BIS Quarterly Review, June 2013
The BIS Quarterly Review for June 2013 says markets are under the spell of monetary easing.
Statistical tables:
- Summary tables (PDF, 19 pages, 546 kb)
- Detailed tables (PDF, 161 pages, 955 kb)
International banking and financial market developments
Special features
A proposed creditor-funded recapitalisation mechanism for too-big-to-fail banks that reach the point of failure ensures that shareholders and uninsured private sector creditors of such banks, rather than taxpayers, bear the cost of resolution. The template is simple, fully respects the existing creditor hierarchy and can be applied to any failing entity within a banking group. The mechanism partially writes off creditors to recapitalise the bank over a weekend, providing them with immediate certainty on their maximum loss. The bank is subsequently sold in a manner that enables the market to determine the ultimate losses to creditors. As such, the mechanism can eliminate moral hazard throughout a banking group in a cost-efficient way that also limits the risk to financial stability. The creditor-funded mechanism is contrasted with other recapitalisation approaches, including bail-in and "single point of entry" strategies.
More...Credit-to-GDP gaps are valuable early warning indicators for systemic banking crises. As such, they are useful for identifying vulnerabilities and can help guide the deployment of macroprudential tools such as the build-up of countercyclical capital buffers. In line with Basel III recommendations, credit-to-GDP gaps can be further improved by taking account of all sources of credit to the private non-financial sector, rather than just bank credit. Drawing on a new BIS database, this special feature finds that total credit developments predict the risk of systemic crises better than indicators based solely on bank credit.
More...We use tools of extreme value theory to extract information about rare events from market prices. We find that such information contributes materially to measures of banks' systemic importance. These measures exhibit strong and intuitive relationships with simple characteristics of banks' balance sheets and income statements.
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