scholarly journals The Recent Financial Crisis and Its Impact on Interest Rate Swaps: A Road to Recovery through the Frustration of Commercial Purpose Doctrine

2014 ◽  
Vol 24 (2) ◽  
pp. 429-460
Author(s):  
Zachary Ahonen
Keyword(s):  
Interest Rate ◽  
Financial Crisis ◽  
Interest Rate Swaps ◽  
Commercial Purpose ◽  
Recent Financial Crisis

A Black Swan in the Money Market

2009 ◽  
Vol 1 (1) ◽  
pp. 58-83 ◽  
Author(s):  
John B Taylor ◽  
John C Williams
Keyword(s):  
Interest Rate ◽  
Financial Crisis ◽  
Money Market ◽  
Black Swan ◽  
Counterparty Risk ◽  
Federal Funds ◽  
No Arbitrage ◽  
Measures Of Risk ◽  
Recent Financial Crisis ◽  
Robust Evidence

The recent financial crisis saw a dramatic and persistent jump in interest rate spreads between overnight federal funds and longer-term interbank loans. The Fed took several actions to reduce these spreads including the creation of the Term Auction Facility (TAF). The effectiveness of these policies depends on the cause of the increased spreads such as counterparty risk, liquidity, or other factors. Using a no-arbitrage pricing framework and various measures of risk, we find robust evidence that increased counterparty risk contributed to the rise in spreads but do not find robust evidence that the TAF had a significant effect on spreads.

Securitization and financial markets: the implications for interest rate pass-through

2016 ◽  
Vol 8 (4) ◽  
pp. 472-498
Author(s):  
Mari L. Robertson
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Financial Crisis ◽  
Consumer Credit ◽  
Private Label ◽  
Mortgage Markets ◽  
Content Type ◽  
Lending Rates ◽  
Recent Financial Crisis ◽  
Pass Through

Purpose The transmission of monetary policy rates to lending rates is viewed as a crucial path of monetary policy. As an integral part of the financial system and the recent financial crisis, securitized assets have the potential to affect the interest rate pass-through process and monetary policy effectiveness. This paper aims to investigate the influence of securitization on the transmission of policy rate changes to lending rates and how rate transmission has changed since the recent financial crisis. Emphasis is placed on differences among the mortgage, consumer credit and business loan securitization markets and between agency and private-label securitization transactions. Design/methodology/approach The empirical framework is an error-correction model augmented to directly measure the influence of securitization. Monetary policy effectiveness is measured by the size and speed of transmitted policy rate changes to lending rates. An efficiency measure of relative adjustment accounts for differences in the size of long-run responses across loan markets and changes in efficiency from securitization within loan markets. Findings The size and speed of interest rate pass-through tend to increase with securitization. Liquidity, capital relief and funding from securitization help to make lending rates more responsive. Increases in pass-through with securitization are less in the consumer credit and business loan markets after the recent financial crisis relative to before the crisis. In contrast, mortgage markets tend to have larger pass-through after the financial crisis. Differences in rate transmission after the recent financial crisis point to the role on nonbanks in consumer credit and business loans and asset purchase programs of the Federal Reserve in mortgage markets. Securitization tends to make the adjustment process more efficient, and gains in efficiency from securitization are larger after the financial crisis. Originality/value A key contribution of the study differentiates securitization across markets and types to determine the effects on the interest rate pass-through process. The results show that increases in the efficiency of the adjustment process from securitization tend to be greater in mortgage markets and for all private-label securitized assets. These findings have implications for proposed government-sponsored entity (GSE) reform to reduce the role of GSEs in the housing market, promote private-label mortgage credit and strengthen securitization deals.

NPLs — The Solution Recipe for Albania

2015 ◽  
Vol 3 (1) ◽  
pp. 48
Author(s):  
Elona Shehu ◽  
Elona Meka
Keyword(s):  
Interest Rate ◽  
Negative Relationship ◽  
Banking System ◽  
Gdp Growth ◽  
System A ◽  
Analysis Technique ◽  
Recent Financial Crisis ◽  
The Stability ◽  
Asset Quality ◽  
Macroeconomic Determinants

The quality of the loan portfolio in Albanian banking system is facing many obstacles during the last decade. In this paper we look at possible determinants of assets quality. During the recent financial crisis commercial banks were confronted with deteriorating asset quality that threatened not only the banking industry, but also the stability of the entire financial system. This study aims to examine the correlation between non-performing loans and the macroeconomic determinants in Albania during the last decade. NPLs are considered to be of a high importance as they represent the high risk exposure of banking system. A solid bank with healthy assets increases the market efficiency. Our approach is based on a panel data regression analysis technique from 2005-2015. Within this methodology this study finds robust evidence on the existing relationship between lending interest rate, real GDP growth and NPLs. We expect to find a negative relationship between lending interest rate and asset quality. Further we assume an inverse relationship between GDP growth and non-performing loans, suggesting that NPLs decrease if the economy is growing. Furthermore this study proposes a solution platform, which looks deeper into the possibility of creating a secondary active market for troubled loans, restructuring the banking system or implementing the Podgorica model. This research paper opens a new lieu of discussion in terms of academic debates and decision-making policies.

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