The paper shows that liquidity injections and liquidity requirements are effective in eliminating liquidity shortages and the asset purchases are not.The paper explains how collapse of markets for securitized assets contributed to the distress of the interbank markets in August 2007.The supervisor can inspect the bank and punish the undercapitalized one with recapitalization and downsizing.
Fourth, implementation of the sensitive capital requirements cannot rely solely on information revealed on the market for the bank’s assets.
By Michal Kowalik and David Martinez-Miera (RWP10-11 April 2010) This paper analyzes the role of expected income in entrepreneurial borrowing.
And industries that are more dependent on external finance recover more when the stock market rises.
Direct measures of industry distress and industry fundamental value, in addition to measures of bond market illiquidity, enter with reduced economic and statistical significance once the constraint that the macroeconomy should have a uniform effect is relaxed.
The paper argues also why the interbank markets during the 2007-2009 crisis did not freeze despite uncertainty about banks' quality.
Simple Problem Solving Worksheets - Research Paper On Banking
By Nada Mora (RWP 13-06, June 2013; Revised December 2014)This paper reconciles industry conditions with the state of the economy in driving asset liquidation values and, therefore, recovery rates on defaulted debt securities.
Parametric and nonparametric estimates of credit score performance reveal different trends, especially on originations with low credit scores.
The data suggest a trend of increased emphasis on higher credit scores accompanying a trend of increased riskiness in other origination attributes.
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.