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Journal Article
Insiders' assessments of the stock market's pricing of New England banks
The surge in bank failures in the late 1980s and early 1990s prompted many policy proposals in search of an improved regulatory and supervisory framework. One such reform urges the enhancement of market forces in the disciplining of banking institutions. This study assesses the effectiveness of one type of outside monitor, stock market participants, in identifying New England banks' exposure to the region's real estate market in the late 1980s and early 1990s. An examination of this issue is important for evaluating the potential role that private sector claimholders can exercise in the ...
Conference Paper
International implications of disclosing supervisory information
Working Paper
Impact of greater bank disclosure amidst a banking crisis
Banking crises have continued to emerge in recent years, contributing to severe economic contractions in Japan, Russia, and Southeast Asia. In response, international organizations have advocated enhanced market discipline, encouraging countries to improve disclosure. One reason so little progress has been made is that neither the proponents nor the opponents of enchanted disclosure policies have persuasive empirical evidence to support their views on potential costs and benefits of such a policy. This paper fills that gap by examining the impact of requiring the release of supervisory ...
Journal Article
Banking in the age of information technology
Conference Paper
Building an infrastructure for financial stability: an overview
Conference Paper
Economic cycles and bank health
Over the past two decades the United States has experienced substantial increases in the number of bank failures, however, surprisingly few banks have failed during the 2001 recession. This paper explores the relationship between economic cycles and bank health. We find that economic forecasts provide little additional information over bank-specific financial data during prosperous times, possibly because bank problems during these times are likely to be idiosyncratic to individual management decisions. However, economic forecasts become relevant during troubled economic periods, with poor ...
Journal Article
Problem loans at New England banks, 1989 to 1992: evidence of aggressive loan policies
The New England banking industry experienced serious problems between 1989 and 1992. As the region's economy deteriorated, banks failed at an unprecedented rate and many others barely survived. Banking problems were widespread, but they were not uniform. The ratio of nonperforming loans to total loans was in excess of 10 percent for some New England banks, below 1 percent for others, even though all faced the external shock of the collapse in the region's real estate market.> This study attempts to determine whether a 'skills' hypothesis or a 'policies' hypothesis better explains the ...
Working Paper
Capital and risk: new evidence on implications of large operational losses
Operational risk is currently receiving significant media attention, as financial scandals have appeared regularly and multiple events have exceeded one billion dollars in total impact. Regulators have also been devoting attention to this risk, and are finalizing proposals that would require banks to hold capital for potential operational losses. This paper uses newly available loss data to model operational risk at internationally active banks. Our results suggest that the amount of capital held for operational risk will often exceed capital held for market risk, and that the largest banks ...
Working Paper
Implications of alternative operational risk modeling techniques
Quantification of operational risk has received increased attention with the inclusion of an explicit capital charge for operational risk under the new Basle proposal. The proposal provides significant flexibility for banks to use internal models to estimate their operational risk, and the associated capital needed for unexpected losses. Most banks have used variants of value at risk models that estimate frequency, severity, and loss distributions. This paper examines the empirical regularities in operational loss data. Using loss data from six large internationally active banking ...