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Credit Cycles, Credit Risk, and Prudential Regulation
Gabriel Jiménez,Jesús Saurina +1 more
TLDR
In this article, the authors found strong empirical support of a positive, although quite lagged, relationship between rapid credit growth and loan losses, and provided empirical evidence of more lenient credit terms during boom periods, both in terms of screening of borrowers and in collateral requirements.Abstract:
This paper finds strong empirical support of a positive, although quite lagged, relationship between rapid credit growth and loan losses. Moreover, it contains empirical evidence of more lenient credit terms during boom periods, both in terms of screening of borrowers and in collateral requirements. Therefore, we confirm the predictions from theoretical models based on disaster myopia, herd behaviour institutional memory and agency problems between banks' managers and shareholders regarding the incentives of the former to engage in too expansionary credit policies during lending booms. The paper also develops a prudential tool, based on loan loss provisions, for banking regulators in order to cope with the former problem.read more
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Capital Regulation, Risk-Taking and Monetary Policy: A Missing Link in the Transmission Mechanism?
Claudio Borio,Haibin Zhu +1 more
TL;DR: In this paper, the authors argue that insufficient attention has so far been paid to the link between monetary policy and the perception and pricing of risk by economic agents - what might be termed the "risk-taking channel" of monetary policy.
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The fundamental principles of financial regulation
TL;DR: The authors argue that actions that banks take to make themselves safer can undermine the system's stability and propose counter-cyclical capital charges to counter the natural decline in measured risk during booms and its rise in subsequent collapses.
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Hazardous times for monetary policy : What do twenty-three million bank loans say about the effects of monetary policy on credit risk-taking?
TL;DR: In this paper, the authors identify the effects of monetary policy on credit risk-taking with an exhaustive credit register of loan applications and contracts, and find that a lower overnight interest rate induces lowly capitalized banks to grant more loan applications to ex ante risky firms and to commit larger loan volumes with fewer collateral requirements to these firms, yet with a higher ex post likelihood of default.
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Capital regulation, risk-taking and monetary policy: A missing link in the transmission mechanism?
Claudio Borio,Haibin Zhu +1 more
TL;DR: In this article, the authors argue that insufficient attention has so far been paid to the link between monetary policy and the perception and pricing of risk by economic agents, what might be termed the "risk-taking channel" of monetary policy.
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Macroprudential policy – a literature review
TL;DR: The recent financial crisis has highlighted the need to go beyond a purely micro approach to financial regulation and supervision and the number of policy speeches, research papers and conferences that discuss a macro perspective on financial regulation has grown considerably.
References
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Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations.
Manuel Arellano,Stephen Bond +1 more
TL;DR: In this article, the generalized method of moments (GMM) estimator optimally exploits all the linear moment restrictions that follow from the assumption of no serial correlation in the errors, in an equation which contains individual effects, lagged dependent variables and no strictly exogenous variables.
Book
Manias, Panics, and Crashes: A History of Financial Crises
TL;DR: In this article, the authors discuss the history of the financial crisis and its role in economic and monetary instability, including speculative manias, economic booms, and international contagion, and the international lender of last resort.
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Social Value of Public Information
Stephen Morris,Hyun Song Shin +1 more
TL;DR: In this article, the authors examine the impact of public information in a setting where agents take actions appropriate to the underlying fundamentals, but they also have a coordination motive arising from a strategic complementarity in their actions.
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Asset prices, financial and monetary stability: exploring the nexus
Claudio Borio,Philip Lowe +1 more
TL;DR: In this article, the authors argue that financial imbalances can build up in a low inflation environment and that in some circumstances it is appropriate for policy to respond to contain these imbalance.
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Ownership Structure, Deregulation, and Bank Risk Taking
TL;DR: This paper investigated the relationship between bank ownership structure and risk taking and found that stockholder controlled banks exhibit significantly higher risk taking behavior than managerially controlled banks during the 1979-1982 period of relative deregulation.
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Credit Risk in Two Institutional Regimes: Spanish Commercial and Savings Banks
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