I find that a 1% increase in aggregate bank credit growth implies that the excess returns of bank stocks over the next one year are lower by nearly 3%. Unlike most other forecasting relationships, credit growth tracks bank stock returns over the business cycle and explains nearly 14% of the variation in bank stock returns over a 1-year horizon. This effect is robust to the exclusion of data fro...

This article deals with the issue of managing bank credit risk using a cost model. Modeling management was proposed based on neural-cell technologies, which expand possibilities modeling complex objects and processes provide high reliability determination. The purpose is to improve develop methodical support practical recommendations for reducing level value-at-risk (VaR) methodology its subseq...

A dynamic stochastic model of a small open economy with a twolevel banking intermediation structure, a risk-sensitive regulatory capital regime, and imperfect capital mobility is developed. Firms borrow from a domestic bank and the bank borrows on world capital markets, in both cases subject to a premium. A sudden flood in capital flows generates an expansion in credit and activity, as well as ...

Credit risk represents by far the biggest risk in the activities of a traditional bank. In particular, during recession periods financial institutions loose enormous amounts as a consequence of bad loans and default events. Traditionally the risk arising from a loan contract could not be transferred and remained in the books of the lending institution until maturity. This has changed completely...

This paper empirically examines whether yield spreads of subordinated debt issued by UK banks are sensitive to bank risks, with a dataset that includes spreads, ratings, accounting measures of bank risks and market condition indexes in the sample period between 1997 and 2009. The results show that Moody’s and S&P traditional ratings have significant and negative impacts on spreads, and investor...

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expresse...

The views expressed in this paper are those of their authors and not necessarily the views of the Financial Stability Institute or the Bank for International Settlements. iii Foreword The Financial Stability Institute is pleased to present the winning FSI Award paper for 2008. This award, announced every two years at the time of the International Conference of Banking Supervisors, was establish...

changes in credit risk may arise when either the value or the risk of corporate assets changes. changes in the equity value associated with the changes in the asset value and changes in asset risk can be characterized into potentially countervailing direct and indirect effects. the indirect effect of risk on equity value is a function of factors that affect the debt value of including leverage,...