Trust in Banks
Zuzana Fungáčová, Iftekhar Hasan, Laurent Weill
Journal of Economic Behavior and Organization,
2019
Abstract
Trust in banks is considered essential for an effective financial system, yet little is known about what determines trust in banks. Only a handful of single-country studies discuss the topic, so this paper aims to fill the gap by providing a cross-country analysis on the level and determinants of trust in banks. Using World Values Survey data covering 52 countries during the period 2010–2014, we observe large cross-country differences in trust in banks and confirm the influence of several sociodemographic indicators. Our main findings include: women tend to trust banks more than men; trust in banks tends to increase with income, but decrease with age and education; and access to television enhances trust, while internet access erodes trust. Additionally, religious, political, and economic values affect trust in banks. Notably, religious individuals tend to put greater trust in banks, but differences are observed across denominations. The holding of pro-market economic views is also associated with greater trust in banks.
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China’s Monetary Policy Communication: Frameworks, Impact, and Recommendations
Michael McMahon, Alfred Schipke, Xiang Li
IMF Working Paper No. 18/244,
2018
Abstract
Financial markets are eager for any signal of monetary policy from the People’s Bank of China (PBC). The importance of effective monetary policy communication will only increase as China continues to liberalize its financial system and open its economy. This paper discusses the country’s unique institutional setup and empirically analyzes the impact on financial markets of the PBC’s main communication channels, including a novel communication channel. The results suggest that there has been significant progress but that PBC communication is still evolving toward the level of other major economies. The paper recommends medium-term policy reforms and reforms that can be adopted quickly.
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Kommentar: Mit bester Absicht in die Krise
Reint E. Gropp
Wirtschaft im Wandel,
No. 4,
2018
Abstract
Zehn Jahre nach der Lehman-Pleite werden die Finanzmärkte besser kontrolliert denn je. Das kann böse Folgen haben.
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Crises and Rescues: Liquidity Transmission Through Global Banks
Michael Koetter, Claudia M. Buch, C. T. Koch
International Journal of Central Banking,
No. 4,
2018
Abstract
This paper shows that global banks transmit liquidity shocks via their network of foreign affiliates. We use the (unexpected) access of German banks' affiliates located in the United States to the Federal Reserve's Term Auction Facility. We condition on the parent banks' U.S. dollar funding needs in order to examine how affiliates located outside the United States adjusted their balance sheets when the U.S. affiliate of the same parent tapped into TAF liquidity. Our research has three main findings. First, affiliates tied to parents with higher U.S. dollar funding needs expanded their foreign assets during periods of active TAF borrowing. Second, the overall effects are driven by affiliates located in financial centers. Third, U.S.- dollar-denominated lending particularly increased in response to the TAF program.
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Channeling the Iron Ore Super-cycle: The Role of Regional Bank Branch Networks in Emerging Markets
Helge Littke
IWH Discussion Papers,
No. 11,
2018
Abstract
The role of the financial system to absorb and to intermediate commodity boom induced windfall gains efficiently presents one of the most pressing issues for developing economies. Using an exogenous increase in iron ore prices in March 2005, I analyse the role of regional bank branch networks in Brazil in reallocating capital from affected to non-affected regions. For the period from March 2004 to March 2006, I find that branches directly exposed to this shock by their geographical location experience an increase in deposit growth in the post-shock period relative to non-affected branches. Given that these deposits are not reinvested locally, I further show that branches located in the non-affected region increase lending growth depending on their indirect exposure to the booming regions via their branch network. Even tough, these results provide evidence against a Dutch Disease type crowding out of the non-iron ore sector, further evidence suggests that this capital reallocation is far from being optimal.
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The Political Economy of Financial Systems: Evidence from Suffrage Reforms in the Last Two Centuries
Hans Degryse, Thomas Lambert, Armin Schwienbacher
Economic Journal,
No. 611,
2018
Abstract
Voting rights were initially limited to wealthy elites providing political support for stock markets. The franchise expansion induces the median voter to provide political support for banking development, as this new electorate has lower financial holdings and benefits less from the riskiness and financial returns from stock markets. Our panel data evidence covering the years 1830–1999 shows that tighter restrictions on the voting franchise induce greater stock market development, whereas a broader voting franchise is more conducive to the banking sector, consistent with Perotti and von Thadden (2006). The results are robust to controlling for other institutional arrangements and endogeneity.
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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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Flooded Through the Back Door: Firm-level Effects of Banks‘ Lending Shifts
Oliver Rehbein
IWH Discussion Papers,
No. 4,
2018
Abstract
I show that natural disasters transmit to firms in non-disaster areas via their banks. This spillover of non-financial shocks through the banking system is stronger for banks with less regulatory capital. Firms connected to a disaster-exposed bank with below median capital reduce their employment by 11% and their fixed assets by 20% compared to firms in the same region without such a bank during the 2013 flooding in Germany. Relationship banking and higher firm capital also mitigate the effects of such negative cross-regional spillovers.
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Too connected to fail? Wie die Vernetzung der Banken staatliche
Rettungsmaßnahmen vorhersagen kann
Friederike Altgelt, Michael Koetter
Wirtschaft im Wandel,
No. 4,
2017
Abstract
Seit der globalen Finanzkrise 2007/2008 liegt aufgrund ihrer Schlüsselrolle für ein funktionierendes Finanzsystem ein besonderer Fokus auf den so genannten systemrelevanten Finanzinstitutionen (systemically important financial institutions, SIFIs). Neben der Größe von Finanzinstitutionen ist auch das Ausmaß ihrer Vernetzung im internationalen Finanzsystem entscheidend für die Klassifikation als systemrelevant. Obwohl die Vernetzung von Banken untereinander in der Regel schwer zu messen ist, kann sie aus der Entwicklung von Prämien von Kreditausfallversicherungen (den so genannten Credit Default Swap (CDS) Spreads) und Aktienrenditen abgeleitet werden. Dieser Beitrag untersucht, inwieweit sich mit Hilfe der sich daraus ergebenden Co-Crash-Probability vor der Finanzkrise vorhersagen lässt, welche Finanzinstitutionen während der Krise Teil von staatlichen Rettungsprogrammen (bailout programmes) wurden.
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Delay Determinants of European Banking Union Implementation
Michael Koetter, Thomas Krause, Lena Tonzer
Abstract
To safeguard financial stability and harmonise regulation, the European Commission substantially reformed banking supervision, resolution, and deposit insurance via EU directives. But most countries delay the transposition of these directives. We ask if transposition delays result from strategic considerations of governments conditional on the state of their financial, regulatory, and political systems? Supervisors might try to protect national banking systems and local politicians maybe reluctant to surrender national sovereignty to deal with failed banks. Alternatively, intricate financial regulation might require more implementation time in large and complex financial and political systems. We therefore collect data on the transposition delays of the three Banking Union directives and investigate observed delay variation across member states. Our correlation analyses suggest that existing regulatory and institutional frameworks, rather than banking market structure or political factors, matter for transposition delays.
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