Forbearance and valuation of deposit insurance as a callable put

Article Abstract:

Insolvent financial institutions are a costly public problem and regulators have been criticised for their seemingly slow response to financial crises and the granting of forbearance. Forbearance is the delay in implementation of rules. It should not be criticised as there is evidence that a delay in bank closure allows the bank to return to solvency and increases the deposit insurance subsidies value. Forbearance is of value to the bank if the deposit insurer decides to use the extra time effectively. Increasing the bank risk can reduce the value of the deposit insurance.

Security brokers and dealers, Management, Laws, regulations and rules, Options (Finance), Deposit insurance

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Operational efficiency in banking: an international comparison

Article Abstract:

The estimation of a worldwide cost function based on an international database of banks serves to test for input and output inefficiencies. Results on 1988-1992 data imply that for all financial institutions in all nations, the dominance of input X-inefficiencies outstrips that of output inefficiencies. Results also imply that the distribution-free model overestimates the size of X-inefficiencies in relation to the stochastic cost frontier method.

Banking Institutions, Depository Credit Intermediation, DEPOSITORY INSTITUTIONS, Banking industry, Analysis, Banks (Finance), Financial institutions

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Credit spreads in the market for highly leveraged transaction loans

Article Abstract:

The empirical exploration of the determinants of the needed credit spreads on highly leveraged transaction (HLT) loans showed a positive HLT loan spread sensitivity to fluctuations in spreads in the corporate bond market. However, this sensitivity is markedly less than unity, suggesting that the HLT loan market and exorbitant yield public debt market are not quite integrated.

Economics, Research and Development in the Social Sciences and Humanities, Research, Leveraged buyouts, Credit market, Credit markets

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