Banking and Financial Markets (eBook)

Contents 6
List of Figures 7
List of Tables 10
1 Introduction 11
2 Securitization and Lending 15
2.1 Data 16
2.2 Methodology 21
2.3 Securitization and Bank Business Models 22
2.4 Types of Securitization and Asymmetric Information 28
2.4.1 Subprime Mortgage Lending 29
2.4.2 Corporate Lending 33
2.4.3 Covered Bonds 36
2.5 Securitization and Financial Stability 37
2.6 Conclusion 40
3 Interest Rate Risk 41
3.1 Data 42
3.2 Methodology 44
3.3 Are Banks Exposed to Interest Rate Risk? 45
3.3.1 Which Factors Determine the Choice of Adjustable or Fixed-Rate Debt? 46
3.4 How and Why Do Banks Manage Interest Rate Risk? 48
3.5 What Are the Consequences of Banks' Decision to Manage Interest Rate Risk? 60
3.5.1 For the Transmission of Monetary Policy 60
3.5.2 For Their Borrowers 64
3.6 Conclusion 65
4 Credit Risk 71
4.1 Credit Default Swap Contracts 73
4.2 Data 75
4.3 Methodology 77
4.4 Why and How Do Banks Trade Credit Risk Transfer Instruments 79
4.5 What Are the Consequences of CDS Trading for Other Credit Markets? 84
4.5.1 Syndicated Loans 85
4.5.2 Corporate Bonds 90
4.6 How Does CDS Trading Affect the Referenced Firm? 91
4.7 How Do Referenced Firms Respond to Being CDS-Referenced Firms? 100
4.8 How Does CDS Trading Affect Firms with Economic Links to Referenced Firms (Spillovers)? 102
4.9 Conclusion 103
5 Collateral and Lending 115
5.1 Data 116
5.2 Methodology 123
5.3 Types of Collateral 124
5.3.1 Real Estate Collateral and Firm Creation 124
5.3.2 Real Estate Collateral and Credit 129
5.3.3 Movable Collateral and Credit 132
5.3.4 Patent Collateral and Credit 135
5.4 Collateral and Law 136
5.5 Conclusion 141
6 Global Banking 143
6.1 The International Transmission of Financial Shocks 145
6.2 Data 148
6.3 Methodologies 151
6.4 How Does Interbank Integration Affect Borrowing Constraints, Loan Rates, and Output? 154
6.5 How and Why Do Banks Establish Foreign Affiliates: Branches or Subsidiaries? 159
6.6 How Does a Bank's Global Activity Affect Its Sensitivity to Local Funding Shocks? 162
6.7 How Do Banks Change Their Local Lending in Response to Shocks to Their Foreign Funding Sources? (Inward Transmission) 164
6.8 How Do Banks Change Their Foreign Lending in Response to Shocks to Their Local Funding Sources? (Outward Transmission) 170
6.9 How Does Global Banking Interact with Macroprudential Regulation? 175
6.10 Conclusion 176
7 FinTech and the Future of Banking 189
7.1 Data 191
7.2 Methodology 195
7.3 Technology, Bank Regulation, and the Rise of FinTech 195
7.3.1 Technological Advances 195
7.3.2 Bank Regulation 201
7.4 Banks vs. FinTech: Substitutes or Complements 202
7.5 The Liability Side of FinTech 206
7.5.1 Conclusion 209
8 Conclusion 210
References 213
Index 226