions on a cross-country sample including 421 commercial banks from 61 countries. We find that capital regulation is effective in mitigating risk taking only in markets with a low degree of concentration. The results remain robust after accounting for financial sector development, legal system efficiency, and for other country and bank-specific characteristics.     

Getting the Right Mix of Capital and Cash Requirements in Prudential Bank Regulation*

Cash reserve requirements are useful as a broadly conceived prudential tool, not just as a narrowly focused means of limiting the risks associated with illiquidity. Indeed, illiquidity risk is neither a necessary nor a sufficient condition for establishing bank liquidity requirements. The primary means of mitigating the systemic costs of bank illiquidity risk is the creation of an effective lender of last resort (LOLR). But instead of focusing narrowly on bank funding risks when designing liquidity requirements, regulators should consider tradeoffs among capital requirements, liquidity requirements, and LOLR policies for achieving the broader prudential goal of limiting bank default risk. When considering the optimal tradeoff between capital ratios and cash ratios as prudential requirements, five “frictions” are identified that favor the use of one or the other: (1) the adverse‐selection costs of raising equity (which favors the use of cash); (2) the opportunity cost of forgone abnormal profits (or “quasi rents”) from lending (which favors the use of capital); (3) the limited verifiability of loan outcomes (which favors the use of cash); (4) the moral hazard that results from costly or postponed loss recognition, given the incentive for risk shifting in bad states (which favors the use of cash); and (5) the prospect of changes in the risk environment (which favors cash since it creates greater option value for maintaining targeted default risk with lower adjustment costs in the face of changing loan risk or illiquidity risk). When viewed from the perspective of achieving the main prudential goal of controlling default risk at a minimum social cost, capital requirements have some limitations that favor liquidity requirements, and vice versa. And thus the optimal regulatory policy will combine liquidity and capital requirements.     

Bank Capital Regulation and Structured Finance

We model the interaction between bank capital regulation and financial innovation. Innovation takes the form of structured finance, namely, pooling and tranching of assets and the creation of separate structures with different seniority, different risk, and different capital charges. Structured finance can improve welfare by manufacturing safer securities, saving on the capital that the structures with different seniority need to satisfy incentive constraints. The divergence between private and social interests in future profits motivates regulation. Regulation lowers profits and may induce banks to innovate to evade the regulation itself, even if this decreases welfare.     

Jointly Optimal Regulation of Bank Capital and Liquidity

In an economy with financial frictions, banks endogenously choose excessive leverage and maturity mismatch in equilibrium, as they fail to internalize the risk of socially wasteful fire sales. Macroprudential regulators can achieve efficiency with simple linear constraints, which require less information than Pigouvian taxes. The liquidity coverage and net stable funding ratios of Basel III can implement efficiency. Additional microprudential regulation of leverage is required when bank failures are socially costly. Micro‐ and macroprudential rules are imperfect substitutes. Optimally, macroprudential policy reacts to systematic risk and credit conditions over the cycle, while microprudential policy reacts to systematic and idiosyncratic risk.     

Capital Requirements,Monetary Policy,and Aggregate Bank Lending: Theory and Empirical Evidence

Capital requirements linked solely to credit risk are shown to increase equilibrium credit rationing and lower aggregate lending. The model predicts that the bank's decision to lend will cause an abnormal runup in the borrower's stock price and that this reaction will be greater the more capital-constrained the bank. I provide empirical support for this prediction. The model explains the recent inability of the Federal Reserve to stimulate bank lending by increasing the money supply. I show that increasing the money supply can either raise or lower lending when capital requirements are linked only to credit risk.     

Bank Loan Supply, Lender Choice, and Corporate Capital Structure

This paper explores the relevance of capital market supply frictions for corporate capital structure decisions. To identify this relationship, I study the effect on firms' financial structures of two changes in bank funding constraints: the 1961 emergence of the market for certificates of deposit, and the 1966 Credit Crunch. Following an expansion (contraction) in the availability of bank loans, leverage ratios of bank-dependent firms significantly increase (decrease) relative to firms with bond market access. Concurrent changes in the composition of financing sources lend further support to the role of credit supply and debt market segmentation in capital structure choice.     

资本监管与银行最优资本结构

资本监管已成为现代商业银行监管体系的核心,而现有研究对资本监管的重要性缺乏系统的理论研究。基于此,本文从MM理论出发,逐步分析并得出:银行自身经营的特殊性、银行作为一般企业所追求的企业价值最大化行为以及银行作为特殊企业所得到的银行安全网保护等因素使得银行形成不断提高最优资产负债率和降低资本充足率的内在机制,逐步分析不同情形下的银行最优资本结构,进而说明资本监管对于维系银行经营的稳健性和审慎性以及减少银行破产而导致的负外部性等方面的重要作用。     

Effects of the New Basel Capital Accord on Bank Capital Requirements for SMEs

Using data from three countries (US, Italy and Australia) and surveying related studies from several other countries in Europe, we investigate the effects of the New Basel Capital Accord on bank capital requirements for small and medium sized enterprises (SMEs). We find that, for all the countries, banks will have significant benefits, in terms of lower capital requirements, when considering small and medium sized firms as retail customers. But they will be obliged to use the Advanced IRB approach and to manage them on a pooled basis. For SMEs as corporate, however, capital requirements will be slightly greater than under the existing Basel I Capital Accord. We believe that most eligible banks will use a blended approach (considering some SMEs as retail and some as corporate). Through a breakeven analysis, we find that for all of our countries, banking organizations will be obliged to classify as retail at least 20% of their SME portfolio in order to maintain the current capital requirement (8%). JEL classification: G21, G28     

理解银行资本监管改革

正资本监管改革是后危机时期国际金融监管改革的核心。2010年12月,巴塞尔委员会发布了新的资本和流动性的国际规则(巴塞尔协议Ⅲ)。在2011年11月召开的G20领导人戛纳峰会上,各国领导人承诺于2013年1月1日前实施新资本监管标准,并于2019年前全面达标。近期,欧盟、澳大利亚、瑞士、瑞典、新加坡、印度、日本、香港地区、美国等相继公布了新资本监管标准。目前,巴塞尔委员会正在对欧     

Bank Portfolio Allocation: The Impact of Capital Requirements, Regulatory Monitoring, and Economic Conditions

This paper develops a structural, dynamic model of a banking firm to analyze how banks adjust their loan portfolios over time. In the model, banks experience capital shocks, face uncertain future loan demand, and incur costs based on their proximity to regulatory minimum capital requirements and the intensity of regulatory monitoring. Implications of the model then are estimated using panel data on large U.S. commercial banks operating continuously between December 1989 and December 1997. The estimated model is used to simulate the optimal bank response to (1) past and proposed changes in capital requirements, (2) changes in regulatory monitoring intensity, and (3) economic downturns. The simulation results are used to shed light on the decline in loan growth and the rise in bank capital ratios witnessed over a decade ago as well as the possible impact of the current proposed modification to capital requirements.     

Internal Capital Markets and Capital Structure: Bank Versus Internal Debt

We argue that domestic business groups are able to actively optimise the internal/external debt mix across their subsidiaries. Novel to the literature, we use bi‐level data (i.e. data from both individual subsidiary financial statements and consolidated group level financial statements) to model the bank and internal debt concentration of non‐financial Belgian private business group affiliates. As a benchmark, we construct a size and industry matched sample of non‐group affiliated (stand‐alone) companies. We find support for a pecking order of internal debt over bank debt at the subsidiary level which leads to a substantially lower bank debt concentration for group affiliates as compared to stand‐alone companies. The internal debt concentration of a subsidiary is mainly driven by the characteristics of the group's internal capital market. The larger its available resources, the more intra‐group debt is used while bank debt financing at the subsidiary level decreases. However, as the group's overall debt level mounts, groups increasingly locate bank borrowing in subsidiaries with low costs of external financing (i.e. large subsidiaries with important collateral assets) to limit moral hazard and dissipative costs. Overall, our results are consistent with the existence of a complex group wide optimisation process of financing costs.     

Capital Market Regimes and Bank Structure in Europe

We hypothesize that fundamental features that distinguish European capital markets have predictably influenced emerging national differences in bank capitalization and loan growth. Using bank‐level data from 13 European countries, 1998 to 2004, we find evidence of positive effects of “equity‐friendly” market features on bank capitalization and positive effects of both “equity‐friendly” and “credit‐friendly” market features on loan growth. The findings are strongest in small banks and in banks with cooperative charters. Our results suggest that ongoing and prospective integration of European banking markets is mitigated by relatively static features of the equity and credit markets on which banks rely.     

The Impact of Capital Requirements and Managerial Compensation on Bank Charter Value

This paper examines the joint impact of capital requirements and managerial incentive compensation on bank charter value and bank risk. Most of the previous literature in the area of banking and agency theory has focused on asymmetric information between either banks and regulators, (and therefore on the role of bank capital), or between bank shareholders and bank managers, (and therefore on the role of managerial ownership). In this paper we unify these issues and present empirical results from the regression of capital requirements jointly with measures of incentive compensation on Tobin's Q, our proxy for bank charter value, and on the standard deviation of total return, our proxy for bank risk. In a sample of 102 bank holding companies we find that capital levels are consistently a significant positive factor in determining bank charter value and a significant negative factor in determining risk. On the other hand, we find our six measures of incentive compensation to be generally insignificant relative to charter value but do provide some evidence consistent with a theory relating types of incentive compensation with risk.     

货币政策操作需要考虑银行资本监管吗

持续宽松的货币政策与巴塞尔协议下银行资本监管的共同作用,可能是本次美国次贷危机产生和经济持续波动的主因之一。巴塞尔协议下的银行资本监管,较大地改变了信贷资金的流向和经济运行规律,从而必然影响到货币政策发挥作用的基础条件与传导途径。本文结合经济周期对银行资本约束下的IS-LM模型进行了扩展分析,发现银行资本约束会通过影响银行信贷渠道使货币政策产生非对称性效果,从理论上论证了货币政策的操作必须考虑银行资本监管。本文还运用随机前沿分析(SFA)方法检验了2000～2009年我国货币政策与银行资本监管联合效率,表明在引入银行资本监管后货币政策实现经济目标的联合效率下降。因此,为了达到稳定物价与产出的总体目标,在货币政策反应函数中必须考虑银行资本及其监管状况。     

中国银行资本监管模式选择研究

有效银行资本监管涉及降低银行倒闭风险所得到的社会收益与抑制金融业发展所产生的社会成本之间的平衡问题,理想的银行资本监管应随着这些成本和收益的变化而调整,设计一种激励相容的银行资本监管制度成为对银行资本监管的现实需要,无论是标准化模式还是内部模型法都是对银行具体风险评价和风险管理方法的约束,整体监管模式建立在预先承诺制的基础之上,注重激励相容、发挥市场约束和银行自身管理的作用,在适用性、稳定性、可操作性等方面都比内部模型法具有优势.     

Regulation and the Determination of Bank Capital Changes: A Note

The effectiveness of bank capital adequacy requirements is examined in this paper. Using empirical tests similar to those employed by Peltzman and Mingo, no significant relationship is found between changes in bank capital and the capital standards imposed by regulators. The findings conflict with those of previous studies. The conflict in findings, it is argued, results from the failure of previous studies to account for the effect of binding deposit rate ceilings.     

资本监管与银行风险:基于联立方程模型的实证分析

本文采用联立方程模型,利用我国36家商业银行的270份面板数据样本对我国商业银行资本监管、银行资本以及风险之间的关系进行了实证分析.结果表明:在资本监管下,商业银行会同时考虑其资本与风险的变化;监管压力总体而言会显著地降低银行的风险,但对上市银行风险的影响并不明显,而监管压力对银行资本产生影响并不显著.     

资本监管与银行贷款:影响机制及原因分析

本文使用我国175家商业银行1998-2009年间的贷款数据,分析了资本监管制度对银行贷款的影响,并结合理论与实际总结了相关原因.本文发现,资本监管制度实施之后,我国商业银行的信贷供给能力显著下降,贷款相对规模减少,信贷扩张的速度下降.进一步分析发现,资本监管之后,银行自身的资本水平对贷款发放产生了重要影响,资本充足率较高的银行信贷扩张的能力较强,而资本充足率较低的银行则放缓了信贷扩张的步伐.此外,本文还发现,受银行融资约束的影响,不同规模的银行在信贷扩张速度上存在一定的差异.