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Working Paper
Risk-based capital and deposit insurance reform
Risk-based capital (RBC) is an important component of deposit insurance reform. This paper provides an empirical analysis of the new 1992 RBC bank standards, applying them to data on virtually all U.S. banks from 1982 to 1989. The data reveal strong associations between several measures of future bank performance (including bankruptcy) and the RBC relative risk weights. These associations suggest that the weights constitute a significant improvement over the old capital standards, although there are several instances in which the weights for specific categories appear to be out of line with ...
Working Paper
Efficiency of financial institutions: international survey and directions for future research
This paper surveys 130 studies that apply frontier efficiency analysis to financial institutions in 21 countries. The primary goals are to summarize and critically review empirical estimates of financial institution efficiency and to attempt to arrive at a consensus view. We find that the various efficiency methods do not necessarily yield consistent results, and we suggest some ways that these methods might be improved to bring about findings that are more consistent, accurate, and useful. Secondary goals are to address the implications of efficiency results for financial institutions in the ...
Working Paper
A Tale of Two Bailouts: Effects of TARP and PPP on Subprime Consumer Debt
High levels of subprime consumer debt can create social problems. We test the effects of the Troubled Asset Relief Program (TARP) and Paycheck Protection Program (PPP) bailouts during the Global Financial Crisis and COVID-19 crisis, respectively, on this debt. We use over 11 million credit bureau observations of individual consumer debt combined with banking, bailout, and local market data. We find that subprime consumers with more TARP institutions in their markets had significantly increased debt burdens following these bailouts. In contrast, PPP bailouts were associated with reduced ...
Working Paper
The economic effects of technological progress: evidence from the banking industry
This paper examines technological progress and its effects in the banking industry. Banks are intensive users of both IT and financial technologies, and have a wealth of data available that may be helpful for the general understanding of the effects of technological change. The research suggests improvements in costs and lending capacity due to improvements in "back-office" technologies, as well as consumer benefits from improved "front-office" technologies. The research also suggests significant overall productivity increases in terms of improved quality and variety of banking services. ...
Working Paper
The efficiency of bank branches
Working Paper
The effects of megamergers on efficiency and prices: evidence from a bank profit function
This paper examines the efficiency and price effects of mergers by applying a frontier profit function to data on bank ``megamergers.'' We find that merged banks experience a statistically significant 16 percentage point average increase in profit-efficiency rank relative to other large banks. Most of the improvement is from increasing revenues, including a shift in outputs from securities to loans, a higher-valued product. Improvements were greatest for the banks with the lowest efficiencies prior to merging, who therefore had the greatest capacity for improvement. By comparison, the effects ...
Working Paper
Some red flags concerning market value accounting
Discussion Paper
An empirical analysis of standby letters of credit