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Discussion Paper
The Effects of Post-Crisis Banking Reforms
The financial crisis of 2007-08 exposed many limitations of the regulatory architecture of the U.S. financial system. In an attempt to mitigate these limitations, there has been a wave of regulatory reforms in the post-crisis period, especially in the banking sector. These include tighter bank capital and liquidity rules; new resolution procedures for failed banks; the creation of a stand-alone consumer protection agency; greater transparency in money market funds; and a move to central clearing of derivatives, among other measures. As these reforms have been finalized and implemented, a ...
Conference Paper
Banking and commerce: an approach based on liquidity synergies
Conference Paper
Study of the banking consolidation impact on small business lending
Journal Article
What makes large bank failures so messy and what should be done about it?
This study argues that the defining feature of large and complex banks that makes their failures messy is their reliance on runnable financial liabilities. These liabilities confer liquidity or money-like services that may be impaired or destroyed in bankruptcy. To make large bank failures more orderly, the authors recommend that systemically important bank holding companies be required to issue ?bail-in-able? long-term debt that converts to equity in resolution. This reassures holders of uninsured liabilities that their claims will be honored in resolution, making them less likely to run. In ...
Discussion Paper
Did the Supervisory Guidance on Leveraged Lending Work?
Financial regulatory agencies issued guidance intended to curtail leveraged lending?loans to firms perceived to be risky?in March of 2013. In issuing the guidance, the Office of the Comptroller of the Currency, the Board of Governors of the Federal Reserve System, and the Federal Deposit Insurance Corporation highlighted several facts that were reminiscent of the mortgage market in the years preceding the financial crisis: rapid growth in the volume of leveraged lending, increased participation by unregulated investors, and deteriorating underwriting standards. Our post shows that banks, in ...
Conference Paper
Do corporate loans sold to CLOs underperform unsecurities loans
Journal Article
Evidence from the bond market on banks’ “Too-Big-to-Fail” subsidy
Using information on bonds issued over the 1985-2009 period, this study finds that the largest banks have a funding advantage over their smaller peers. This advantage may not be entirely attributable to investors? belief that the largest banks are ?too big to fail,? because the study also finds that the largest nonbanks, as well as the largest nonfinancial corporations, have a cost advantage relative to their smaller peers. However, a comparison across the three groups reveals that the funding advantage enjoyed by the largest banks is significantly larger than that available to the largest ...
Discussion Paper
Liquidity Risk, Liquidity Management, and Liquidity Policies
During the 2007-09 financial crisis, banks experienced widespread funding shortages, with shortfalls even hindering adequately capitalized banks. The Federal Reserve responded to the funding shortages by creating liquidity backstops to insulate the real economy from the banking sector?s liquidity crisis. The regulatory reforms initiated by the Dodd-Frank Act and Basel III introduced systematic liquidity risk management into bank regulations. In the past year, research economists from the Federal Reserve Bank of New York have undertaken a number of research projects to further the conceptual ...
Journal Article
Systemic risk and deposit insurance premiums
Professor Viral Acharya of the London Business School and New York University collaborates with New York Fed economists Joo Santos and Tanju Yorulmazer to analyze various ways to incorporate systemic risk into deposit insurance premiums. Presented at "Central Bank Liquidity Tools and Perspectives on Regulatory Reform" a conference sponsored by the Federal Reserve Bank of New York, February 19-20, 2009.
Discussion Paper
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 ...