Competition and Bank Risk the Role of Securitization and Bank Capital

By Yener Altunbas, David Marques-Ibanez, Michiel van Leuvensteijn, Tianshu Zhao

July 2, 2019

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Yener Altunbas, David Marques-Ibanez, Michiel van Leuvensteijn, and Tianshu Zhao. Competition and Bank Risk the Role of Securitization and Bank Capital, (USA: International Monetary Fund, 2019) accessed December 3, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

We examine how bank competition in the run-up to the 2007–2009 crisis affects banks’ systemic risk during the crisis. We then investigate whether this effect is influenced by two key bank characteristics: securitization and bank capital. Using a sample of the largest listed banks from 15 countries, we find that greater market power at the bank level and higher competition at the industry level lead to higher realized systemic risk. The results suggest that the use of securitization exacerbates the effects of market power on the systemic dimension of bank risk, while capitalization partially mitigates its impact.

Subject: Banking, Capital adequacy requirements, Competition, Financial crises, Financial markets, Financial regulation and supervision, Financial sector policy and analysis, Financial services, Securitization, Systemic risk

Keywords: Bank capital, Bank capitalization, Bank competition, Bank competition variable, Bank market power, Bank risk, Bank-quarter estimation, Capital adequacy requirements, Capital ratio, Competition, Global, Index value, Lerner index, Monopolist bank, Securitization, Systemic risk, WP

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/140
Stock No:

WPIEA2019140
ISBN:

9781498318501
ISSN:

1018-5941

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