Realized Bank Risk during the Great Recession
Yener Altunbas (),
Simone Manganelli () and
David Marques-Ibanez ()
No 1140, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)
In the years preceding the 2007-2009 financial crisis, forward-looking indicators of bank risk concentrated and suggested unusually low expectations of bank default. We assess whether the ex-ante (i.e. prior to the crisis) cross-sectional variability in bank characteristics is related to the ex-post (i.e. during the crisis) materialization of bank risk. Our tailor-made dataset crucially accounts for the different dimensions of realized bank risk including access to central bank liquidity during the crisis. We consistently find that less reliance on deposit funding, more aggressive credit growth, larger size and leverage were associated with larger levels of realized risk. The impact of these characteristics is particularly relevant for capturing the systemic dimensions of bank risk and tends to become stronger for the tail of the riskier banks. The majority of these characteristics also predicted bank risk as materialized before the financial crisis.
Keywords: Bank risk; business models; Great Recession (search for similar items in EconPapers)
JEL-codes: E58 G15 G21 G32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-cfn, nep-eec, nep-fmk, nep-mac and nep-rmg
Date: 2015-08-04, Revised 2015-10-05
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http://www.federalreserve.gov/econresdata/ifdp/2015/files/ifdp1140r.pdf Full text (application/pdf)
http://dx.doi.org/10.17016/IFDP.2015.1140r DOI (application/pdf)
Journal Article: Realized bank risk during the great recession (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:1140
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