Bank Resolution Costs, Depositor Preference, and Asset Encumbrance
Title | Bank Resolution Costs, Depositor Preference, and Asset Encumbrance PDF eBook |
Author | Mr.Daniel C. Hardy |
Publisher | International Monetary Fund |
Pages | 30 |
Release | 2013-07-18 |
Genre | Business & Economics |
ISBN | 1484354109 |
Depositor preference and collateralization of borrowing may reduce the cost of settling the conflicts among creditors that arises in case of resolution or bankruptcy. This net benefit, which may be capitalized into the value of the bank rather than affect creditors’ expected returns, should result in lower overall funding costs and thus a lower probability of distress despite increasing encumbrance of the bank’s balance sheet. The benefit is maximized when resolution is initiated early enough for preferred depositors to remain fully protected.
Bank Resolution Costs, Depositor Preference, and Asset Encumbrance
Title | Bank Resolution Costs, Depositor Preference, and Asset Encumbrance PDF eBook |
Author | Daniel Hardy |
Publisher | |
Pages | 31 |
Release | 2013 |
Genre | |
ISBN |
Depositor preference and collateralization of borrowing may reduce the cost of settling the conflicts among creditors that arises in case of resolution or bankruptcy. This net benefit, which may be capitalized into the value of the bank rather than affect creditors' expected returns, should result in lower overall funding costs and thus a lower probability of distress despite increasing encumbrance of the bank's balance sheet. The benefit is maximized when resolution is initiated early enough for preferred depositors to remain fully protected.
Bail-In Power, Depositor Preference, and Asset Encumbrance
Title | Bail-In Power, Depositor Preference, and Asset Encumbrance PDF eBook |
Author | Jorge A. Chan-Lau |
Publisher | |
Pages | 37 |
Release | 2016 |
Genre | |
ISBN |
Regulatory reforms are transforming bank funding and its seniority structures, with hard to gauge impact on funding costs. Basel III requires higher equity, while some bank resolution tools, such as depositor preference and bail-in power, can reduce the seniority ranking of senior unsecured debt. Moreover, tight market funding conditions during a crisis typically force banks to rely more on secured debt and repo from central banks, increasing asset encumbrance, which reduces the recovery rate for other debt. We use extensions of simple option price models for pricing various debts and find that asset encumbrance and the introduction of new bank resolution tools only increases senior unsecured debt yields modestly for existing banks under distressed market conditions in 2013. Moreover, if properly designed, bail-in debt could improve financial stability.
The Case for Depositor Preference
Title | The Case for Depositor Preference PDF eBook |
Author | Mr.Marc C Dobler |
Publisher | INTERNATIONAL MONETARY FUND |
Pages | 28 |
Release | 2020-12-22 |
Genre | Business & Economics |
ISBN | 9781513557397 |
This technical note and manual (TNM) addresses the following issues: advantages and disadvantages of different types of depositor preference, international best practice and experience in adopting depositor preference, and introducing depositor preference in jurisdictions with or without deposit insurance.
Bank Debt in Europe
Title | Bank Debt in Europe PDF eBook |
Author | Mrs.Vanessa Le Lesle |
Publisher | International Monetary Fund |
Pages | 40 |
Release | 2012-12-20 |
Genre | Business & Economics |
ISBN | 1475522037 |
The crisis in Europe has underscored the vulnerability of European bank funding models compared to international peers. This paper studies the drivers behind this fragility and examines the future of bank funding, primarily wholesale, in Europe. We argue that cyclical and structural factors have altered the structure, cost, and composition of funding for European banks. The paper discusses the consequences of shifting funding patterns and investor preferences and presents possible policy options and bank actions to enhance European bank funding models’ robustness.
Cross-Border Bank Resolution - Recent Developments
Title | Cross-Border Bank Resolution - Recent Developments PDF eBook |
Author | International Monetary Fund |
Publisher | International Monetary Fund |
Pages | 41 |
Release | 2014-02-06 |
Genre | Business & Economics |
ISBN | 1498343287 |
Developing an effective framework for cross-border resolution is a key priority in international regulatory reform. Large bank failures during the global financial crisis brought home the lack of adequate tools for resolving “too-big-to-fail” institutions. In cross-border cases, misaligned incentives and lack of robust mechanisms for resolution and cross-border cooperation left some country authorities with little choice but to take unilateral actions, which contributed to the high fiscal costs of the crisis and resulted in disorderly resolution in some cases
Managing Systemic Banking Crises
Title | Managing Systemic Banking Crises PDF eBook |
Author | Ms.Marina Moretti |
Publisher | International Monetary Fund |
Pages | 88 |
Release | 2020-02-11 |
Genre | Business & Economics |
ISBN | 1513512277 |
This paper updates the IMF’s work on general principles, strategies, and techniques from an operational perspective in preparing for and managing systemic banking crises in light of the experiences and challenges faced during and since the global financial crisis. It summarizes IMF advice concerning these areas from staff of the IMF Monetary and Capital Markets Department (MCM), drawing on Executive Board Papers, IMF staff publications, and country documents (including program documents and technical assistance reports). Unless stated otherwise, the guidance is generally applicable across the IMF membership.