Market power and bank systemic risk: role of securitization and bank capital

Yener Yener Altunbas; David  Marques-Ibanez; Michiel  van Leuvensteijn; Tianshu Zhao

doi:10.1016/j.jbankfin.2022.106451

Market power and bank systemic risk: role of securitization and bank capital

Yener Yener Altunbas, David Marques-Ibanez, Michiel van Leuvensteijn, Tianshu Zhao

Finance

Research output: Contribution to journal › Article › peer-review

Abstract

We examine how market power in the run-up to the 2007–2009 crisis affected banks’ systemic risk during the crisis, and whether this effect was influenced by two key factors: securitization and bank capital. Using a sample of the largest listed banks from 15 countries, we find that more market power prior to the crisis is connected to larger levels of realized systemic risk during the crisis. The use of securitization exacerbated the effect of market power on systemic risk, while capitalization partially mitigated it.

Original language	English
Article number	106451
Number of pages	15
Journal	Journal of Banking & Finance
Volume	138
Early online date	1 Mar 2022
DOIs	https://doi.org/10.1016/j.jbankfin.2022.106451
Publication status	Published - May 2022

Bibliographical note

Funding Information:
This work was completed while David Marques-Ibanez was a visiting scholar at the IMF's Macro Financial Division of the Research Department. We are grateful to two anonymous referees as well as to Giovanni Dell'Ariccia, Soledad Martinez Peria and the colleagues at the IMF's Macro Financial Research division for their kind hospitality and fruitful discussions. We would also like to thank Leonardo Gambacorta, Florian Heider, Simone Manganelli, Agnese Leonello, Alex Popov. We are also grateful to participants at seminars at the European Central Bank, Bangor University, Bank of England as well as at conferences including IFABS 2016 conference Risk in Financial Markets and Institutions: New challenges, New solutions, Wolpertinger 2016 and EBA's 5th Annual Research Workshop on Competition in Banking for useful comments for their constructive suggestions. Our special thanks also to Jacob Bikker for generously providing some of the data used on some of the estimations of this paper and his useful suggestions. We are also most grateful to Francesca Fabbri and Luiz Paulo for their help constructing the dataset.

Publisher Copyright:
© 2022

Keywords

Bank risk
Capitalization
Market power
Securitization

ASJC Scopus subject areas

Finance
Economics and Econometrics

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10.1016/j.jbankfin.2022.106451

https://research.bangor.ac.uk/portal/en/researchoutputs/market-power-and-bank-systemic-risk-role-of-securitization-and-bank-capital(046fa956-fa94-4476-91e6-062fe781c630).htmlLicence: Creative Commons: Attribution-NonCommercial-NoDerivs (CC BY-NC-ND)

Cite this

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abstract = "We examine how market power in the run-up to the 2007–2009 crisis affected banks{\textquoteright} systemic risk during the crisis, and whether this effect was influenced by two key factors: securitization and bank capital. Using a sample of the largest listed banks from 15 countries, we find that more market power prior to the crisis is connected to larger levels of realized systemic risk during the crisis. The use of securitization exacerbated the effect of market power on systemic risk, while capitalization partially mitigated it.",

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Market power and bank systemic risk: role of securitization and bank capital

Abstract

Bibliographical note

Keywords

ASJC Scopus subject areas

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