Basel III and CEO compensation in banks: pay structures as a regulatory signal : [March 6, 2013]

This paper proposes a new regulatory approach that implements capital requirements contingent on managerial compensation. We argue that excessive risk taking in the financial sector originates from the shareholder moral hazard created by government guarantees rather than from corporate governance failures within banks. The idea of the proposed regulation is to utilize the compensation scheme to drive a wedge between the interests of top management and shareholders to counteract shareholder risk-shifting incentives. The decisive advantage of this approach compared to existing regulation is that the regulator does not need to be able to properly measure the bank investment risk, which has been shown to be a difficult task during the 2008-2009 financial crisis

Interbank network and bank bailouts: Insurance mechanism for non-insured creditors? : [Version 20 Februar 2013]

This paper presents a theory that explains why it is beneficial for banks to engage in circular lending activities on the interbank market. Using a simple network structure, it shows that if there is a non-zero bailout probability, banks can significantly increase the expected repayment of uninsured creditors by entering into cyclical liabilities on the interbank market before investing in loan portfolios. Therefore, banks are better able to attract funds from uninsured creditors. Our results show that implicit government guarantees incentivize banks to have large interbank exposures, to be highly interconnected, and to invest in highly correlated, risky portfolios. This can serve as an explanation for the observed high interconnectedness between banks and their investment behavior in the run-up to the subprime mortgage crisis

Basel III and CEO compensation in banks: a new regulatory attempt after the crisis : [March 27, 2012]

The paper analyzes the mutual influence of the capital structure and the investment decision of a bank, as well as the incentive effects of the bank executives compensation schemes on these decisions. In case the government implicitly or explicitly insures deposits and/or the banks debt, banks are incentivized to invest in risky assets and to have a high leverage. Capital regulation could potentially solve this excessive risk taking problem. However, this is only possible if the regulator can observe and properly measure the investment risks of the bank, which was called into question during the 2008-09 financial crisis. Hence, we propose a regulatory approach that is also able to implement the first best risk taking levels by the bank, but does not require the regulator to know the investment risk of the bank. The regulatory approach involves the implementation of capital requirements, which are made contingent on the management compensation

Interbank network and bank bailouts: insurance mechanism for non-insured creditors : [Version 10 April 2012]

This paper presents a theory that explains why it is beneficial for banks to engage in circular lending activities on the interbank market. Using a simple network structure, it shows that if there is a non-zero bailout probability, banks can significantly increase the expected repayment of uninsured creditors by entering into cyclical liabilities on the interbank market before investing in loan portfolios. Therefore, banks are better able to attract funds from uninsured creditors. Our results show that implicit government guarantees incentivize banks to have large interbank exposures, to be highly interconnected, and to invest in highly correlated, risky portfolios. This can serve as an explanation for the observed high interconnectedness between banks and their investment behavior in the run-up to the subprime mortgage crisis

Three essays on bank risk-taking from a portfolio perspective

This dissertation studies three distinct aspects of bank risk-taking from a novel portfolio perspective. First, I provide compelling evidence demonstrating that banks with high industry exposure adeptly adapt loan contract design to prevent potential adverse effects on loan portfolio value arising from the interaction between rival borrowers. Second, I stress the importance of banks’ pre-existing exposure and asset concentration in characterizing the risk-shifting incentives of banks enjoying government guarantees coverage. Last, I show that government guarantees coverage prompts bank risk-shifting at the intensive margin, and induces borrowers to leverage excessively, overinvest, and engage in low-quality projects. Altogether, I highlight the importance of pre-existing exposure in shaping banks’ risk management incentives and its connection to two key issues: the rise in bank concentration and the extent of government guarantees coverage. These findings carry noteworthy implications for bank lending behavior and loan contract design, ultimately impacting borrowers’ corporate policy and potentially giving rise to unintended policy consequences

Durchführung von Parameterstudien zur Analyse der Auswirkungen äußerer Einflüsse auf den Erstellungsprozess von Modellen mittels Photogrammetrie

Photogrammetrie ermöglicht eine exakte digitale Abbildung aufgenommener Strukturen in Form einer Punktwolke mit vergleichsweise geringem Aufwand im Vergleich zu herkömmlichen Methoden. Gerade mithilfe von Drohnen stellen schwer einsehbare Bereiche von Bestandsbauten keine Hürde mehr dar und Gebäude lassen sich so von allen Seiten aufnehmen. Zur Untersuchung der Auswirkung von äußeren Einflüssen auf die Qualität der Aufnahme wurde am IIB einer Bachelorarbeit durchgeführt. Die Ergebnisse der Abschlussarbeit sind in diesem Paper zusammengefasst. Die Auswertung zeigt, dass die Qualität der Eingangsbilder der maßgebende Faktor für eine hochwertige digitale Abbildung ist. Diese hängt zusätzlich von den Lichtverhältnissen sowie den Kameraeinstellungen ab. Starker Sonnenschein kann beispielsweise zu dunklen Schatten führen, wodurch Informationen verloren gehen können. Darüber hinaus können Reflektionen zu fehlerhaften Auswertungen führen, welche durch reflektierende Materialien, Nässe und Sonnenschein bedingt sein können. Bezüglich der Kameraeinstellungen können niedrige Brennweiten größere Verzerrungen erzeugen, welche es im Zuge des kalibrierungsprozesses auszugleichen gilt. Ebenso wird der Effekt der Blendenzahl untersucht, da der Schärfetiefenbereich maßgeblich von dieser abhängt. Eine Möglichkeit den Kalibrierungsprozess zu optimieren, bieten Passpunkte, diese liefern zusätzlich eine Georeferenzierung und bereiten die Basis für eine Überführung in ein übergeordnetes Koordinatensystem. Die Möglichkeit, die Punktwolke in ein BIM- Modell zu überführen, wurde im Rahmen der Abschlussarbeit nicht untersucht

Whatever it Takes: The Real Effects of Unconventional Monetary Policy

Launched in Summer 2012, the European Central Bank (ECB)’s Outright Monetary Transactions (OMT) program indirectly recapitalized European banks through its positive impact on periphery sovereign bonds. However, the stability reestablished in the banking sector did not fully translate into economic growth. We document zombie lending by banks that remained undercapitalized even post-OMT. In turn, firms receiving loans used these funds not to undertake real economic activity such as employment and investment but to build up cash reserves. Creditworthy firms in industries with a high zombie firm prevalence suffered significantly from this credit misallocation, which further slowed down the economic recovery