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45 posts on "Banks"

June 19, 2018

At the New York Fed: Conference on the Effects of Post-Crisis Banking Reforms



The financial crisis of 2007-08 and the ensuing recession, the most severe since the 1930s, prompted a wave of regulatory reforms: tighter bank capital and liquidity rules, new failed bank resolution procedures, a stand-alone consumer protection agency, greater transparency in money market funds, central clearing of derivatives, and others as well. As these reforms have gradually taken effect, a healthy debate has emerged in the policy and academic communities over their efficacy in achieving their intended goals and possible unintended consequences.

Continue reading "At the New York Fed: Conference on the Effects of Post-Crisis Banking Reforms" »

Posted by Blog Author at 7:00 AM in Banks, Regulation | Permalink | Comments (0)

June 01, 2018

Hey, Economist! Outgoing New York Fed President Bill Dudley on FOMC Preparation and Thinking Like an Economist

LSE_2018.06.01-LSE-Dudley_920x576

Bill Dudley will soon turn over the keys to the vault—so to speak. But before his tenure ends after nine years as president of the New York Fed, Liberty Street Economics sought to capture his parting reflections on economic research, FOMC preparation, and leadership. Publications editor Trevor Delaney recently caught up with Dudley. This transcript has been lightly edited.

Continue reading "Hey, Economist! Outgoing New York Fed President Bill Dudley on FOMC Preparation and Thinking Like an Economist" »

Posted by Blog Author at 7:00 AM in Banks, Federal Reserve, Hey, Economist!, Monetary Policy | Permalink | Comments (0)

May 07, 2018

Have the Biggest U.S. Banks Become Less Complex?



LSE_Have the Biggest U.S. Banks Become Less Complex?0

The global financial crisis, and the ensuing Dodd-Frank Act, identified size and complexity as determinants of banks’ systemic importance, increasing the potential risks to financial stability. While it’s known that big banks haven’t shrunk, the question that remains is: have they simplified? In this post, we show that while the largest U.S. bank holding companies (BHCs) have somewhat simplified their organizational structures, they remain very complex. The industries spanned by entities within the BHCs have shifted more than they have declined, and the countries in which some large BHCs have entities still include numerous “secrecy” or tax-haven locations.

Continue reading "Have the Biggest U.S. Banks Become Less Complex?" »

March 05, 2018

Did the Dodd-Frank Act End ‘Too Big to Fail’?



LSE_Did the Dodd-Frank Act End ‘Too Big to Fail’?

One goal of the Dodd-Frank Act of 2010 was to end “too big to fail.” Toward that goal, the Act required systemically important financial institutions to submit detailed plans for an orderly resolution (“living wills”) and authorized the FDIC to create an alternative resolution procedure. In response, the FDIC has developed a “single point of entry” (SPOE) strategy, under which healthy parent companies bear the losses of their failing subsidiaries. Since SPOE makes the parent company responsible for subsidiaries’ losses, we would expect that parents have become riskier, relative to their subsidiaries, since the announcement of the SPOE strategy in December 2013. Do bond raters and investors share this view?

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Posted by Blog Author at 7:00 AM in Banks, Crisis, Dodd-Frank, Regulation | Permalink | Comments (4)

February 12, 2018

Does More "Skin in the Game" Mitigate Bank Risk-Taking?



LSE_2018_Does More

It is widely said that a lack of “skin in the game” would distort lenders’ incentives and cause a moral hazard problem, that is, excessive risk‑taking. If so, does more skin in the game—in the form of extended liability—reduce bankers’ risk‑taking? In order to examine this question, we investigate historical data prior to the Great Depression, when bank owners’ liability for losses in the event of bank failure differed by state and primary regulator. This post describes our preliminary findings.

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February 09, 2018

Hey, Economist! What Do Cryptocurrencies Have to Do with Trust?



LSE_Hey, Economist!  What Do Cryptocurrencies Have to Do with Trust?


Bitcoin and other “cryptocurrencies” have been much in the news lately, in part because of their wild gyrations in value. Michael Lee and Antoine Martin, economists in the New York Fed’s Money and Payment Studies function, have been following cryptocurrencies and agreed to answer some questions about digital money.

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February 02, 2018

New Report Assesses Structural Changes in Global Banking



LSE_2018_New Report Assesses Structural Changes in Global Banking

The Committee on the Global Financial System, made up of senior officials from central banks around the world and chaired by New York Fed President William Dudley, recently released a report on “Structural Changes in Banking after the Crisis.” The report includes findings from a wide-ranging study documenting the significant structural adjustments in banking systems around the world in response to regulatory, technological, and market changes after the crisis, while also assessing their implications for financial stability, credit provision, and capital markets activity. It includes a new banking database spanning over twenty-one countries from 2000 to 2016 that could serve as a valuable reference for further analysis. Overall, the study concludes that the changed regulatory and market environment since the crisis has led banks to alter their business models and balance sheets in ways that make them more resilient but also less profitable, while continuing their role as intermediaries providing financial services to the real economy.

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October 18, 2017

What Explains Shareholder Payouts by Large Banks?



Editor's note: This post has been corrected to show that the $750 billion increase in common equity at CCAR banks since 2009 reflects a rise of more than 150 percent. (October 20, 2017, 2:06 p.m.)

LSE_2017_What Explains Shareholder Payouts by Large Banks?

On June 28, the Federal Reserve released the latest results of the Comprehensive Capital Analysis and Review (CCAR), the supervisory program that assesses the capital adequacy and capital planning processes of large, complex banking companies. The Fed did not object to any of the banks’ capital plans, an outcome that was widely heralded as a signal that these banks would be able to increase payouts to their shareholders. And in fact, immediately following the release of the CCAR results, several large banks announced substantial increases in quarterly dividends and record-sized share repurchase programs. In this post, we put these announced increases into recent historical context, showing how banks’ payouts to shareholders have increased since the financial crisis and describing how CCAR has affected the composition of payouts between dividends and share repurchases.

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Posted by Blog Author at 7:00 AM in Bank Capital, Banks, Financial Institutions | Permalink | Comments (0)

September 06, 2017

What Drives International Bank Credit?



LSE_2017_What Drives International Bank Credit?

A major question facing policymakers is how to deal with slumps in bank credit. The policy prescriptions are very different depending on whether the decline is a result of global forces, domestic demand, or supply problems in a particular banking system. We present findings from new research that exactly decompose the growth in banks’ aggregate foreign credit into these three factors. Using global banking data for the period 2000-16, we uncover some striking patterns in bilateral credit relationships between consolidated banking systems and borrowers in more than 200 countries. The most important we term the “Anna Karenina Principle” of global banking: all healthy credit relationships behave alike; each unhealthy credit relationship is unhealthy in its own way.

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August 09, 2017

Investor Diversity and Liquidity in the Secondary Loan Market



LSE_Investor Diversity and Liquidity in the Secondary Loan Market

Over the last two decades, the U.S. secondary loan market has evolved from a relatively sleepy market dominated by banks and insurance companies that trade only occasionally to a more active market comprising a diversified set of institutional investors, including collateralized loan obligations (CLOs), loan mutual funds, hedge funds, pension funds, brokers, and private equity firms. This shift resulted from the growing presence of these investors in the syndicates of corporate loans, as shown in the chart below. In 1991 the average term loan had just two different types of investors; by 2013 that number had grown to five.

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Posted by Blog Author at 7:00 AM in Banks, Financial Markets | Permalink | Comments (0)
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Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

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