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Author:Hirtle, Beverly 

Discussion Paper
Bank Capital and Risk: Cautionary or Precautionary?

Do riskier banks have more capital? Banking companies with more equity capital are better protected against failure, all else equal, because they can absorb more losses before becoming insolvent. As a result, banks with riskier income and assets would hopefully choose to fund themselves with relatively more equity and less debt, giving them a larger equity cushion against potential losses. In this post, we use a top-down stress test model of the U.S. banking system?the Capital and Loss Assessment under Stress Scenarios (CLASS) model?to assess whether banks that are forecast to lose capital in ...
Liberty Street Economics , Paper 20150202

Discussion Paper
How Does Supervision Affect Banks?

Supervisors monitor banks to assess the banks? compliance with rules and regulations but also to ensure that they engage in safe and sound practices (see our earlier post What Do Banking Supervisors Do?). Much of the work that bank supervisors do is behind the scenes and therefore difficult for outsiders to measure. In particular, it is difficult to know what impact, if any, supervisors have on the behavior of banks. In this post, we describe a new Staff Report in which we attempt to measure the impact that supervision has on bank performance. Does more attention by supervisors lead to lower ...
Liberty Street Economics , Paper 20160413

Discussion Paper
Common Stock Repurchases during the Financial Crisis

Large bank holding companies (BHCs) continued to pay dividends to their shareholders well after the onset of the recent financial crisis. Academics, industry analysts, and policymakers have noted that these payments reduced capital at these firms at a time when there was considerable uncertainty about the full extent of losses facing individual banks and the banking industry. But dividends are not the only means to return capital to shareholders; stock repurchases serve much the same function. In this post, I examine common stock repurchases by large BHCs during the financial crisis and show ...
Liberty Street Economics , Paper 20130710

Journal Article
Estimating the funding gap of the Pension Benefit Guaranty Corporation

Quarterly Review , Volume 13 , Issue Aut , Pages 45-59

Report
How do stock repurchases affect bank holding company performance?

Using data from bank holding company regulatory reports, we examine the relationship between stock repurchases and financial performance for a large sample of bank holding companies over the years 1987 to 1998. The primary result is that higher levels of repurchases in one year are associated with higher profitability and a lower share of problem loans in the subsequent year. This finding is robust to several different ways of measuring share repurchase activity. Our results appear to be driven primarily by bank holding companies with publicly traded stock, especially those companies whose ...
Staff Reports , Paper 123

Report
Bank holding company dividends and repurchases during the financial crisis

Many large U.S. bank holding companies (BHCs) continued to pay dividends during the 2007-09 financial crisis, even as financial market conditions deteriorated, large losses accumulated, and emergency capital and liquidity were being provided by the official sector. In contrast, share repurchases by these BHCs dropped sharply in the early part of the crisis. Documenting this divergent behavior is one of the key contributions of this paper. The paper also examines the role that repurchases played in large BHCs? decisions to reduce or eliminate dividends. The key findings are that smaller BHCs ...
Staff Reports , Paper 666

Journal Article
The changing financial structure: challenges for supervisors and risk managers

Economic Policy Review , Issue Oct , Pages 89-94

Discussion Paper
The CLASS Model: A Top-Down Assessment of the U.S. Banking System

Central banks and bank supervisors have increasingly relied on capital stress testing as a supervisory and macroprudential tool. Stress tests have been used by central banks and supervisors to assess the resilience of individual banking companies to adverse macroeconomic and financial market conditions as a way of gauging additional capital needs at individual firms and as a means of assessing the overall capital strength of the banking system. In this post, we describe a framework for assessing the impact of various macroeconomic scenarios on the capital and performance of the U.S. banking ...
Liberty Street Economics , Paper 20140604

Report
Bank loan commitments and the transmission of monetary policy

Research Paper , Paper 9009

Journal Article
Trends in financial market concentration and their implications for market stability

The link between financial market concentration and stability is a topic of great interest to policymakers and other market participants. Are concentrated markets - those where a relatively small number of firms hold large market shares - inherently more prone to disruption? This article considers that question by drawing on academic studies as well as introducing new analysis. Like other researchers, the authors find an ambiguous relationship between concentration and instability when a large firm in a concentrated market fails. In a complementary review of concentration trends across a ...
Economic Policy Review , Volume 13 , Issue Mar , Pages 33-51

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