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Record Nr. |
UNINA9910961232603321 |
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Autore |
Boot Arnoud |
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Titolo |
Banking and Trading / / Arnoud Boot, Lev Ratnovski |
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Pubbl/distr/stampa |
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Washington, D.C. : , : International Monetary Fund, , 2012 |
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ISBN |
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9781475512489 |
1475512481 |
9781475512465 |
1475512465 |
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Edizione |
[1st ed.] |
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Descrizione fisica |
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1 online resource (49 p.) |
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Collana |
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IMF Working Papers |
IMF working paper ; ; WP/12/238 |
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Altri autori (Persone) |
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Disciplina |
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Soggetti |
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Banks and banking |
Stocks |
Bank soundness |
Banking |
Banks and Banking |
Banks |
Brokerage |
Capital and Ownership Structure |
Credit |
Depository Institutions |
Economic & financial crises & disasters |
Finance |
Finance: General |
Financial Crises |
Financial crises |
Financial Institutions and Services: Government Policy and Regulation |
Financial institutions |
Financial Risk and Risk Management |
Financial Risk Management |
Financial risk management |
Financial sector policy and analysis |
Financing Policy |
General Financial Markets: Government Policy and Regulation |
Goodwill |
Industries: Financial Services |
Investment Banking |
Lines of credit |
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Loans |
Micro Finance Institutions |
Monetary economics |
Monetary Policy, Central Banking, and the Supply of Money and Credit: General |
Money and Monetary Policy |
Money |
Moral hazard |
Mortgages |
Public finance & taxation |
Ratings and Ratings Agencies |
Tax incentives |
Taxation |
Taxation, Subsidies, and Revenue: General |
Value of Firms |
Venture Capital |
United States |
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Lingua di pubblicazione |
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Formato |
Materiale a stampa |
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Livello bibliografico |
Monografia |
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Note generali |
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Description based upon print version of record. |
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Nota di bibliografia |
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Includes bibliographical references. |
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Nota di contenuto |
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Cover; Contents; I. Introduction; II. Relationship to the Literature; III. Model; A. Approach; B. Credit Constraints; C. Banking; D. Trading; IV. Benefits of Conglomeration; V. Time Inconsistency of Capital Allocation; A. Setup: Long-term Banking; B. The Consequences of Time Inconsistency; C. Cost of Conglomeration under Time Inconsistency; VI. Trading as Risk-Shifting; A. Setup: Risky Trading; B. Risk-Shifting; C. The Interaction of Time Inconsistency and Risk Shifting; VII. Discussion; A. Front-loaded Income in Relationship Banking; B. External Equity and Internal Capital Allocation |
C. Policy Implications VIII. Conclusion; References; Figures; 1. The Timeline; 2. The Timeline with Time Inconsistency; 3. Relationship Banking Allocation R as a Function of Trading Opportunities; 4. The Volume of Banking (R) and Trading (T), and Profits (Π)under Conglomerated Banking; 5. The Volumes of Banking (R)and Trading (T), and Profits (Π) with Risk-shifting; 6. Time Inconsistency Arises due to a Higher Return to Trading under Risk-shifting ("Effect 1"); 7. Risk-shifting Arises due to a Higher Volume of Trading, Driven by Time Inconsistency ("Effect 2") |
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Sommario/riassunto |
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We study the effects of a bank's engagement in trading. Traditional banking is relationship-based: not scalable, long-term oriented, with high implicit capital, and low risk (thanks to the law of large numbers). Trading is transactions-based: scalable, shortterm, capital constrained, and with the ability to generate risk from concentrated positions. When a bank engages in trading, it can use its ‘spare’ capital to profitablity expand the scale of trading. However, there are two inefficiencies. A bank may allocate too much capital to trading ex-post, compromising the incentives to build relationships ex-ante. And a bank may use trading for risk-shifting. Financial development augments the |
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scalability of trading, which initially benefits conglomeration, but beyond some point inefficiencies dominate. The deepending of the financial markets in recent decades leads trading in banks to become increasingly risky, so that problems in managing and regulating trading in banks will persist for the foreseeable future. The analysis has implications for capital regulation, subsidiarization, and scope and scale restrictions in banking. |
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