ABSTRACT
This paper provides early evidence on the effect of global regulation mandating a switch from loan loss provisioning (LLP) based on incurred credit losses (ICLs) to LLP based on expected ...credit losses (ECLs). Using a sample of systemically important banks from 74 countries, we find that ECL provisions are more predictive of future bank risk than ICL provisions. Corroborating that the switch to ECL provisioning results in more information to assess bank risk, we also observe that the announcement of a larger first‐time impact of the accounting change elicits lower stock returns and higher changes in credit default swap spreads. Critically, these patterns are most pronounced when credit conditions deteriorate. Additional analyses show that the higher information content of the ECL model stems from the provisions for nondefaulted loans, which did not exist under ICL. Our study contributes to the debate on the effect of the ECL model on procyclicality, an especially pressing issue in the context of the current pandemic.
When does relationship lending start to pay? López-Espinosa, Germán; Mayordomo, Sergio; Moreno, Antonio
Journal of financial intermediation,
07/2017, Letnik:
31
Journal Article
Recenzirano
This paper empirically characterizes relationship lending using data from more than 20,000 loans of a Spanish bank to small and medium enterprises (SMEs). The study analyzes the pricing determinants ...of loans to firms based on the entire previous bank–firm relationship, allowing for the identification of nonlinear pricing patterns in the bank–firm relationship. We show that firms only start capitalizing the gains of relationship lending when the relationship extends beyond two years. This reduction in the loan rate spread charged is driven by the opaque firms, for which the acquisition of “soft” information is especially relevant. Finally, we find that relationship lending significantly mitigates the increased costs of refinancing loans along two dimensions: relationship duration and having additional contracts—other than loans—with the bank.
Based on a large sample of publicly listed and non-listed US commercial banks from 1996 to 2011, we find robust evidence consistent with banks using realized available for sale (AFS) securities gains ...and losses to smooth earnings and increase low regulatory capital. We also find that (i) banks with positive earnings smooth earnings, and banks with negative earnings generally take big baths; (ii) regulatory capital constrains big baths; (iii) banks with more negative earnings and more unrealized beginning-of-quarter losses (gains) take big baths (smooth earnings); and (iv) banks with low regulatory capital and more unrealized gains realize more gains. Also, banks with negative earnings take big baths (avoid or reduce the earnings loss) if their unrealized gains are insufficient (sufficient) to offset the negative earnings. Our inferences apply to listed and non-listed banks, which indicates that the earnings management incentives do not derive solely from public capital markets. Our findings reveal that the accounting for AFS securities gains and losses enables banks to manage regulatory capital and earnings in a variety of ways.
► We use the CoVaR approach to identify the main factors behind systemic risk. ► We examine a set of large international banks. ► We find weaker evidence that either size or leverage contributes to ...systemic risk. ► Short-term wholesale funding emerges as the most relevant systemic factor. ► Asymmetries play an important role in the CoVaR approach.
We use the CoVaR approach to identify the main factors behind systemic risk in a set of large international banks. We find that short-term wholesale funding is a key determinant in triggering systemic risk episodes. In contrast, we find weaker evidence that either size or leverage contributes to systemic risk within the class of large international banks. We also show that asymmetries based on the sign of bank returns play an important role in capturing the sensitivity of system-wide risk to individual bank returns. Since short-term wholesale funding emerges as the most relevant systemic factor, our results support the Basel Committee’s proposal to introduce a net stable funding ratio, penalizing excessive exposure to liquidity risk.
Several studies have analyzed discretionary accruals to address earnings-smoothing behaviors in the banking industry. We argue that the characteristic link between accruals and earnings may be ...nonlinear, since both the incentives to manipulate income and the practical way to do so depend partially on the relative size of earnings. Given a sample of 15,268 US banks over the period 1996–2011, the main results in this paper suggest that, depending on the size of earnings, bank managers tend to engage in earnings-decreasing strategies when earnings are negative (“big-bath”), use earnings-increasing strategies when earnings are positive, and use provisions as a smoothing device when earnings are positive and substantial (“cookie-jar” accounting). This evidence, which cannot be explained by the earnings-smoothing hypothesis, is consistent with the compensation theory. Neglecting nonlinear patterns in the econometric modeling of these accruals may lead to misleading conclusions regarding the characteristic strategies used in earnings management.
To date, an operational measure of systemic risk capturing nonlinear tail-comovements between system-wide and individual bank returns has not yet been developed. This paper proposes an extension of ...the CoVaR methodology in Adrian and Brunnermeier (2011) to capture the asymmetric response of the banking system to positive and negative shocks to the market-valued balance sheets of individual banks. Building on a comprehensive sample of U.S. banks in the period 1990–2010, the evidence in this paper shows that ignoring asymmetries that feature tail-interdependences may lead to a severe underestimation of systemic risk. On average, the relative impact on the system of a fall in individual market value is sevenfold that of an increase. Moreover, the downward bias in systemic-risk measuring from ignoring this asymmetric pattern increases with bank size. In particular, the conditional tail-comovement between the banking system and a bank that is losing market value belonging to the top size-sorted decile is nearly 5.5 times larger than the unconditional tail-comovement versus 3.3 times for banks in the bottom decile. The asymmetric model also produces much better fitting, with the restriction that gives rise to the standard symmetric model being rejected for most firms in the sample, particularly, in the segment of large-scale banks. This result is important from a regulatory and supervisory perspective, since the asymmetric generalization enhances the capacity to monitor systemic interdependences.
Drivers of depositor discipline in credit unions Gómez‐Biscarri, Javier; López‐Espinosa, Germán; Mesa‐Toro, Andrés
Annals of public and cooperative economics,
December 2022, Letnik:
93, Številka:
4
Journal Article
Recenzirano
Odprti dostop
In this paper, we analyze whether credit unions are subject to market discipline by their (member) depositors and examine the drivers of such discipline. We first provide descriptive evidence of ...depositor discipline in credit unions: shares and deposits as well as savings interest rates react to variables that reflect the financial health of the credit union and its asset risk. We show that this discipline is long‐lasting and that it is mediated by the existence of a deposit guarantee scheme and by the strength of the relationship of members with the credit union. We then use proxies of the capability of members to process financial information to show that discipline is heavily influenced by member financial sophistication. Our results suggest that a type of market‐based discipline acts as a complement for regulation in controlling credit union risk taking, thus contributing to overall financial stability.
US credit unions have been subject to a strict regulation of their commercial lending which included both requirements for enhanced organizational practices and a cap on the proportion of business ...loans relative to assets (imposed in 1998 by US Congress). Since 2003, however, these limitations have been steadily relaxed, a process which has resulted in an increase in credit union business lending activity. Using data from the universe of US credit unions we provide comprehensive evidence that expansion of the business loan portfolio increases the risk of the asset side of the credit union. This is the case even for credit unions which benefit from partnership with the SBA, for which we observe an initial increase in the risk of non-SBA backed loans (an overconfidence effect) which reverses over time (a learning effect). Our results suggest, furthermore, that the risk of business loans is exacerbated for credit unions which initiate their business loan activity and which do so rapidly. In the second part of our analysis we provide descriptive and quasi-experimental evidence that expansions of credit union activity into business loans are associated with lower subsequent growth rates of deposits. This result is similar to the reaction to risk indicators found in the banking literature and might give an ex-ante incentive for the CU that could work as a market-based stabilization mechanism complementary to that of explicit regulation.
En el presente artículo se aborda el estudio de las relaciones existentes entre las partes interactivas y las cinemáticas o cutscenes de un videojuego mediante el análisis de siete títulos de la saga ...Assassin’s Creed. En primer lugar, se introduce el tema y se contextualiza. Se realiza un repaso al marco teórico para señalar la gran necesidad de nuevos escritos que suplan la escasísima bibliografía existente sobre este tema. A continuación, se aplica una metodología consistente en la transcripción del argumento de los videojuegos, indicando detalladamente qué partes son interactivas, cuáles son cinemáticas y cuáles son fusión de ambas. Una vez realizado el estudio, exponemos los resultados y los discutimos, observando cómo en todos los títulos se aprecia una clara preocupación por ver cuál es la utilidad de las cinemáticas, experimentando constantemente con la relación entre estas y las partes jugables para llegar a la mejor manera de armar el argumento del videojuego, lo que sugiere que excluir a las cinemáticas del análisis de un videojuego es un error. Aunque tanta variedad en las cinemáticas impide que se elabore una tipología de las mismas, sí que se identifican algunos usos útiles.
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