The Determinants of Long-Term Debt Issuance by European Banks: Evidence of Two Crises

Rixtel, Adrian Van; Romo, Luna; Yang, Jing

doi:10.2139/ssrn.2848841

Cited by 17 publications

(8 citation statements)

References 138 publications

(203 reference statements)

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“…Covitz, Hancock, and Kwast () find that higher implied stock market volatility is negatively associated with subordinated debt issuance by U.S. banks. Camba‐Mendez, Carbó‐Valverde, and Rodríguez‐Palenzuela () and van Rixtel, Romo‐González, and Yang () also find a negative correlation between the VIX and European banks' bond issuance…”

Section: Literature Review On Global Banking and Its Sources Of Fundingmentioning

confidence: 92%

“…Moreover, the cost of funding in the borrowing country could also indicate a relative convenience to tap funds abroad. For example, van Rixtel, Romo‐González, and Yang () show that cost considerations were a significant driver of debt issuance by European banks, especially in precrisis episodes. Hence, banks are expected to tap foreign funding markets when interest rates in those markets are lower than those in their home markets, in principle when hedged for exchange rate risk.…”

Section: Literature Review On Global Banking and Its Sources Of Fundingmentioning

confidence: 99%

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Changing Business Models in International Bank Funding

2018

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This paper investigates the foreign funding mix of globally active banks. Using BIS international banking statistics for a panel of 12 advanced economies, we detect a structural break in international bank funding at the onset of the great financial crisis. In their postbreak business model, banks rely less on cross‐border liabilities and, instead, tap funds from outside their jurisdictions by making more active use of their subsidiaries and branches, as well as interoffice accounts within the same banking group. (JEL C32, F65, G21)

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Section: Literature Review On Global Banking and Its Sources Of Fundingmentioning

confidence: 92%

Section: Literature Review On Global Banking and Its Sources Of Fundingmentioning

confidence: 99%

Changing Business Models in International Bank Funding

2018

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“…In addition, it is expected that sub-debt yield could provide a signal to the regulators regarding a bank's capital requirement and resilience of the capital which apparently enhances the off-site supervision of the banking authority (Ahmed, 2009). However, such a 'direct and indirect' market discipline thesis (see BCBS, 2003) was challenged by other contemporary scholars and views that sub-debt yield couldn't control banks' risk taking behavior (see Brown, Evangelou & Stix, 2017;Götz & Tröger, 2016;Rixtel, González & Yang, 2015). Besides, some have argued that sub-debt yield provides a weak signal to the regulator (Miller, Olson & Yeager, 2015).…”

Section: Regulations Of Sub-debt In Bangladeshmentioning

confidence: 99%

A Critique of Bangladeshi Adoption of Basel Type Capital Regulation: An Institutional View

Hasan

Suzuki

2020

Financial Internet Quarterly

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International concern on bank capital and minimum capital adequacy was first raised in 1980, in the G-10 countries governors meeting at the Bank for International Settlements (BIS) to respond to a series of bank failures and financial instability observed in Western developed economies. Later, the Basel Committee on Banking Supervision (BCBS) of the BIS proposed the Basel accord I, II and III in 1988, 2004 and 2010, respectively. Bangladesh Bank (BB) has introduced the ‘capital to risk weighted assets’-based approach for assessing the capital adequacy of banks in 1996 and later formally introduced the Basel framework in the early 2000s for its regulated banks. However, during Basel accord II and III implementation period (2009-2018), the banking industry accumulated huge non-performing loans which eroded its profitability. This creates a skepticism regarding any loopholes within the institutions. This paper argues that the naïve and excess reliance on External Credit Assessment Institutions (ECAIs’) credit rating in the process of adopting the Basel-type capital adequacy amounted to a risky strategy for the Bangladeshi banking industry in a sense that ECAIs allocate less efforts on accumulation of credit risk screening skills. We also document that the huge transaction cost and high coupon rate embedded within the debt instrument like the subordinated debt (sub-debt) issued by the regulated banks as Tier 2 capital might shrink the bank’s profitability and its contribution to the national exchequer. Little in the existing literature has been addressed to investigate the adoption of Basel regulations in Bangladesh from the institutional lens. This paper critically reviewed the Bangladeshi ECAIs regulations and sub-debt regulations to fill this research gap.

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“…Beirne et al (2011) empirically examine the effectiveness of the ECB's covered bond purchase program during 2009-10. Rixtel et al (2015) contrast the issuance of various bonds by European banks.…”

Section: Introductionmentioning

confidence: 99%