Government interventions in banking crises: Assessing alternative schemes in a banking model of debt overhang

We evaluate policy measures to stop the fall in loan supply following a banking crisis. We apply a dynamic framework in which a debt overhang induces banks to curtail lending or to choose a fragile capital structure. Government assistance conditional on new banking activities, like on new lending or on debt and equity issues, allows banks to influence the scale of the assistance and to externalize risks, implying overinvestment or excessive risk taking or both. Assistance granted without reference to new activities, like establishing a bad bank, does not generate adverse incentives but may have higher fiscal costs.Banking crisis; debt overhang; bank lending; capital structure

Bank Lending, Bank Capital Regulation and Efficiency of Corporate Foreign Investment

In this paper we study interdependencies between corporate foreign investment and the capital structure of banks. By committing to invest predominantly at home, firms can reduce the credit default risk of their lending banks. Therefore, banks can refinance loans to a larger extent through deposits thereby reducing firms’ effective financing costs. Firms thus have an incentive to allocate resources inefficiently as they then save on financing costs. We argue that imposing minimum capital adequacy for banks can eliminate this incentive by putting a lower bound on financing costs. However, the Basel II framework is shown to miss this potential.financial contracting, multinational corporations, internal capital markets

Reestablishing stability and avoiding a credit crunch: Comparing different bad bank schemes

This paper develops a model to analyze two different bad bank schemes, an outright sale of toxic assets to a state-owned bad bank and a repurchase agreement between the bad bank and the initial bank. For both schemes, we derive a critical transfer payment that induces a bank manager to participate. Participation improves the bank's solvency and enables the bank to grant new loans. Therefore, both schemes can reestablish stability and avoid a credit crunch. However, an outright sale will be less costly to taxpayers than a repurchase agreement only if the transfer payment is sufficiently low. --bad banks,financial crisis,financial stability,credit crunch

Internationale Finanzintegration und Stabilität: Ursachen und vorläufige Lehren

Since its beginning, the recent financial market turmoil that has come to be known as the „subprime crisis“ has provoked considerable controversy among both, policymakers and scientists. The debate mainly focuses on two questions. The first is whether and how short-term measures should be taken to stabilize the global financial system. The second is which general lessons can be drawn from this crisis. Up to now, several potential causes of the crisis have been discussed in a more or less isolated manner. However, a predominant source of the crisis has not been identified yet. Accordingly, there is still a lack of knowledge regarding general consequences of the crisis for economic policy. The purpose of this article is twofold. First, we show that to a large extent the crisis is due to the economic integration of formerly peripheral countries into the world economy that led to significant savings and investment imbalances. Thus, we argue that the crisis not only is a global phenomenon in its effects but also has global roots. Based on this argument, the second purpose of our paper is to derive implications for economic policy, where we also discuss the consequences for the future design of the global financial architecture.

Government interventions in banking crises: Assessing alternative schemes in a banking model of debt overhang

We evaluate policy measures to stop the fall in loan supply following a banking crisis. We apply a dynamic framework in which a debt overhang induces banks to curtail lending or to choose a fragile capital structure. Government assistance conditional on new banking activities, like on new lending or on debt and equity issues, allows banks to influence the scale of the assistance and to externalize risks, implying overinvestment or excessive risk taking or both. Assistance granted without reference to new activities, like establishing a bad bank, does not generate adverse incentives but may have higher fiscal costs

Government interventions in banking crises: Assessing alternative schemes in a banking model of debt overhang

We evaluate policy measures to stop the fall in loan supply following a banking crisis. We apply a dynamic framework in which a debt overhang induces banks to curtail lending or to choose a fragile capital structure. Government assistance conditional on new banking activities, like on new lending or on debt and equity issues, allows banks to influence the scale of the assistance and to externalize risks, implying overinvestment or excessive risk taking or both. Assistance granted without reference to new activities, like establishing a bad bank, does not generate adverse incentives but may have higher fiscal costs

Селянський рух в Харківській губернії (1917–1921 рр.)

Дисертацію присвячено комплексному дослідженню розвитку селянського руху в Харківській губернії в період Української революції 1917–1921 рр. Доведено, що невирішені проблеми у сфері аграрних відносин спричинили селянський рух і розгортання збройного конфлікту на Харківщині у 1917–1921 рр. Порівняно ступінь активної участі у революційних подіях у даному регіоні різних соціальних груп населення. Обґрунтовано тезу, що у період Української революції 1917–1921 рр. представники лівих політичних партій вживали поняття "куркуль" для визначення власників індивідуальних селянських господарств, які бажали зберегти приватну власність на землю й активно захищали свої економічні, політичні та національні права. З'ясовано, що невирішеність національного питання була одним з важливих чинників посилення селянського руху у Харківській губернії. Досліджено взаємозв'язок селянського повстанського руху сусідніх регіонів з селянським рухом у Харківській губернії та встановлено, що найбільш впливовими та популярними серед сільського населення регіону було махновське і "уенерівське" повстанство. Розглянуто процес радикалізації селянського руху у 1917–1921 рр., висвітлено пасивні й активні, нелегальні та легальні форми боротьби селянства за свої економічні, політичні та національні інтереси. Узагальнено наслідки селянського руху

Reestablishing stability and avoiding a credit crunch: comparing different bad bank schemes

This paper develops a model to analyze two different bad bank schemes, an outright sale of toxic assets to a state-owned bad bank and a repurchase agreement between the bad bank and the initial bank. For both schemes, we derive a critical transfer payment that induces a bank manager to participate. Participation improves the bank's solvency and enables the bank to grant new loans. Therefore, both schemes can reestablish stability and avoid a credit crunch. An outright sale will be less costly to taxpayers than a repurchase agreement if the transfer payment is sufficiently low