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Newsletter
Rising interest rates, bank loans, and deposits
The authors show how the relationships between interest rate changes, deposit growth rates, and loan growth rates have changed in the last ten years, discuss some possible reasons, and assess the likely impact of rising interest rates on loans and deposits going forward.
Newsletter
Japanese banks and market discipline
Journal Article
Japan's corporate groups
Newsletter
The Cyprus crisis through the lens of bank investors
Last year, Cyprus joined its neighbor Greece on the list of eurozone countries in financial crisis. Although Cyprus is one of the smallest economies in the euro area, following the announcement of the official financial aid package for Cyprus on March 16, 2013, bank investors in the rest of the eurozone suffered large losses. Our analysis indicates that bank investors interpreted the Cypriot aid package as potentially forming a template for future eurozone bank restructurings, whereby bank investors would bear a higher fraction of the resolution costs. .
Working Paper
The value of banking relationships during a financial crisis: evidence from failures of Japanese banks
In this paper, we provide evidence on the value of banking relationships by examining the stock market valuation impact of three large bank failures in Japan in 1997 and 1998 on their clients and the clients of surviving banks. Bank failures are theorized to have adverse consequences for other firms in general, and for customers of the failed institutions in particular. Firms that are customers of the failed institution may be adversely affected because, among other things, they may lose an ongoing source of funding and need to incur the expense of search and providing financial and other ...
Working Paper
The security issue decision: evidence from small business investment companies
Using a unique transactions-level dataset, this paper examines the investment choices of small business investment companies (SBICs), which are private venture capital firms licensed and regulated by the U.S. Small Business Administration (SBA). SBICs make debt and equity investments in small businesses, and we seek to explain their security choices. We focus on factors suggested by asymmetric information and contracting theories of security choice. Overall, our results are consistent with the predictions of contracting theory, although certain aspects of our results also support asymmetric ...
Newsletter
What Is the Impact of a Low Interest Rate Environment on Bank Profitability?
The economic conditions and low interest rate environment of recent years have been challenging for banks that rely on a wide spread between long- and short-maturity yields to generate earnings. The authors? analysis indicates that a low interest rate environment is associated with decreased profitability for banks, particularly for small institutions. However, the estimated negative effects on bank profits are economically small and are outweighed by the likely positive effects on profits of low interest rates boosting economic activity.
Newsletter
Why aren't banks lending more? the role of commercial real estate
Since August 2007, the U.S. and global financial markets have endured the worst crisis since the Great Depression, accompanied by a deep economic recession. At the height of the crisis, whole segments of financial markets froze and market participants hesitated to engage in transactions with even the most creditworthy counterparties.
