Emirates Institute for Banking and Financial Studies

Bonds at a premium: the impact of insurers on corporate bond issuers

Retrieved on: 
Friday, September 29, 2023
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Key Points: 

What information does the euro area bank lending survey provide on future loan developments?

Retrieved on: 
Monday, January 16, 2023
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The *euro area bank lending survey (BLS) * provides valuable information on bank lending standards and conditions as well as on loan demand in the euro area.

Key Points: 
  • The *euro area bank lending survey (BLS) * provides valuable information on bank lending standards and conditions as well as on loan demand in the euro area.
  • *By collecting this information, the survey sheds light on the transmission of monetary policy in the euro area via the bank lending channel.
  • While the survey information is qualitative, the replies of the banks are closely related to actual loan growth and lending rate developments.
  • *BLS data provide timely information on bank lending conditions and loan demand.
  • The short reporting lag compared with other statistical data means that BLS data provide early information on key lending developments in the euro area, which has been especially valuable for identifying turning points in lending conditions and assessing lending developments during exceptional periods.
  • [4] Overall, the BLS has proved to be a very useful tool for understanding and analysing bank lending conditions in the euro area.
  • A first indication of the information BLS indicators provide for future loan growth is to consider cross-correlations between BLS indicators at different leads relative to data on actual loan growth.
  • BLS indicators either lead loan growth (negative value on the y-axis) or lag loan growth (positive value).
  • Beyond the simple correlations mentioned above, the information that the BLS indicators provide on future loan growth can be assessed by analysing their value in forecasting actual loan growth.
  • Broadly corresponding evidence on the information that the BLS provides regarding future loan growth is also found for individual euro area countries.
  • The BLS contains information on future loan growth not only at the aggregate level, but also for individual banks.
  • Loan demand also helps predict future housing loan growth at the bank level – banks reporting a decrease in demand experience lower loan growth over the following quarters compared with banks reporting unchanged or increased loan demand (Chart D, panel b).

Model-based regulation: lending in times of Covid

Retrieved on: 
Monday, January 16, 2023
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This is because during upswings in the business cycle banks tend to overestimate the creditworthiness of their borrowers, often resulting in excessive credit expansion, while they rapidly cut lending during downturns.

Key Points: 
  • This is because during upswings in the business cycle banks tend to overestimate the creditworthiness of their borrowers, often resulting in excessive credit expansion, while they rapidly cut lending during downturns.
  • In our recent paper (Fiordelisi et al., 2022), we focus on the impact of model-based regulation on lending during the pandemic.
  • This could exacerbate procyclicality, worsen the economic downturn and potentially have negative consequences for the overall stability of the banking sector.
  • For example, there are model parameters specifically designed to increase banks’ resilience during economic downturns that should support lending during such times.
  • While the trends in lending for the two groups were largely comparable before the pandemic, after March 2020 IRB banks cut lending significantly compared with SA banks.
  • Loans to non-financial corporations (NFCs)

    Notes: “SA banks” are banks reporting all corporate credit risk exposures using a standardised approach.

  • Banks that include these features in their models continue to provide credit to the corporate sector in bad times, thereby also supporting the economic recovery.
  • (2016, 2022) which show that in Germany, model-based risk estimates systematically understated actual default rates and had a procyclical effect.
  • model-based regulation) aims to ensure that an increase in risks is swiftly taken into account, which supports the financial soundness of individual banks.
  • At the same time, the use of these models generally induces lower lending to firms during crises.

Low rates and bank stability: the risk of a tipping point

Retrieved on: 
Friday, November 11, 2022
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This has spurred academic and policy discussions about the economic implications of such low rates for the banking sector.

Key Points: 
  • This has spurred academic and policy discussions about the economic implications of such low rates for the banking sector.
  • It develops a model closely based on Allen and Gale (1998) and shows the existence of a critical policy rate level, dubbed the tipping point.
  • Past the tipping point, an interest rate cut has a negative net effect on bank capital and may indeed result in bank insolvency.
  • From the model, we learn which bank characteristics matter for the tipping point and how they affect it.
  • Using these theoretical results, we can use data on banks to quantify the tipping point.
  • To discuss bank solvency, we need to understand what constitutes the assets of a bank from an economic point of view.
  • A banks deposit franchise, which is generally not capitalised on bank balance sheets, is also a relevant bank asset.
  • With this concept of solvency in mind, the question becomes: what is the effect of a low policy rate on bank assets?
  • Past the tipping point, the deposit-franchise effect dominates and a policy rate cut hurts bank solvency.
  • Our observed value for average bank asset maturity (4.5 years) implies that a 0.55% policy rate is the tipping point.
  • [4]
    More work is required to obtain a sound quantification of the tipping point, also for the euro area.

Bluejay Diagnostics Appoints Kenneth Fisher as Chief Financial Officer

Retrieved on: 
Thursday, March 24, 2022
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ACTON, Mass., March 24, 2022 (GLOBE NEWSWIRE) -- Bluejay Diagnostics, Inc. (NASDAQ: BJDX) (Bluejay, the Company), a late-stage, pre-revenue diagnostics company focused on developing cost-effective, rapid, near-patient products for triage and monitoring of disease progression, today announced that Kenneth Fisher, CPA, has joined the Company as Chief Financial Officer (CFO), effective March 23, 2022.

Key Points: 
  • ACTON, Mass., March 24, 2022 (GLOBE NEWSWIRE) -- Bluejay Diagnostics, Inc. (NASDAQ: BJDX) (Bluejay, the Company), a late-stage, pre-revenue diagnostics company focused on developing cost-effective, rapid, near-patient products for triage and monitoring of disease progression, today announced that Kenneth Fisher, CPA, has joined the Company as Chief Financial Officer (CFO), effective March 23, 2022.
  • Mr. Fisher is an accomplished financial professional and Certified Public Accountant.
  • Kenneth Fisher, CFO of Bluejay Diagnostics, said, I am excited to join Bluejay at such a pivotal time for the Company.
  • Most recently, he was Executive Vice President, Chief Financial Officer and Treasurer of Meridian Bancorp, Inc. and its subsidiary, East Boston Savings Bank (merged with Rockland Trust in November 2021).