Is Government Regulation of Banks Necessary?

Banks have been involved with and regulated by governments for hundreds of years. Following a brief review of this history, I delineate nine reasons that could justify continued regulation, particularly in the United States. These include deposit insurance, preventing banks from obtaining excessive economic power, reducing the cost of individual bank insolvency, avoiding the effects of bank failures on the economy, protecting the payments system, serving the interests of popularly elected officials, enhancing the Federal Reserve's control over the money supply, suppressing competition, and protecting consumers. Analysis of each leads me to conclude that deposit insurance, which allows banks to hold insufficient capital, is the only public-policy-justifiable rationale for regulation. This concern can be managed with capital requirements; otherwise, banks should only be regulated as are other corporations.     

Deposit Insurance, Capital Regulations, and Financial Contagion in Multinational Banks

Abstract:  Banking sector globalization has caused an expansion in foreign-owned bank assets. In this paper we analyse the effects of a MNB's liability structure upon its investment in a foreign country. We develop a model in which capital adequacy requirements introduce some deliberate underinvestment which counters deposit insurance-induced overinvestment. Diversification is unattractive with fixed bank capital requirements, because it reduces the expected value of the deposit insurance net. This effect applies in multinational banks (MNBs), where shocks to the home country economy alter the value of the deposit insurance net and hence affect overseas lending incentives. Thus, MNBs act as a channel for financial contagion. We discuss the policy implications of our results.     

Bank Capital Adequacy versus Deposit Insurance

This paper re-evaluates the Diamond-Dybvig analysis of deposit insurance by constructing a model in which an agent not in need of liquidity sets up a financial intermediary to sell liquidity insurance to other agents who desire such insurance. This intermediary resembles a real-world bank in that it is financed by both demand deposits and equity. It also dominates the Diamond-Dybvig intermediary, which is funded only by demand deposits. Provided the intermediary has adequate capital, it also is perfectly safe. Deposit insurance then is both unnecessary and incapable of achieving a superior outcome to that which private agents could achieve on their own.     

Entry mode choice of multinational banks

When expanding abroad, a multinational bank faces a trade-off between accessing a foreign country via cross border lending or financial foreign direct investment, i.e. greenfield or acquisition entry. We analyze the entry mode choice of multinational banks and explicitly derive the entry mode pattern in the banking industry. Moreover, we show that in less developed banking markets, a trend towards cross border lending and acquisition entry exists. Greenfield entry prevails in more developed markets. Furthermore, we identify a tendency towards acquisition entry in smaller host countries and towards greenfield entry in larger host countries.     

存款保险制度能否抑制银行个体风险承担?

基于2008-2019年我国30家上市银行的财务数据,研究了存款保险制度实施对银行风险承担行为的影响.对选取的经济变量进行单位根检验发现,变量均为平稳变量.利用固定效应模型进行实证回归分析,结果表明:总体上看,存款保险制度的推出增加了银行的风险承担行为;在将银行进行分类后,存款保险制度的实施对大型商业银行的风险承担影响...     

Financial Turmoil, Failed Bank Acquisitions, and Bank Business Lending Behavior

This paper utilizes bank Call Report and FDIC receivership data from 1987 to 1991 to examine the impact of a failed bank acquisition on the growth rate of commercial and industrial (C&I) lending at the acquiring institutions. Using a two-stage least squares model with fixed effects, we find that banks acquiring a failed bank's assets experience a significant decline in both the growth rate of C&I lending and their capital asset ratios in the period of the acquisition. The results support anecdotal evidence that failed-bank borrowers may experience difficulties in accessing credit once their bank fails and underscores the importance of bank-borrower relationships in C&I lending. Finally, the paper provides an alternative explanation for banks' stagnant or declining business lending activity during this period of financial turmoil.     

Earnings and capital management and signaling: the use of loan-loss provisions by European banks

This paper investigates the relationship between loan-loss provisions (LLPs) and earnings management in the context of the capital adequacy of Euro Area (EA) banks versus non-EA credit institutions. This paper also examines whether LLPs signal managements’ expectations concerning future bank profits to investors. Additionally, this paper traces the role of bank regulations and creditor protection systems in explaining income smoothing. Evidence drawn from the 1996 to 2006 period indicates that LLPs do reflect changes in the expected quality of a bank's loan portfolio for both groups of banks, and that earnings management is an important determinant of LLPs for EA intermediaries, whereas non-EA credit institutions use LLPs to signal private information to outsiders. The paper also finds that higher protection of creditors’ rights significantly reduces the incentives to smooth earnings for EA banks. During the recent financial crisis, EA bank managers are much more concerned with their credit portfolio quality and do not use LLPs for discretionary purposes, whereas LLPs at non-EA banks are used to smooth income more than for the purposes of managing capital ratios or conveying private information about future performance to the market.     

我国商业银行危机处置与存款保险立法模式选择

本文对我国商业银行风险处置的价值定位及有关市场退出的法律体系进行了梳理,探讨提出了我国存款保险机制的主要框架,对存款保险立法的四种模式进行了比较选择,建议尽快制定《存款保险条例》,并通过司法实践逐步完善存款保险机制与银行破产退市程序的有效衔接。     

Theories of bank behavior under capital regulation

This paper reviews academic studies of bank capital regulation in an effort to evaluate the intellectual foundation for the imposition of the Basel I and Basel II systems of risk-based capital requirements. The theoretical literature yields general agreement about the immediate effects of capital requirements on bank lending and loan rates and the longer-term impacts on bank ratios of equity to total or risk-adjusted assets. This literature produces highly mixed predictions, however, regarding the effects of capital regulation on asset risk and overall safety and soundness for the banking system as a whole. Thus, the intellectual foundation for the present capital-regulation regime is not particularly strong. The mixed conclusions in the academic literature on banking certainly do not provide unqualified support for moving to an even more stringent and costly system of capital requirements. These widely ambiguous results do suggest, however, that assessing the implications of capital regulation for balance-sheet risk and monitoring effort in diverse banking systems is an important agenda for future theoretical research in the banking area.     

Time‐Varying Capital Requirements and Disclosure Rules: Effects on Capitalization and Lending Decisions

We investigate how banks’ capital and lending decisions respond to changes in bank‐specific capital and disclosure requirements. We find that an increase in the bank‐specific regulatory capital requirement results in a higher bank capital ratio, brought about via less asset risk. A decrease in the requirement implies more lending to firms but also less Tier 1 capital and higher bank leverage. We do not observe differences between confidential and public disclosure of capital requirements. Our results empirically illustrate a tradeoff between bank resilience and a fostering of the economy through more bank lending using banks’ capital requirement as policy instrument.     

Measuring aggregate risk: Can we robustly identify asset-price boom–bust cycles?

We investigate the extent to which it is possible to detect asset-price booms and banking crises according to alternative identification strategies and we assess their robustness. We find some evidence that house price-booms are more likely to turn into costly recession or to trigger a banking crisis than stock-price booms. Resorting both to a non-parametric approach and a discrete-choice (logit) model, we analyze the ability of a wide set of indicators to robustly explain costly asset-price booms. According to our results, real long-term interest rates and real stock prices tend to increase the probability of a costly housing-price boom, whereas real GDP tends to increase the probability of a costly stock-price boom. Interestingly, the credit-to-GDP gap indicator, sometimes put forward in the literature as a key reference for setting countercyclical capital buffers, does not seem to be a robust leading indicator of costly booms or banking crises.     

The Timing and Persistence of CRA Compliance Ratings

We evaluate supervisory practices in enforcing the Community Reinvestment Act (CRA) by examining whether or not supervisors consider observable, bank-specific characteristics in (1) scheduling CRA compliance examinations and (2) determining whether, and for how long, a given CRA rating persists. Failure to confirm such a relationship would be consistent with criticism that the evaluation criteria are so vague that supervisors can essentially assign any rating they want for compliance purposes. Analysis of a sample of several thousand commercial banks, observed over a relatively stable regulatory regime, indicates that both examination scheduling and the persistence of examination ratings are associated with residential loan levels, a presumed cornerstone of the CRA, as well as other financial, regulatory and market factors. We conclude that CRA enforcement during this period reflected, at least in part, objective evaluation criteria.     

美国联邦存款保险公司：问题银行处置的经验与启示

本轮国际金融危机爆发后,美国大量中小金融机构倒闭,但并未严重冲击美国经济,也未引发社会恐慌,这主要归功于美国联邦存款保险公司（FDIC）灵活高效的处置手段,也再次彰显了有效存款保险制度的重要性。危机中,FDIC创新其问题银行的处置方式和手段。危机后美国金融监管改革立法进一步强化了FDIC的监管职能,这些对于中国推出存款保险制度部具有借鉴意义。     

Disparities in Mortgage Lending,Bank Performance,Economic Influence,and Regulatory Oversight

This study investigates factors affecting changes in the disparity of home mortgage denial rates between white and minority loan applicants in the U.S. during the period 1991–1997. We develop a two-stage least-squares regression model that incorporates applicant-level characteristics, neighborhood characteristics, regional economic data, and bank-specific data as explanatory variables. Some have argued that mortgage lenders were under increasing pressure from industry regulators to extend additional credit to minorities and low-income groups during the period under study. The model includes each institution's periodic CRA rating as a proxy for regulatory influence. An alternative explanation is that market forces, such as improvements in economic conditions and in bank financial condition and performance, affected default loss estimates and credit standards in a way that disproportionally benefited minority and low-income applicants. The empirical findings are consistent with the latter hypothesis. We conclude that policy makers should consider the impact of market factors when assessing the allocation of mortgage credit in a particular demographic market. The findings also underscore the importance of controlling for lender assessments of credit risk when evaluating compliance with CRA and fair lending statutes.     

中国对外资银行的监管制度分析——以相关外资银行管理条例为视角

外资银行是中国银行业的重要组成部分，中国于1994年、2001年和2006年先后颁布的三个外资金融机构管理条例及其相应的实施细则，集中体现了中国对WTO承诺的履行和外资银行监管制度的发展，也标志着中国银行业（中国加入WTO过渡期最长的一个行业）从此进入完全开放的时代。2006年12月，中国在入世过渡期结束时采用的新《中华人民共和国外资银行管理条例》在市场开放、履行WTO承诺等各方面有了很大进展。不过中国仍然需要在对外资银行的审慎监管、法人银行导向、国民待遇落实和统一监管等问题上做出进一步的努力.