Are early market indicators of financial deterioration accurate for Too Big To Fail banks? Evidence from East Asia

This paper investigates whether market information is reliable to predict financial deterioration of large Too Big To Fail banks in Asia. A stepwise logit model is first estimated to isolate the optimal set of accounting indicators to predict rating downgrades. The model is then extended to assess the added value of market indicators and to test for the possible presence of a Too Big To Fail effect. While some results show that market indicators bring in additional information in the prediction process, there is consistent evidence of a Too Big To Fail effect.Bank, Bank Failure, Bank Risk, East Asia

Bank Regulatory Capital and Liquidity: Evidence from U.S. and European publicly traded banks

International audienceThe theory of financial intermediation highlights various channels through which capital and liquidity are interrelated. Using a simultaneous equations framework, we investigate the relationship between bank regulatory capital and bank liquidity measured from on-balance sheet positions for European and U.S. publicly traded commercial banks. Previous research studying the determinants of bank capital buffer has neglected the role of liquidity. On the whole, we find that banks decrease their regulatory capital ratios when they face higher illiquidity as defined in the Basel III accords or when they create more liquidity as measured by Berger and Bouwman (2009). However, considering other measures of illiquidity that focus more closely on core deposits in the United States, our results show that small banks strengthen their solvency standards when they are exposed to higher illiquidity. Our empirical investigation supports the need to implement minimum liquidity ratios concomitant to capital ratios, as stressed by the Basel Committee; however, our findings also shed light on the need to further clarify how to define and measure illiquidity and also on how to regulate large banking institutions, which behave differently than smaller ones

The Role of Market Discipline on Bank Capital Buffer: Evidence from a Sample of European Banks

Using a sample of European commercial banks over the period 1993-2006, we show that market discipline significantly and positively affects banks' capital buffer. By distinguishing junior from senior debt holders, we find that both types of investors exert a pressure on banks to hold more capital but that the pressure exerted by junior debt holders is higher. Furthermore, junior debt holders exert a pressure on banks whatever the importance of their non-traditional activities. By contrast, we find that senior debt holders exert a pressure only on banks that are heavily involved in non-traditional activities that are badly taken into account in the current bank capital regulation framework. These results might help us to better understand the role of market discipline as a complement to capital regulation

Are early market indicators of financial deterioration accurate for Too Big To Fail banks? Evidence from East Asia

This paper investigates whether market information is reliable to predict financial deterioration of large Too Big To Fail banks in Asia. A stepwise logit model is first estimated to isolate the optimal set of accounting indicators to predict rating downgrades. The model is then extended to assess the added value of market indicators and to test for the possible presence of a Too Big To Fail effect. While some results show that market indicators bring in additional information in the prediction process, there is consistent evidence of a Too Big To Fail effect

A Note on Bank Capital Buffer: Does Bank Heterogeneity matter?

International audienceThe objective of this paper is to extend the literature on bank capital buffer by considering the role of bank heterogeneity. Using a sample of European commercial banks over 1992-2006, we show that four key determinants – risk, business cycle, market and peer discipline – have different impact on capital buffer depending on banks' financing mode, activity or size. Our results offer a framework for discussing the appropriateness of the still on-going suggestions on bank capital regulation. Whereas they support the differentiating measures undertaken in Basel 3 such as specific capital surcharges for SIFIs, they disagree with the adoption of uniform countercyclical buffers

The use of accounting and stock market data to predict bank financial distress: the case of East Asian banks

This paper investigates whether market information could add to accounting information in the prediction of bank financial distress in Asia. A stepwise logit model is first estimated to isolate the optimal set of accounting indicators and then extended to include market indicators. Dummy variables are also introduced in the model to account for the possible existence of balance sheet structure effects. Our results show that market indicators bring in additional information in the prediction process and this contribution holds whatever the importance of the ratio of market funded liabilities over total assets. We also find that market indicators are significant to predict banks' financial distress whatever assets structure. However, for non traditional banks, that is for banks with a low ratio of net loans to total assets, market information seems difficult to interpret

Bank regulatory Capital Buffer and Liquidity: Evidence from US and European Publicly Traded Banks

The theory of financial intermediation highlights various channels through which capital and liquidity are interrelated. Using a simultaneous equations framework, we investigate the relationship between bank regulatory capital buffer and liquidity for European and U.S. publicly traded commercial banks. Previous research studying the determinants of bank capital buffer has neglected the role of liquidity. On the whole, we find that banks do not strengthen their regulatory capital buffer when they face higher illiquidity as defined in the Basel III accords or when they create more liquidity as measured by Berger and Bouwman (2009). However, considering other measures of illiquidity that focus more closely on core deposits in the United States, our results show that small banks do actually strengthen their solvency standards when they are exposed to higher illiquidity. Our empirical investigation supports the need to implement minimum liquidity ratios concomitant to capital ratios, as stressed by the Basel Committee; however, our findings also shed light on the need to further clarify how to define and measure illiquidity and also on how to regulate large banking institutions, which behave differently than smaller ones

Contrôle prudentiel et détection des difficultés financières des banques : Quel est l'apport de l'information de marché ?

International audienceThis paper studies the role that can be played by the stock market in the early detection of bank financial distress. We test the additional contribution of market indicators to accounting indicators in the European case and its accuracy for opaque institutions. We show that the significance of the marginal contribution of market indicators is dependent on the extent to which bank liabilities are market traded. For banks heavily relying on deposits, the market does not convey useful information even when more subordinated debt is issued.L'objectif de cet article est d'étudier le rôle que peut jouer, pour les autorités prudentielles, le marché des actions dans la détection avancée des dégradations financières des banques. On teste, dans le cas européen, l'apport d'indicateurs construits à partir du cours des actions, en complément des indicateurs comptables habituellement utilisés et la pertinence de cet apport pour des établissements par nature opaques. Les résultats concluent à l'apport significatif des indicateurs de marché. Ils montrent cependant qu'il est difficile d'en extraire de l'information pour les banques à forte collecte de dépôts, quel que soit le montant des titres subordonnés émis

Features of Mild-to-Moderate COVID-19 Patients with Dysphonia

Introduction To explore the prevalence of dysphonia in European patients with mild-to-moderate COVID-19 and the clinical features of dysphonic patients. Methods The clinical and epidemiological data of 702 patients with mild-to-moderate COVID-19 were collected from 19 European Hospitals. The following data were extracted: age, sex, ethnicity, tobacco consumption, comorbidities, general and otolaryngological symptoms. Dysphonia and otolaryngological symptoms were self-assessed through a 4-point scale. The prevalence of dysphonia, as part of the COVID-19 symptoms, was assessed. The outcomes were compared between dysphonic and non-dysphonic patients. The association between dysphonia severity and outcomes was studied through Bayesian analysis. Results A total of 188 patients were dysphonic, accounting for 26.8% of cases. Females developed more frequently dysphonia than males (p=0.022). The proportion of smokers was significantly higher in the dysphonic group (p=0.042). The prevalence of the following symptoms was higher in dysphonic patients compared with non-dysphonic patients: cough, chest pain, sticky sputum, arthralgia, diarrhea, headache, fatigue, nausea and vomiting. The severity of dyspnea, dysphagia, ear pain, face pain, throat pain and nasal obstruction was higher in dysphonic group compared with non-dysphonic group. There were significant associations between the severity of dysphonia, dysphagia and cough. Conclusion Dysphonia may be encountered in a quarter of patients with mild-to-moderate COVID-19 and should be considered as a symptom list of the infection. Dysphonic COVID-19 patients are more symptomatic than non-dysphonic individuals. Future studies are needed to investigate the relevance of dysphonia in the COVID-19 clinical presentation