Heterogenous banks and macroprudential regulations
Name
1108621384-MIT.pdf
Size
3.14 MB
Format
Adobe PDF
Checksum (MD5)
9038c55fb1232e0c321987bb5729ba59
Author(s)
Bhowal, Subhendu.
Advisor(s)
Adrien Verdelhan.
Alternative Title
Heterogeneous banks and macroprudential regulations
Date Issued
2019
Publisher
Massachusetts Institute of Technology
Abstract
This paper studies how financial intermediation varies across banks. Bank size is a first-order determinant of banks' capital structure in the cross-section. Largest banks have the lowest capital-to-asset ratio and the lowest ratio of Tier-1 capital against risk-weighted assets. These large banks earn a larger interest income per dollar invested in their loan portfolio than small banks, and they maintain the highest net interest margins among all banks. A cash flow sensitivity analysis shows that the largest banks are the most tightly constrained by minimum capital requirement, while all other banks maintain capital in excess of minimum capital requirement regulation. Empirically, banks do not adjust their lending portfolio dollar for dollar as their net profits increase or lever up immediately by issuing more deposits. Further, we find that the financial accelerator amplifies productivity shock in aggregate data. The impulse response to total productivity shock shows that the loan volume of the capital-constrained largest banks does not respond positively to positive productivity shocks. This is in contrast to smaller banks that increase loans when productivity improves in the economy.
Description
Thesis: S.M. in Management Research, Massachusetts Institute of Technology, Sloan School of Management, 2019
Cataloged from PDF version of thesis.
Includes bibliographical references (pages 47-49).
Subjects
Sloan School of Management.
MIT Department
Sloan School of Management
Terms of Use
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