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Research output:
Published papers:
“Supervising Cross-Border Banks: Theory, Evidence and Policy”, with Thorsten Beck (Cass Business School) and Wolf Wagner (Tilburg University), Economic Policy, 2013, 28: 5–44.
Abstract: This paper analyzes the distortions that banks' cross-border activities, such as foreign assets, deposits and equity, can introduce into regulatory interventions. We find that while each individual dimension of cross-border activities distorts the incentives of a domestic regulator, a balanced amount of cross-border activities does not necessarily cause inefficiencies, as the various distortions can offset each other. Empirical analysis using bank-level data from the recent crisis provide support to our theoretical findings. Specifically, banks with a higher share of foreign deposits and assets and a lower foreign equity share were intervened at a more fragile state, reflecting the distorted incentives of national regulators. We discuss several implications for the supervision of cross-border banks in Europe.
Abstract: This paper analyzes the distortions that banks' cross-border activities, such as foreign assets, deposits and equity, can introduce into regulatory interventions. We find that while each individual dimension of cross-border activities distorts the incentives of a domestic regulator, a balanced amount of cross-border activities does not necessarily cause inefficiencies, as the various distortions can offset each other. Empirical analysis using bank-level data from the recent crisis provide support to our theoretical findings. Specifically, banks with a higher share of foreign deposits and assets and a lower foreign equity share were intervened at a more fragile state, reflecting the distorted incentives of national regulators. We discuss several implications for the supervision of cross-border banks in Europe.
Working papers:
“The Effects of Peers on Bank Capital"
Abstract: I analyze if bank peers influence bank decisions on capital and Tier-1 regulatory capital among publicly listed US commercial banks between 1971 and 2010. The results show that banks adjust capital ratios in response to the capital decisions of other banks in their peer group, and the peer effects are an economically significant determinant of bank capital. On average, a bank increases its book capital and market capital ratios by 0.8 percent and 1.8 percent respectively after a standard deviation increase in the peer capital ratios, holding all other factors constant. Furthermore, banks make similar adjustments to Tier 1 capital and non-deposit liabilities in response to peers. The evidence also suggests that the impact of peer banks on bank capital decisions becomes stronger with an increase in competition among banks.
“Banks and Monetary Policy in Developing Countries: Evidence from Africa”, with Thorsten Beck (Cass Business School)
Abstract: We analyze the impact of monetary policy on bank lending activities and bank asset portfolios in Uganda between 1999 and 2005. We find no evidence of a bank-lending channel under the conventional credit channel view in the economy documenting the existence of a transmission of monetary policy shocks that depends upon the share of bank foreign currency deposits. Consistent with Mora (2010), banks with a higher share of foreign currency deposits are less responsive to changes in domestic monetary policy compared to banks with a higher share of domestic currency deposits. We also document a transmission of foreign monetary policy shocks in the local banking system where loan growth is found to decrease following an increase in the British policy rate. The evidence suggest the presence of an asset substitution that depends upon credit market conditions abroad: changes in foreign interest rates dictate allocations of funds among bank assets such as government securities or foreign assets at the expense of domestic loans, thus limiting the future supply of loans. Our findings have policy implications for the conduct of monetary policy in developing countries.
Abstract: I analyze if bank peers influence bank decisions on capital and Tier-1 regulatory capital among publicly listed US commercial banks between 1971 and 2010. The results show that banks adjust capital ratios in response to the capital decisions of other banks in their peer group, and the peer effects are an economically significant determinant of bank capital. On average, a bank increases its book capital and market capital ratios by 0.8 percent and 1.8 percent respectively after a standard deviation increase in the peer capital ratios, holding all other factors constant. Furthermore, banks make similar adjustments to Tier 1 capital and non-deposit liabilities in response to peers. The evidence also suggests that the impact of peer banks on bank capital decisions becomes stronger with an increase in competition among banks.
“Banks and Monetary Policy in Developing Countries: Evidence from Africa”, with Thorsten Beck (Cass Business School)
Abstract: We analyze the impact of monetary policy on bank lending activities and bank asset portfolios in Uganda between 1999 and 2005. We find no evidence of a bank-lending channel under the conventional credit channel view in the economy documenting the existence of a transmission of monetary policy shocks that depends upon the share of bank foreign currency deposits. Consistent with Mora (2010), banks with a higher share of foreign currency deposits are less responsive to changes in domestic monetary policy compared to banks with a higher share of domestic currency deposits. We also document a transmission of foreign monetary policy shocks in the local banking system where loan growth is found to decrease following an increase in the British policy rate. The evidence suggest the presence of an asset substitution that depends upon credit market conditions abroad: changes in foreign interest rates dictate allocations of funds among bank assets such as government securities or foreign assets at the expense of domestic loans, thus limiting the future supply of loans. Our findings have policy implications for the conduct of monetary policy in developing countries.
Work in Progress (all titles provisional):
“Entrepreneurial Spirit, Financial Innovation and Risky Attitudes”
“Household Mortgage Decisions and Mortgage Defaults”
"Bank Executive Boards and Financial Policy"
“Entrepreneurial Spirit, Financial Innovation and Risky Attitudes”
“Household Mortgage Decisions and Mortgage Defaults”
"Bank Executive Boards and Financial Policy"