Reaching for Yield in the ABS Market: Evidence from German Bank Investments*

2019 ◽  
Vol 24 (4) ◽  
pp. 929-959 ◽  
Author(s):  
Matthias Efing
Keyword(s):  
Market Power ◽  
Idiosyncratic Risk ◽  
Capital Adequacy ◽  
Balance Sheets ◽  
Value Differences ◽  
German Bank ◽  
Regulatory Constraints ◽  
Ex Post ◽  
Show Evidence ◽  
Reaching For Yield

Abstract If regulation fails to differentiate between priced and idiosyncratic risk, it incentivizes investors to reach for yield. Studying securitization exposures on the balance sheets of German banks, I show evidence consistent with this prediction. Banks with tight regulatory constraints (low capital adequacy ratios) invest more in higher yielding ABSs conditionally on rating-implied regulatory risk weights. ABS investments of constrained banks tend to perform worse ex post in terms of collateral delinquency and lose value. Differences in bank sophistication, market power, or incentives to retain securitizations are unlikely to explain the riskier ABS investments of constrained banks.

Uniform Price Auctions with Asymmetric Bidders

2018 ◽  
Vol 19 (1) ◽  
Author(s):  
Sylvain Bourjade
Keyword(s):  
Market Power ◽  
Low Cost ◽  
Uniform Price ◽  
Ex Post ◽  
Increasing Demand

AbstractIn uniform price auctions, multiple prices are sustainable in equilibrium as a result of the market power of bidders. I show that low price equilibria are removed in a framework with asymmetric bidders who cannot anticipate the seller’s rationing strategy. Attracting high cost bidders’ participation in the auction induces the low cost bidders to bid more aggressively in order to eliminate the high cost bidders. Ex-post optimal equilibria with non-increasing demand schedules only exist when the seller is allowed to use any degree of rationing.

General Outlook on Financial Structure and Capital Adequacy of ISE-30 Companies during Economic Crisis (2008-2009)

2013 ◽  
pp. 1189-1205
Author(s):  
Deniz Umut Erhan ◽  
M. Uğur Akdoğan
Keyword(s):  
Financial Stability ◽  
Stock Exchange ◽  
Capital Adequacy ◽  
Capital Inflows ◽  
Smooth Transition ◽  
Balance Sheets ◽  
Structural Problems ◽  
Long Run ◽  
Financial Soundness ◽  
Difficult Challenge

In the simplest terms, economic crises could be recognised as abnormal fluctuations adversely impacting market conditions. Despite subsequent economic recoveries, markets and the financial system remain in a period of significant uncertainty after such crises. The baseline scenario is for balance sheets to strengthen gradually as the economy recovers and as progress is made in addressing structural problems in financial positions. However, substantial downside risks always remain for companies. Even companies with a high “Capital Adequacy Ratio” (CAR) face the difficult challenge of managing a smooth transition to self-sustaining growth while stabilising debt burdens under low and uncertain economic prospects. Without further bolstering of balances sheets, markets remain susceptible to funding shocks that could intensify deleveraging pressures and place further drag on public finances and recovery. Companies have proven resilient to economic turbulence but are vulnerable to a slowdown and face risks in managing sizable and potentially volatile capital inflows. Policy actions need to be intensified to contain risks, address debt burdens, and implement effective and institutional frameworks to ensure financial stability. Based on this perspective and through applying the financial soundness indicators methodology, the financial structures and soundness indicators of the top 30 companies on the Istanbul Stock Exchange (ISE-30) are subjected to an assessment for determining the impact of the global crisis. The short- and long-run credits and non-monetary debit lines of ISE-30 companies are investigated together with the momentum of growth in assets, liabilities, and cash-flow stabilities. The financial soundness of ISE-30 companies is discussed in terms of the “capital-liabilities ratios” performance measure. Finally, the study focuses on long-run economic impacts and the analysis assumes that companies should transition to new levels of capital and liquidity to strengthen their financial stability and sustainability.

Innovative or Indefensible? An Empirical Assessment of Patenting within Standard Setting

2012 ◽  
pp. 1-18
Author(s):  
Anne Layne-Farrar
Keyword(s):  
Market Power ◽  
Standard Setting ◽  
Empirical Assessment ◽  
Ex Post ◽  
Strategic Patenting

Cooperative standard setting may be burdened by “over patenting”. Because standards may convey market power to firms whose patents are implicated, “strategic” patenting may enable opportunistic behaviors. Thus, particular concerns have been raised over patenting that takes place after the first versions of a standard are published, as these patents may be aimed at the acquisition of market power. This is a reasonable concern, but another possibility also may be likely: “ex post” patenting may be driven by genuine innovation. Which is more prevalent? To begin answering this question, the author empirically assesses the patenting that occurs within a standard setting organization. The author rejects the first stage hypothesis that all ex post patenting must be opportunistic and conclude instead that such patenting is likely a mixed bag of (incremental) innovative contributions along with some strategic ones. As a result, standard setting policy prescriptions should proceed with caution so that the good is not eliminated with the bad.

Innovative or Indefensible?

2011 ◽  
Vol 9 (2) ◽  
pp. 1-18 ◽  
Author(s):  
Anne Layne-Farrar
Keyword(s):  
Market Power ◽  
Standard Setting ◽  
Ex Post ◽  
Strategic Patenting

Cooperative standard setting may be burdened by “over patenting”. Because standards may convey market power to firms whose patents are implicated, “strategic” patenting may enable opportunistic behaviors. Thus, particular concerns have been raised over patenting that takes place after the first versions of a standard are published, as these patents may be aimed at the acquisition of market power. This is a reasonable concern, but another possibility also may be likely: “ex post” patenting may be driven by genuine innovation. Which is more prevalent? To begin answering this question, the author empirically assesses the patenting that occurs within a standard setting organization. The author rejects the first stage hypothesis that all ex post patenting must be opportunistic and conclude instead that such patenting is likely a mixed bag of (incremental) innovative contributions along with some strategic ones. As a result, standard setting policy prescriptions should proceed with caution so that the good is not eliminated with the bad.

International Perspectives on Electricity Market Monitoring and Market Power Mitigation

2007 ◽  
Vol 6 (3) ◽  
Author(s):  
José A. García ◽  
James D. Reitzes
Keyword(s):  
Market Power ◽  
Electricity Markets ◽  
Electricity Market ◽  
Information Disclosure ◽  
Design Features ◽  
Disclosure Requirements ◽  
Market Monitoring ◽  
International Perspectives ◽  
Ex Post ◽  
Bilateral Trading

We review the different market monitoring and market-power mitigation policies that arise in world electricity markets. Regulators for electricity markets apparently respond to differences in underlying market structure and design features when choosing between ex-ante (that is, rule-based) behavioral restrictions as opposed to ex-post enforcement (that is, investigations and sanctions) as the principal means for deterring abuses of market power. Particular design features that influence market-monitoring policies are whether the market is one-part (energy only) versus two-part (energy and capacity), and whether there is centralized or bilateral trading. Information-disclosure requirements also are a key element of market monitoring.

scholarly journals Capital adequacy implications on Islamic and non-Islamic bank's behavior: Does market power matter?

2015 ◽  
Vol 15 (3) ◽  
pp. 192-204 ◽  
Author(s):  
Salma Louati ◽  
Ilhem Gargouri Abida ◽  
Younes Boujelbene
Keyword(s):  
Market Power ◽  
Capital Adequacy

scholarly journals CHALLENGES FACING COMMERCIAL BANKS IN THE IMPLEMENTATION OF CAPITAL ADEQUACY REQUIREMENT IN BASEL III FRAMEWORK

2017 ◽  
Vol 1 (4) ◽  
pp. 45
Author(s):  
Kevin N. Kombo ◽  
Dr. Amos Njuguna
Keyword(s):  
Commercial Banks ◽  
Survey Design ◽  
Descriptive Analysis ◽  
Capital Adequacy ◽  
Primary Data ◽  
Basel Iii ◽  
Management Culture ◽  
Finance Management ◽  
Regulatory Constraints ◽  
Management Staff

Purpose: The purpose of the study was to identify challenges facing commercial banks in the implementation of capital adequacy requirement in Basel III framework.Methodology: A descriptive survey design was applied to a population of 43 commercial banks operating in Kenya. The target population composed of the 159 management staff currently employed at the head offices of the various commercial banks in Kenya. The population was composed of Senior, Middle and Junior or Entry level Management staff. A sample of 30% was selected from within each group. Primary data was gathered using questionnaires which were dropped off at the bank’s head offices and picked up later when the respondents had filled the questionnaires. Descriptive analysis was used to analyze quantitative data while content analysis was used to analyze qualitative data.Results: The study concludes that the implementation of Basel III requirement has been faced by various challenges like growth barrier, regulatory constraints, risk and finance management culture and additional capital challenges. In addition, the study concluded that commercial banks face challenges in deciding how best to implement a solution that will allow them to comply with Basel III, how to operate the systems and processes for improved operational effectiveness, and how to understand and ultimately reduce their capital requirements.Unique contribution to theory, practice and policy: The study recommends that Banks should manage their risks more closely and avoid a build-up of unintended risk, reducing the opportunities for regulatory capital arbitrage. This would go a long way in eliminating growth barriers, regulatory constraints, capital adequacy requirement, risk and finance management culture and additional capital challenges.

scholarly journals Loan To Deposit Ratio, Capital Adequacy Ratio, Return On Equity Dan Bopo Dalam Menilai Kinerja Keuangan Pt. Bank Bni Syariah

2019 ◽  
Vol 4 (2) ◽  
pp. 217
Author(s):  
Rinto Noviantoro ◽  
Herlin Herlin
Keyword(s):  
Data Collection ◽  
Financial Performance ◽  
Financial Statements ◽  
Capital Adequacy ◽  
Balance Sheets ◽  
Return On Equity ◽  
Capital Adequacy Ratio ◽  
Equity Ratio

Abstract. The purpose of this study is to determine the financial performance of PT. Bank BNI Syariah. The method of collecting data in this study is documentation. documentation, namely data collection through financial statements in the form of balance sheets and profit / loss statements.  Loan Deposit Ratio (LDR) from 2015-2017 it was 89.14%, 84.01% and 78.89%.the Capital adequacy ratio and the Debt to equity ratio have been determined if the ratio produced is <50% - 75%. Return on equity have been determined to produce a ratio of> 1.5% and at BOPO ≤93.52%. From the perspective of the Capital Adequacy Ratio, in 2015-2017 the value was 38.45%, 64.84% and 38.50%By using BOPO in 2015-2017 the value was 83.21%, 80.75% and 80.91%. While the return on equity in 2015-2017 is 1.18%, 1.18% and 0.93%

scholarly journals A Look at the Liquidity Management Practices of Banks in South Africa

2017 ◽  
Vol 9 (3(J)) ◽  
pp. 113-120
Author(s):  
Tafirei Mashamba ◽  
Farai Kwenda
Keyword(s):  
South Africa ◽  
South African ◽  
Management Practices ◽  
Management Strategies ◽  
Generalized Method Of Moments ◽  
Adjustment Costs ◽  
Capital Adequacy ◽  
Loan Loss ◽  
Liquidity Management ◽  
Balance Sheets

In an effort to strengthen bank liquidity-risk management practices, the Basel Committee proposed new liquidity requirements for banks in 2010 under the Basel III framework. However, despite the good intentions of the liquidity requirements the new regulations are likely to present some challenges for banks in the course of managing their liquidity. However, before any inference can be made about the possible implications of the liquidity standards on bank liquidity management practices, it is imperative to have insight into the current liquidity management strategies of banks. This paper seeks to determine the current liquidity management practices of banks in South Africa by examining whether South African banks have target liquidity levels which they pursue and also by determining the variables that drive bank liquidity ratios. The study sample comprised six commercial banks operating in South Africa over the period 1993 to 2009. For analysis, a partial adjustment model was developed and estimated using the generalized method of moments (GMM) estimator. The rate at which South African banks adjust their balance sheets was estimated at 8%. This adjustment speed implies that South African banks adjust their balance sheets slowly – probably due to high adjustment costs. Thus, South African listed banks have passively managed their liquidity and partially adjust their liquidity levels in an attempt to reach the optimal level. Furthermore, the following variables were considered to be the main drivers of liquidity ratios in South Africa: bank size, capital adequacy, loan loss reserves, and financial crisis.

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