Why Have Banks' Market-to-Book Ratios Declined?
Nov 1, 2016
A new TCH research note shows that most of the decline in price-to-tangible book value of equity in the post-crisis period is driven by the fall in banks’ profitability as measured by the return on tangible common equity (ROTCE). The TCH note also shows that both the decline in P/TBV and ROTCE is particularly pronounced for banks above $10bn in total consolidated assets. The note then explores possible explanations for this finding, including the role of major changes in regulatory policies.
Liquidity and Leverage Regulation, Money Market Structure, and the Federal Reserve’s Monetary Policy Framework in the Longer Run
Sep 21, 2016
The Clearing House research note demonstrates that recent changes in bank regulation will have foreseeable and material consequences for the structure of, and pricing in, money markets. We also show that new bank regulations will constrain the FOMC’s choices for its longer-run monetary policy framework.
Liquidity Regulations, the Neutral Real Federal Funds Rate, and the Money Premium
Aug 24, 2016
TCH provides evidence that tighter liquidity regulations may have several significant unintended consequences that could reduce ability of the Federal Reserve to provide stimulus to the economy and promote reliance on the shadow banking sector.
TCH Publishes Research Note on Shortcoming of the Leverage Ratio
Aug 9, 2016
A new TCH research note shows that the leverage ratio is a poor measure of bank risk, with many banks that had excellent leverage ratios nevertheless failing during the crisis. This result may be because, as the note demonstrates, leverage ratio requirements give banks an incentive to increase the riskiness of their portfolios. The note demonstrates that leverage ratio requirements are influencing bank behavior as predicted, leading banks to pullback from low-risk capital market activities.
TCH Publishes Research Note on the Net Stable Funding Ratio
Jul 5, 2016
In a new research note, The Net Stable Funding Ratio: Neither Necessary nor Harmless, The Clearing House finds the Net Stable Funding Ratio (NSFR) has no clear, defining objective or benefit while its economic costs may be substantial.
TCH Publishes Research Note on the Methodology Used to Calibrate the Single-Counterparty Credit Limit
Jun 3, 2016
In order to achieve conceptual and intellectual consistency across the single-counterparty credit limit and GSIB surcharge frameworks, either the inter-GSIB credit limit would have to be increased substantially or the GSIB surcharges would have to be cut roughly in half for the majority of GSIBs.
TCH Publishes Empirical Analysis of BCBS-Proposed Revisions to the Standardized Approach for Credit Risk
May 20, 2016
Recently, The Clearing House (TCH) released empirical analysis (TCH Study) utilizing data from large U.S. bank holding companies to analyze the impact that could result from the implementation of the BCBS-proposed revisions to the Standardized Approach for credit risk with respect to credit conversion factors (CCFs) for off-balance sheet commitments.
TCH Research Note Compares United States and European Union Stress Tests
May 19, 2016
TCH’s Research Department has published a note on a comparison between United States and European Union Stress Tests.
TCH Publishes Research Note on the Methodology Used to Calibrate the U.S. GSIB Capital Surcharge
May 10, 2016
TCH’s Research Department has published a note on the methodology used to calibrate the U.S. global systemically important bank holding companies (GSIB) capital surcharge. This research note provides an overview and assesses the efficacy of the methodology used to determine the capital surcharge for each GSIB. The research note identifies two key shortcomings: (i) the methodology does not estimate the systemic losses that would occur if each GSIB were to fail, instead the losses are simply assumed to be proportional to selected bank characteristics; and (ii) the estimated relationship between capital levels and odds of failure used to calibrate the surcharge is very sensitive to the number of banks included and the time period used in the empirical analysis.
The Net Stable Funding Ratio – A Few Questions
Apr 28, 2016
On April 26, 2016, the FDIC and OCC released a draft proposal for a new, additional, liquidity regulation – the net stable funding ratio (NSFR) – and requested public comment. On May 3, 2016, the Federal Reserve Board held an open meeting at which they discussed and considered the same NSFR proposal. Open Board meetings are open to the public, but the public doesn’t get to ask questions. There were definitely a few worth asking. The accompanying document offers four.
Understanding the Facts Regarding the Ongoing Debate about “Too Big to Fail”
Apr 4, 2016
The chances of a large banking organization failing have been greatly reduced by higher levels of and better quality of capital and liquidity, central clearing and other efforts to reduce risk; if a banking organization should fail, a new legal regime imposes losses from failed institutions on shareholders and creditors without government “bailouts.” However, as evidenced at the Minneapolis Federal Reserves’ recent Ending Too Big to Fail Policy symposium, some scholars have chosen to ignore the reality of these seismic changes. They continue to propagate myths that are inconsistent with reality.
TCH Publishes Research Note on the 2016 Federal Reserve Stress Testing Scenarios
Mar 16, 2016
The Clearing House Research Department has published a note that provides an overview of the 2016 Federal Reserve Stress Testing Scenarios.
Banking Brief: Ensuring Consistent Consumer Protection for Data Security: Banks vs. Alternative Payment Providers
Aug 31, 2015
Recently, The Clearing House released a White Paper that analyzes the alternative payment provider (APP) industry, identifies regulatory and enforcement gaps between banks’ payment operations and APPs, and makes recommendations on how to close those gaps in order to ensure that consumers receive a consistent level of protection.
Industry Working Paper Provides Recommendations Regarding the Basel Committee Monitoring Tools for Intraday Liquidity Management
Jun 3, 2015
The working paper submitted to the BCBS Working Group on Liquidity highlights the need for cross-border dialogue on implementation alongside standardization of data and definitions across the industry internationally, noting that such dialogue between the BCBS, national authorities and the industry is the only way of minimizing areas of divergence.
TCH Commissioned Study by Oliver Wyman Shows Increased Stability of the U.S. Banking System
Mar 26, 2015
The Clearing House (TCH) commissioned study conducted by Oliver Wyman examines whether regulatory changes and changes to the banking system since the 2008 crisis have improved the financial stability of the U.S. banking system.
Banking Brief: Overview of Total Loss Absorbing Capacity
Feb 20, 2015
In November 2014, the Financial Stability Board (“FSB”) proposed international standards for total loss absorbing capacity (“TLAC”) that a global systemically important bank (“G-SIB”) would be required to maintain to facilitate its orderly resolution should it fail.
Moody’s Analytics Releases TCH-Sponsored Report on Banking System Resilience
Nov 21, 2014
Moody’s Analytics released a report commissioned by TCH, entitled Measuring the Banking System’s Resilience, that presents a new framework for understanding and measuring the relationship between the stability of the banking system and its ability to contribute to the broader economy’s productivity and growth.
Banking Brief: The Clearing House Working Paper Series on the Value of Large Banks Working Paper No. 4: Quantifying the Impact of Macroprudential Regulation on the Largest U.S. Banks
Nov 19, 2014
In the fourth paper in its Working Paper Series on the Value of Large Banks, The Clearing House builds on and provides evidence supporting the conclusion drawn in its Third Working Paper that the cost of compliance with regulations imposed on large banks must be factored into any assessment of whether large banks enjoy an unfair funding advantage.
TCH Releases Fourth Working Paper in a Series on the Value of Large Banks
Nov 18, 2014
The fourth paper in the Working Paper Series focuses on the costs of macroprudential regulation and the net impact of government policies on banks.
Banking Brief: Living Will Requirements for Banking Organizations
Oct 9, 2014
The Dodd-Frank Act requires banking organizations with $50 billion or more of consolidated assets to file resolution plans annually with the Federal Reserve and FDIC. Each resolution plan, also known as a “living will,” must describe the organization’s strategy for rapid and orderly resolution under the U.S. Bankruptcy Code in the event of the organization’s material financial distress or failure.