How Do Banks React to Government Regulation? The Effects of Liquidity Regulation and the AOCI Filter Removal
| Autor: | Han-Chung Chen, 陳漢鐘 |
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| Rok vydání: | 2018 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 107 This paper examines whether two crucial post-crisis regulations affect US banks’ debt securities investments and accounting classification. First, the new liquidity coverage ratio regulation requires large bank holding companies to hold adequate high-quality liquid assets (HQLA) relative to their expected net cash outflows. Using a difference-in-differences design, we find that banks affected by this requirement remarkably recompose their securities in favor of HQLA and thus improve the credit quality of securities holdings. Moreover, banks subject to the requirement favor longer maturity securities when trading off between motives to reduce volatility caused by fair value and search for yield incentives.Second, huge banks (advanced approach banks) are further required to include unrealized gains and losses of available-for-sale debt securities (accumulated other comprehensive income) in their regulatory capital. Empirical evidence shows advanced approach banks classify additional securities as held to maturity (HTM) in response to the regulation. In addition, we further show advanced banks classify additional HQLA as HTM when they increase HQLA holdings. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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