Can banks provide liquidity in a financial crisis?

In financial crises of the recent past, investors often withdrew from securities markets and placed their funds into safer assets, such as U.S. Treasuries and bank deposits. During such episodes, a wide range of businesses shut out of securities markets sought to fund their operations by drawing down credit lines established with banks during normal times. Awash with funds from depositors seeking a safe haven, banks had no difficulty meeting these increased credit demands. Thus, banks helped avoid financial disruptions and business liquidations that would have occurred in the absence of a liquidity backstop. ; In 2007-09, however, banks were at the center of the financial crisis. While significant risks were present in some other financial institutions, this crisis was special in that commercial banks were much more exposed to losses than in recent past crises. This key feature of the crisis casts doubt on the notion that banks are a natural source of liquidity during financial crises. Were bank deposits still viewed as a safe haven, and if not, how compromised was their ability to meet the demand for liquidity? ; Mora examines how commercial bank deposits and lending evolved during the recent crisis compared with past episodes of financial stress. She concludes that the bank-centered nature of the crisis made it harder than in the past for banks to attract deposits and provide liquidity to borrowers shut out of securities markets.

Lender exposure and effort in the syndicated loan market

This paper tests for agency problems between the lead arranger and syndicate participants in the syndicated loan market. One problem comes from adverse selection, whereby the lead arranger has a private informational advantage over participants. A second problem comes from moral hazard, whereby the lead arranger puts less effort in monitoring when it retains a smaller loan portion. Applying an instrumental variables strategy, I find that borrowers' performance is influenced by the lead's share. Dynamic tests extract active contributions made by the lead, supporting a monitoring interpretation. Loan covenants serve as a mechanism to induce the lead arranger to monitor.

The effect of bank credit on asset prices: Evidence from the Japanese real estate boom during the 1980s

This paper studies whether bank credit fuels asset prices. I show that I have an instrument for the supply of real estate loans. Financial deregulation during the 1980s allowed keiretsus to obtain finance publicly and reduce their dependence on banks. Banks that lost these blue-chip customers increased their property lending. Using this instrument I find that a 0.01 increase in a prefecture's real estate loans as a share of total loans causes 14-20% higher land inflation compared to other prefectures over the 1981-1991 period. The timing of losses also coincides with subsequent land inflation in a prefecture

Are banks passive liquidity backstops? deposit rates and flows during the 2007-2009 crisis

Can banks maintain their advantage as liquidity providers when they are heavily exposed to a financial crisis? The standard argument - that banks can - hinges on deposit inflows that are seeking a safe haven and provide banks with a natural hedge to fund drawn credit lines and other commitments. We shed new light on this issue by studying the behavior of bank deposit rates and inflows during the 2007-09 crisis. Our results indicate that the role of the banking system as a stabilizing liquidity insurer is not one of the passive recipient, but of an active seeker, of deposits. We find that banks facing a funding squeeze sought to attract deposits by offering higher rates. Banks offering higher rates were also those most exposed to liquidity demand shocks (as measured by their unused commitments, wholesale funding dependence, and limited liquid assets), as well as with fundamentally weak balance-sheets (as measured by their non-performing loans or by subsequent failure). Such rate increases have a competitive effect in that they lead other banks to offer higher rates as well. Overall, the results present a nuanced view of deposit rates and flows to banks in a crisis, one that reflects banks not just as safety havens but also as stressed entities scrambling for deposits.

What Moves Capital to Transition Economies?

The transition economies in Europe and the former Soviet Union between 1991 and 1999 differed widely in terms of total capital flows and the share and composition of private flows. With some exceptions (notably Russia), the main source of private inflows was foreign direct investment. Portfolio investment was volatile, and concentrated in a handful of countries. Regressions show that direct investment can be well explained in terms of economic fundamentals, whereas the presence of a financial market infrastructure and a property rights indicator are the only explanatory variables that seem to have a robust effect on portfolio invest-ment. Copyright 2002, International Monetary Fund

Are Banks Passive Liquidity Backstops?

Can banks maintain their advantage as liquidity providers when they are heavily exposed to a financial crisis? The standard argument - that banks can - hinges on deposit inflows that are seeking a safe haven and provide banks with a natural hedge to fund drawn credit lines and other commitments. We shed new light on this issue by studying the behavior of bank deposit rates and inflows during the 2007-09 crisis. Our results indicate that the role of the banking system as a stabilizing liquidity insurer is not one of the passive recipient, but of an active seeker, of deposits. We find that banks facing a funding squeeze sought to attract deposits by offering higher rates. Banks offering higher rates were also those most exposed to liquidity demand shocks (as measured by their unused commitments, wholesale funding dependence, and limited liquid assets), as well as with fundamentally weak balance-sheets (as measured by their non-performing loans or by subsequent failure). Such rate increases have a competitive effect in that they lead other banks to offer higher rates as well. Overall, the results present a nuanced view of deposit rates and flows to banks in a crisis, one that reflects banks not just as safety havens but also as stressed entities scrambling for deposits

Funding Liquidity Risk in a Quantitative Model of Systemic Stability

We demonstrate how the introduction of liability-side feedbacks affects the properties of a quantitative model of systemic risk. The preliminary version of the model, which is still in its development phase, is based on detailed balance sheets for UK banks and encompasses macro-credit risk, interest and non-interest income risk, network interactions, and feedback effects. Funding liquidity risk is introduced by allowing for rating downgrades and incorporating a simple framework in which concerns over solvency, funding profile and confidence may trigger the outright closure of funding markets. In presenting results, we focus on how policymakers could use the model with reference to both aggregate distributions and analysis of a scenario in which large losses at some banks can be exacerbated by liability-side feedbacks, leading to system-wide instability.

Potensi Peningkatan Nilai Tambah Produk Olahan Talas Pada Masa Pandemi Covid-19 di Kelurahan Situgede Kota Bogor

Talas merupakan komoditas unggulan di Kelurahan Situgede Kota Bogor. Selain sebagai komoditas unggulan, talas juga dikenal sebagai icon Kota Bogor. Sebagai ikon, tentunya pengembangan agribisnis talas perlu dilakukan. KTD Saluyu yang merupakan salah satu kelompok tani yang berperan aktif mengembangkan agribisnis talas di Kelurahan Situgede Kecamatan Bogor Barat Kota Bogor. Anggota kelompok tani perlu bersinergi dengan stakeholder untuk menciptakan inovasi baru terutama dalam hal pengolahan produk talas. Selain itu, KTD Saluyu juga perlu beradaptasi dengan teknologi digital untuk mendukung aktivitas pemasaran produk hasil pertanian maupun hasil olahannya. Kegiatan yang dilaksanakan adalah pendampingan KTD Saluyu untuk proses pengolahan talas menjadi produk jadi yaitu keripik talas, pembuatan brand dan desain packaging produk, serta memasarkan produk yang dihasilkan secara online melalui media sosial dan marketplace. Inovasi produk yang dihasilkan adalah Kripik Talas dan Stik Talas (Rasa Original, Coklat, Keju, dan Balado) yang dapat menghasilkan nilai tambah sebesar 44,29 persen. Inovasi produk ini diberi merek “Caritalas” dipasarkan melalui instagram (caritalas_) dan Shopee (caritalas.id)