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Research and Analysis

The Clearing House

The Clearing House Research Department strives to be the banking industry’s leading source for quantitative insights on banking and payments policy through the production of high quality research and analytics for its owner banks, policymakers, and the public. This is accomplished through issue-specific empirical studies and the monitoring of regulatory implementation and other industry trends.


Recent Highlights

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.

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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.

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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. 

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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.

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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.

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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.

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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.

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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. 

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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.

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