Finance and Financial Management Commons^™

Bank Partnership And Liquidity Crisis, Seungho Choi, Yong Kyu Gam, Junho Park, Hojong Shin

Research Collection Lee Kong Chian School Of Business

This study empirically investigates the relationship between banking integration and liquidity management. To measure banks’ connectivity, we use the number of partnerships proxied via the syndicated loan arrangements in which they serve as lead arrangers. If banks establish more business partnerships through syndicated loan arrangements, those under market stress are more likely to face increased funding costs, create reduced liquidity, and originate declined small business loans and mortgages. Those banks with more partners are shown to have a lower liquidity coverage ratio, suggesting that business partnerships create a disincentive toward liquidity risk management.

The Greek Credit Guarantee Scheme (Greece Gfc), Daniel Thompson

Journal of Financial Crises

Beginning in 2008, many Greek banks began to face liquidity strains and capital problems as a result of the global financial crisis. In October 2008, Eurozone leaders released a declaration requiring all participating nations to ensure adequate liquidity, facilitate ease of funding, and recapitalize banks. On November 7, 2008, the Greek Ministry of Economy and Finance submitted a draft law, Law 3723, to the European Commission to fulfill the above directives through the Bank of Greece (BOG). While Law 3723 consisted of three main “pillars,” the focus for this case is pillar II, the credit guarantee scheme, otherwise known as …

Crisis Regulations: The Unexpected Consequences Of Floating Nav For Money Market Funds, Kyle D. Allen, Drew B. Winters

Finance Faculty Publications and Presentations

From the inception of money market funds (MMFs), all MMFs reported a fixed $1 NAV (Net Asset Value). In July 2014, the Securities and Exchange Commission (SEC) issued new regulations for MMFs that require Prime institutional MMFs to report floating NAVs. The SEC did not expect a significant impact on the MMF industry from requiring floating NAVs for Prime institutional funds. We find that over 70% of the assets under management in Prime MMFs left Prime funds with over half the Prime funds closing. We find that more than half of the Prime retail MMFs (which are not required to …

Private Equity Value Creation In Finance: Evidence From Life Insurance, Divya Kirti, Natasha Sarin

All Faculty Scholarship

This paper studies how private equity buyouts create value in the insurance industry, where decentralized regulation creates opportunities for aggressive tax and capital management. Using novel data on 57 large private equity deals in the insurance industry, we show that buyouts create value by decreasing insurers' tax liabilities; and by reaching-for-yield: PE firms tilt their subsidiaries' bond portfolios toward junk bonds while avoiding corresponding capital charges. Previous work on affiliated or "shadow" reinsurance and capital management misses the important role that private equity buyouts play as recent drivers of these phenomenon. The trend we document is of growing importance in …

A Tale Of Two Markets: Regulation And Innovation In Post-Crisis Mortgage And Structured Finance Markets, William W. Bratton, Adam J. Levitin

All Faculty Scholarship

This Article takes the occasion of the tenth anniversary of the financial crisis to review recent developments in the structured products market, connecting the emergent pattern to post-crisis regulation.

The Article tells a tale of two markets. The financial crisis stemmed from excessive risk-taking and shabby practice in the subprime home mortgage market, a market that owed its existence to the private-label, originate to securitize model. But the pre-crisis boom in private label subprime mortgage-backed securities could never have happened absent back up financing from an array of structured products and vehicles created in the capital markets—the CDOs that found …