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| Working Papers – 2014 |
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Understanding the Components of Bank Failure Resolution Costs FDIC Center for Financial Research Working Paper No. 2014-04 This Version: July 2014 Published as: Bennett, Rosalind and Haluk Unal. "Understanding the Components of Bank Failure Resolution Costs." Financial Markets, Institutions and Instruments, 24, (2015): 349-389. Abstract In this paper, we demonstrate how the resolution costs associated with over 1,000 bank failures from 1986 to 2007 are distributed across the method of resolution, bank size, regulatory periods, and the existence of fraud. In addition, we document the time spent in the resolution by the resolution method and legislative period. Finally, we show how various classes of claimants against the failed banks bear the costs of the failure. JEL Codes: G21, G28, G33 |
Market Discipline by Bank Creditors during the 2008-2010 Crisis FDIC Center for Financial Research Working Paper No. 2014-03 First Version: March 2011 Published as: Bennett, Rosalind L., Vivian Hwa and Myron L. Kwast. "Market Discipline by Bank Creditors During the 2008-2010 Crisis." Journal of Financial Stability 20, (2015): 51-69. Abstract This paper shows that the liability classes most likely to exhibit evidence of market discipline during the recent financial crisis were uninsured depositors, insured depositors, and general creditors. We evaluate the FDIC's expectations about losses to creditors at banks that failed between 2008 and 2010 to establish that these creditors expected to incur loss. Our empirical tests find evidence of quantity market discipline that tends to begin far enough in advance to signal to both banks and supervisors that corrective actions can and should be taken. Consistent with the literature, our results suggest that during the crisis, quantity discipline was relatively strong and price market discipline was relatively weak. Our findings support several policy implications for encouraging market discipline. JEL Classifications: G01, G21, G28, G33, H12 |
Deposit Rate Advantages at the Largest Banks FDIC Center for Financial Research Working Paper No. 2014-02 First Version: March 2011 Published as: Jacewitz, Stefan and Jon Pogach. "Deposit Rate Advantages at the Largest Banks." Journal of Financial Services Research 53, no. 1 (2018): 1-35. Abstract We estimate differences in funding costs between the largest banks and the rest of the industry. Using deposit rates offered at the branch level, we eliminate many non-risk-related differences between banks. We document significant and persistent pricing advantages at the largest banks for comparable deposit products and deposit risk premiums. Between 2007 and 2008, the risk premium paid by the largest banks was 39 bps lower than the risk premium at other banks under the baseline estimate after controlling for common risk variables. These findings are consistent with an economically significant too-big-to-fail subsidy paid to the largest banks through lower risk premiums on uninsured deposits. JEL Classifications: G21, G28, H81 |
Local Banking Panics of the 1920s: Identification and Determinants FDIC Center for Financial Research Working Paper No. 2014-01 First Version: March 2011 Published as: Davidson, Lee K. and Carlos D. Ramirez. "Local Banking Panics of the 1920s: Identification and Determinants." Journal of Monetary Economics 66, (2014): 164-177. Abstract Using a newly discovered dataset of U.S. bank suspensions from 1921 to 1929, we discovered that banking panics were more common in the 1920s than had been believed. Besides identifying panics, we investigate their determinants, finding that local banking panics were more likely when fundamental economic conditions were generally weak and more likely in "overbanked" states; they were less likely in states with deposit insurance or states where a relatively large share of banks belonged to chain banking organizations. JEL Codes: N22, G21 |
The Center for Financial Research (CFR) Working Paper Series allows CFR staff and their coauthors to circulate preliminary research findings to stimulate discussion and critical comment. Views and opinions expressed in CFR Working Papers reflect those of the authors and do not necessarily reflect those of the FDIC or the United States. Comments and suggestions are welcome and should be directed to the authors. References should cite this research as a “FDIC CFR Working Paper” and should note that findings and conclusions in working papers may be preliminary and subject to revision.