Regulation of International Financial Markets and International Banking

This research group analyses causes and consequences of banks' international activities and the regulatory framework they operate in.

Internationally active banks can facilitate an efficient international allocation of capital and provide channels for international risk sharing. But they can also be a source of financial instabilities themselves, thus contributing to international contagion and risk-shifting. This is one reason for the current re-regulation of international banking.

The research group contributes to the literature in three ways. First, the group empirically analyses the channels through which shocks are transmitted by internationally active banks. Second, the group analyses the build-up of aggregate imbalances in integrated banking markets and resulting consequences for the real economy. Third, the group analyses the impact of changes in banking supervision and regulation on (inter)national activities of banks, with a special focus on the European integration process.

 

IWH Data Project: International Banking Library

Research Cluster
Economic Dynamics and Stability

Your contact

Professor Dr Lena Tonzer
Professor Dr Lena Tonzer
Mitglied - Department Financial Markets
Send Message Personal page

EXTERNAL FUNDING

07.2017 ‐ 12.2022

The Political Economy of the European Banking Union

European Social Fund (ESF)

Causes of national differences in the implementation of the Banking Union and the resulting impact on financial stability.

see project's webpage

Professor Dr Lena Tonzer

01.2015 ‐ 12.2017

Dynamic Interactions between Banks and the Real Economy

German Research Foundation (DFG)

Professor Dr Felix Noth

Refereed Publications

cover_journal_of_monetary_economics.jpg

Lending Effects of the ECB’s Asset Purchases

Michael Koetter

in: Journal of Monetary Economics, December 2020

Abstract

Between 2010 and 2012, the European Central Bank absorbed €218 billion worth of government securities from five EMU countries under the Securities Markets Programme (SMP). Detailed security holdings data at the bank level affirms an effective lending stimulus due to the SMP. Exposed banks contract household lending, but increase commercial lending substantially. Holding non-SMP securities from stressed EMU countries amplifies the commercial lending response. The SMP also improved liquidity buffers and profitability without compromising credit quality.

read publication

cover_journal-of-international-money-and-finance.png

The Impact of Social Capital on Economic Attitudes and Outcomes

Iftekhar Hasan Qing He Haitian Lu

in: Journal of International Money and Finance, November 2020

Abstract

This article traces the extant literature on the impact of social capital on economic attitudes and outcomes. Special attention is paid to clarify conceptual ambiguities, measurement techniques, channels of influence, and identification strategies. Insights derived from the literature are then used to analyze the marketplace lending industry in China, where the size of the peer-to-peer (P2P) lending market is larger than that of the rest of the world combined. Ironically, approximately two-thirds of these online P2P lending platforms have failed. Empirical evidence from the monthly operating data of 735 lending platforms and transaction level data from one prominent platform (Renrendai) shows that platforms in provinces with high social capital have low risk of failure, and borrowers in provinces with high social capital can borrow at low interest rate and are less likely to default. We also provide observations to guide future economic research on social capital.

read publication

cover_journal-of-international-money-and-finance.png

Finance and Wealth Inequality

Iftekhar Hasan Roman Horvath Jan Mares

in: Journal of International Money and Finance, November 2020

Abstract

Using a global sample, this paper investigates the determinants of wealth inequality capturing various economic, financial, political, institutional, and geographical indicators. Using instrumental variable Bayesian model averaging, it reveals that only a handful of indicators robustly matters and finance plays a key role. It reports that while financial depth increases wealth inequality, efficiency and access to finance reduce inequality. In addition, redistribution and education are associated with lower inequality whereas wars and openness to international trade contribute to greater wealth inequality.

read publication

cover_journal-of-financial-stability.gif

Are Bank Capital Requirements Optimally Set? Evidence from Researchers’ Views

Gene Ambrocio Iftekhar Hasan Esa Jokivuolle Kim Ristolainen

in: Journal of Financial Stability, October 2020

Abstract

We survey 149 leading academic researchers on bank capital regulation. The median (average) respondent prefers a 10% (15%) minimum non-risk-weighted equity-to-assets ratio, which is considerably higher than the current requirement. North Americans prefer a significantly higher equity-to-assets ratio than Europeans. We find substantial support for the new forms of regulation introduced in Basel III, such as liquidity requirements. Views are most dispersed regarding the use of hybrid assets and bail-inable debt in capital regulation. 70% of experts would support an additional market-based capital requirement. When investigating factors driving capital requirement preferences, we find that the typical expert believes a five percentage points increase in capital requirements would “probably decrease” both the likelihood and social cost of a crisis with “minimal to no change” to loan volumes and economic activity. The best predictor of capital requirement preference is how strongly an expert believes that higher capital requirements would increase the cost of bank lending.

read publication

cover_Journal_of_Banking_and_Finance_September_2020.png

Do Conventional Monetary Policy Instruments Matter in Unconventional Times?

Manuel Buchholz Kirsten Schmidt Lena Tonzer

in: Journal of Banking and Finance, No. 105874, September 2020

Abstract

This paper investigates how declines in the deposit facility rate set by the ECB affect euro area banks’ incentives to hold reserves at the central bank. We find that, in the face of lower deposit rates, banks with a more interest-sensitive business model are more likely to reduce reserve holdings and allocate freed-up liquidity to loans. The result is driven by banks in the non-GIIPS countries of the euro area. This reveals that conventional monetary policy instruments have limited effects in restoring monetary policy transmission during times of crisis.

read publication

Working Papers

cover_iza-discussion-papers-2020-november.png

Explaining Regional Disparities in Housing Prices across German Districts

Lars Brausewetter Stephan L. Thomsen Johannes Trunzer

in: IZA Institute of Labor Economics, March 2022

Abstract

Over the last decade, German housing prices have increased unprecedentedly. Drawing on quality-adjusted housing price data at the district level, we document large and increasing regional disparities: growth rates were higher in 1) the largest seven cities, 2) districts located in the south, and 3) districts with higher initial price levels. Indications of price bubbles are concentrated in the largest cities and in the purchasing market. Prices seem to be driven by the demand side: increasing population density, higher shares of academically educated employees and increasing purchasing power explain our findings, while supply remained relatively constrained in the short term.

read publication
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoSupported by the BMWK