Banken, Regulierung und Anreizstrukturen
Ziel dieser Forschungsgruppe ist es, unser Verständnis der Wechselwirkungen zwischen Bankgeschäften, Vorschriften und Anreizen für Bankangestellte zu verbessern.
ForschungsclusterFinanzresilienz und Regulierung
The Nexus between Loan Portfolio Size and Volatility: Does Bank Capital Regulation Matter?
in: Journal of Banking and Finance, June 2021
This paper analyzes the effects of bank capital regulation on the link between bank size and volatility. Using bank-level data for 27 advanced economies over the 2000–2014 period, we estimate a power law that relates the volume of a bank’s loan portfolio to the volatility of loan growth. Our analysis reveals, first, that more stringent capital regulation weakens the size-volatility nexus. Hence, in countries with more stringent capital regulation, large banks show, ceteris paribus, lower loan portfolio volatility. Second, the effect of tighter capital requirements on the size-volatility nexus becomes stronger for the upper tail of the bank size distribution. This is in line with capitalization decreasing with bank size, such that larger banks tend to be more affected by increasing capital requirements. Third, in countries with higher sectoral capital buffers, the size-volatility nexus is weaker.
The Adverse Effect of Contingent Convertible Bonds on Bank Stability
in: IWH Discussion Papers, Nr. 1, 2022
This paper examines the effect of CoCo bonds that qualify as additional tier 1 capital on bank fundamentals. The results reveal a significant reduction in the distance to insolvency following the hybrid bond issuance due to increased earnings volatility. Further analyses suggest a link between CoCo issuance and more active earnings management, evidenced by a higher standard deviation of loan loss provisions and impairment charges. The findings substantiate long-standing theoretical hypotheses suggesting that the regulatory design requirements for going-concern CoCos adversely affect bank stability. Furthermore, they correspond to the notion that private monitoring is largely absent as a corrective measure due to prevailing uncertainties and information frictions.