Search Results
Conference Paper
Quantification of operational risk
Conference Paper
International implications of disclosing supervisory information
Journal Article
Resolving a banking crisis: what worked in New England
Many Asian economies are now experiencing economic hardship, their troubles stemming in part from crises in their banking sectors. Given the important role the banking sector plays in these economies, resolution of their banking crises is a vital first step toward resuming economic growth. Unfortunately, the steps taken so far appear inadequate, and many observers compare current attempts to those of U.S. regulators during our initial efforts to resolve the S&L crisis. Given the lengthy time it took and the high cost of the taxpayer-supported resolution, this is not a comparison the Asian ...
Working Paper
Capital and risk: new evidence on implications of large operational losses
Operational risk is currently receiving significant media attention, as financial scandals have appeared regularly and multiple events have exceeded one billion dollars in total impact. Regulators have also been devoting attention to this risk, and are finalizing proposals that would require banks to hold capital for potential operational losses. This paper uses newly available loss data to model operational risk at internationally active banks. Our results suggest that the amount of capital held for operational risk will often exceed capital held for market risk, and that the largest banks ...
Working Paper
Manager's opportunistic trading of their firms' shares: a case study of executives in the banking industry
Providing managers with stock in the firm may help ensure that managers act in the shareholders' interest. The level of managerial stock ownership, however, is not generally controlled by the firm's compensation committee. Rather, managers themselves determine the level of their stock holdings. To date, though, little evidence exists on managers' personal transactions and how these trades affect their overall equity holdings. This analysis provides insight on the trading practices of bank managers. ; I find that managers do not rely solely on the actions of a compensation committee to set ...
Working Paper
Implications of alternative operational risk modeling techniques
Quantification of operational risk has received increased attention with the inclusion of an explicit capital charge for operational risk under the new Basle proposal. The proposal provides significant flexibility for banks to use internal models to estimate their operational risk, and the associated capital needed for unexpected losses. Most banks have used variants of value at risk models that estimate frequency, severity, and loss distributions. This paper examines the empirical regularities in operational loss data. Using loss data from six large internationally active banking ...
Journal Article
Depositor discipline at failing banks
Uninsured depositors, whose deposits are not fully protected by federal deposit insurance, have an incentive to monitor banks' activities and impose additional funding costs on risky banks. This pricing is a form of market discipline, since the market penalizes banks for taking on greater risk. For banks that become troubled, market discipline can take a more severe form: Market participants may become unwilling to supply uninsured funds at any reasonable price. This study examines the effectiveness of depositor discipline at banks that failed in New England in the early 1990s. ; The ...
Journal Article
Banking in the age of information technology
Journal Article
Problem loans at New England banks, 1989 to 1992: evidence of aggressive loan policies
The New England banking industry experienced serious problems between 1989 and 1992. As the region's economy deteriorated, banks failed at an unprecedented rate and many others barely survived. Banking problems were widespread, but they were not uniform. The ratio of nonperforming loans to total loans was in excess of 10 percent for some New England banks, below 1 percent for others, even though all faced the external shock of the collapse in the region's real estate market.> This study attempts to determine whether a 'skills' hypothesis or a 'policies' hypothesis better explains the ...