Kommentar: 30 Jahre DAX
Reint E. Gropp
Wirtschaft im Wandel,
No. 3,
2018
Abstract
Gerade ist der Deutsche Aktienindex DAX 30 Jahre alt geworden, und es gibt viel zu feiern. Preisbereinigt hätte ein Investment von 1 000 Euro, angelegt am DAX-Eröffnungstag 1. Juli 1988, heute einen Wert von über 6 000 Euro, hätte sich also versechsfacht!
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Market Power and Risk: Evidence from the U.S. Mortgage Market
Carola Müller, Felix Noth
Economics Letters,
2018
Abstract
We use mortgage loan application data of the Home Mortgage Disclosure Act (HMDA) to shed light on the role of banks’ market power on their presumably insufficient risk screening activities in the U.S. mortgage market in the pre-crisis era. We find that banks with higher market power protect their charter value. The effect is stronger for banks that have more information about local markets.
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Banks Fearing the Drought? Liquidity Hoarding as a Response to Idiosyncratic Interbank Funding Dry-ups
Helge Littke, Matias Ossandon Busch
IWH Discussion Papers,
No. 12,
2018
Abstract
Since the global financial crisis, economic literature has highlighted banks’ inclination to bolster up their liquid asset positions once the aggregate interbank funding market experiences a dry-up. To this regard, we show that liquidity hoarding and its detrimental effects on credit can also be triggered by idiosyncratic, i.e. bankspecific, interbank funding shocks with implications for monetary policy. Combining a unique data set of the Brazilian banking sector with a novel identification strategy enables us to overcome previous limitations for studying this phenomenon as a bankspecific event. This strategy further helps us to analyse how disruptions in the bank headquarters’ interbank market can lead to liquidity and lending adjustments at the regional bank branch level. From the perspective of the policy maker, understanding this market-to-market spillover effect is important as local bank branch markets are characterised by market concentration and relationship lending.
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Effectiveness and (In)Efficiencies of Compensation Regulation: Evidence from the EU Banker Bonus Cap
Stefano Colonnello, Michael Koetter, Konstantin Wagner
Abstract
We investigate the (unintended) effects of bank executive compensation regulation. Capping the share of variable compensation spurred average turnover rates driven by CEOs at poorly performing banks. Other than that, banks‘ responses to raise fixed compensation sufficed to retain the vast majority of non-CEO executives and those at well performing banks. We fail to find evidence that banks with executives that are more affected by the bonus cap became less risky. In fact, numerous results indicate an increase of risk, even in its systemic dimension according to selected measures. The return component of bank performance appears to be unaffected by the bonus cap. Risk hikes are consistent with an insurance effect associated with raised the increase in fixed compensation of executives. The ability of the policy to enhance financial stability is therefore doubtful.
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15.03.2018 • 3/2018
Consistently strong economy, but risks are increasing
The global upswing continues in 2018. The German economy is cur-rently in a boom and is increasingly coming up against capacity limits. “According to our forecast, gross domestic product will expand by 2.2% in 2018; the general government surplus will amount to 1.1% in relation to gross domestic product. Economic growth in East Germany is likely to be slightly below the German growth rate”, says Oliver Holtemöller, head of the Department Macroeconomics and IWH vice president.
Oliver Holtemöller
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Comments on “Consultation BCBS discussion paper on the regulatory treatment of sovereign exposures”
Michael Koetter, Lena Tonzer
Einzelveröffentlichungen,
2018
Abstract
The BCBS discussion paper on the regulatory treatment of sovereign exposures addresses a so far hardly touched topic as concerns capital regulation. While the regulatory framework has been changed substantially over recent years including the establishment of the European Banking Union, risk weights on sovereign exposures have remained mostly unchanged and sovereign exposures of banks benefit from a favourable capital treatment. This applies despite the fact that the recent European sovereign debt crisis has revealed the potential of a doom loop between bank and sovereign risk and demonstrated that sovereign exposures are by no means “risk-free”. The paper is thus an important proposal how to change the risk evaluation of banks’ sovereign exposures.
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Big Fish in Small Banking Ponds? Cost Advantages and Foreign Affiliate Presences
Michael Koetter, Rients Galema
Journal of International Money and Finance,
2018
Abstract
We distinguish cost advantage at home from cost advantage vis-à-vis incumbent banks in destination markets to explain the probability of foreign bank affiliate lending. We combine detailed affiliate lending data of all German banks with public bank micro data from 59 destination markets. The likelihood to operate foreign affiliates depends positively on both types of cost advantage. Only cost advantage at home is economically significant. Generally, risk, return, and unobservable bank traits explain a larger share of the variation in foreign affiliate operations. Less profitable, more risky, and larger banks are more likely to operate affiliates abroad.
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Can Lenders Discern Managerial Ability from Luck? Evidence from Bank Loan Contracts
Dien Giau Bui, Yan-Shing Chen, Iftekhar Hasan, Chih-Yung Lin
Journal of Banking and Finance,
2018
Abstract
We investigate the effect of managerial ability versus luck on bank loan contracting. Borrowers showing a persistently superior managerial ability over previous years (more likely due to ability) enjoy a lower loan spread, while borrowers showing a temporary superior managerial ability (more likely due to luck) do not enjoy any spread reduction. This finding suggests that banks can discern ability from luck when pricing a loan. Firms with high-ability managers are more likely to continue their prior lower loan spread. The spread-reduction effect of managerial ability is stronger for firms with weak governance structures or poor stakeholder relationships, corroborating the notion that better managerial ability alleviates borrowers’ agency and information risks. We also find that well governed banks are better able to price governance into their borrowers’ loans, which helps explain why good governance enhances bank value.
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