Risk and return of publicly held versus privately owned banks

The author divides bank holding companies (BHCs) into four size classes, then categorizes each class according to public or private ownership. He compares the performance and risk across bank size classes between 1986 and 2000 and in five-year windows therein. For the largest BHCs, returns on assets and operating costs do not depend on ownership, but for the smaller BHCs, returns on assets are lower and operating costs are higher for those that are publicly owned. Small public BHCs also hold more capital than do small private ones.Corporate governance ; Bank holding companies ; Bank stocks ; Bank management

Safe and sound banking, 20 years later: what was proposed and what has been adopted

In 1986, a task force of banking academics organized and sponsored by the American Bankers Association convened to examine the banking industry and the efficacy of its regulatory system. The group was charged with reviewing the problems of ensuring the safety and soundness of the banking system and evaluating a number of policy options to improve the efficiency, performance, and safety of the system by changing the structure of the deposit insurance system and the bank regulatory and supervisory process. The results of the work of the task force were published by the MIT Press as the book, Perspectives on Safe and Sound Banking (Benston et al., 1986, the Report), which includes a set of principal options and recommendations. The purpose of this article is to assess the extent to which changes in public policy regarding depository institutions have been aligned with the recommendations of the Report. We find that, over the past 20 years, several legislative initiatives and changes in regulations and the bank supervisory process have been in keeping with the specific recommendations of the Report or with the analytic framework underlying the recommendations. At the same time, other recommendations in the Report have not been taken up and some proposals rejected in the Report have been put in place by legislative and regulatory initiatives. Overall, public policy and private sector initiatives appear to have contributed to safer and sounder banking and thrift sectors over the past 20 years. Consistent with what we see as the main theme of the Report, a likely contributing factor is the more appropriate alignment of incentive for risk-taking among larger depository institutions. Developments affecting risk-taking by depository institutions likely include higher capitalizations, greater risk exposure of private sector stakeholders more generally, improvements in risk management, and supervision and regulation that is focused on overall risk.Banks and banking ; Bank supervision

Bank Risk, Capitalization and Inefficiency

This paper employs a simultaneous equations approach to measuring the tradeoffs between risk, capitalization and measured inefficiencies in a sample of 254 large bank holding companies over the period 1986 through 1991. The results confirm the belief that these three variables are simultaneously determined. Furthermore, asymmetries were identified in the relationship between risk and inefficiencies. Support was found in the asset risk equations for the hypothesis that less efficient institutions took on more risk to off set this inefficiency, thereby transferring risk to the deposit insurance finds. Similarly, less efficient institutions tended to be less well capitalized, a result that may also be associated with differences in management quality. Finally, evidence is provided that risk averse managers tend to expend real resources to reduce asset risk, which makes them appear to be inefficient, when compared to efficiency measures derived under the assumption of risk neutrality. This paper was presented at the Financial Institutions Center's October 1996 conference on "

Safe & sound banking, 20 years later: what was proposed and what has been adopted

Banks and banking ; Bank supervision

Early Chinese Faience and Glass Beads and Pendants

The earliest Chinese beads and pendants were composed of faience and appeared during the early Western Zhou period, around the 11th Century B.C. True glass began to be made about the time of the Spring and Autumn period (771-467 B.C.). An amazing variety of beautiful dragonfly-eye beads appeared in China during the Warring States period (475-221 B.C.), but these were imported and not local products. The complex eye beads were replaced during the Han dynasty (206 B.C.-A.D. 220) by small, plain glass beads generally intended to be strung together. Perforated glass ear spools were also popular during this period and were sometimes adorned with bead strands. Small glass stringing beads as well as other forms continued in use in subsequent dynasties, as did various types of pendants. During the Ming dynasty (1368-1644), glass was used to produce beautiful imitation jade objects including fanciful compound pendants. These were often finely carved and exhibit a high level of craftsmanship

The 2007-09 financial crisis and bank opaqueness

Doubts about the accuracy with which outside investors can assess a banking firm’s value motivate many government interventions in the banking market. The recent financial crisis has reinforced concerns about the possibility that banks are unusually opaque. Yet the empirical evidence, thus far, is mixed. This paper examines the trading characteristics of bank shares over the period from January 1990 through September 2009. We find that bank share trading exhibits sharply different features before vs. during the crisis. Until mid-2007, large (NYSE-traded) banking firms appear to be no more opaque than a set of control firms, and smaller (NASD-traded) banks are, at most, slightly more opaque. During the crisis, however, both large and small banking firms exhibit a sharp increase in opacity, consistent with the policy interventions implemented at the time. Although portfolio composition is significantly related to market microstructure variables, no specific asset category(s) stand out as particularly important in determining bank opacity.Banks and banking ; Stock market ; Financial crises

The informativeness of stochastic frontier and programming frontier efficiency scores: Cost efficiency and other measures of bank holding company performance

This paper examines the properties of the X-inefficiencies in U.S. bank holding companies derived from both stochastic and linear programming frontiers. This examination allows the robustness of results across methods to be compared. While we find that calculated programming inefficiency scores are two to three times larger than those estimated using a stochastic frontier, the patterns of the scores across banks and time are similar, and there is a relatively high correlation of the rankings of banks' efficiencies under the two methods. However, when we examine the "informativeness" of the efficiency measured by the two different techniques, we find some large differences. We find evidence that the stochastic frontier scores are more closely related to risk-taking behavior, managerial competence, and bank stock returns. Based on these findings, we conclude that while both methods produce informative efficiency scores, for this data set decision makers should put more weight on the stochastic frontier efficiency estimates.Bank holding companies ; Banks and banking - Costs

CMS Pixel Telescope Addition to T-980 Bent Crystal Collimation Experiment at the Tevatron

An enhancement to the T-980 bent crystal collimation experiment at the Tevatron has been completed. The enhancement was the installation of a pixel telescope inside the vacuum-sealed beam pipe of the Tevatron. The telescope is comprised of six CMS PSI46 pixel plaquettes, arranged as three stations of horizontal and vertical planes, with the CAPTAN system for data acquisition and control. The purpose of the pixel telescope is to measure beam profiles produced by bent crystals under various conditions. The telescope electronics inside the beam pipe initially were not adequately shielded from the image current of the passing beams. A new shielding approach was devised and installed, which resolved the problem. The noise issues encountered and the mitigating techniques are presented herein, as well as some preliminary results from the telescope.Comment: 9 pp. 2nd International Conference on Technology and Instrumentation in Particle Physics 2011: TIPP 2011. 9-14 Jun 2011. Chicago, Illinoi