Judging the risk of banks: what makes banks opaque?
We argue that the risk of banks is hard for outsiders to judge because the risk of their mostly financial assets is either hard to measure (opaque) or easy to change. We report evidence that bond rating agencies seem to disagree more over banks than over other types of firms. Among banks, bond raters disagree more over opaque assets, like loans, and easily substitutable assets, like cash and trading assets. Fixed assets, like premises, reduce disagreement. Capital also reduces disagreement, but only at trading banks, where the risk of asset shifting may be most severe.
|Date of creation:||1998|
|Contact details of provider:|| Postal: 33 Liberty Street, New York, NY 10045-0001|
Web page: http://www.newyorkfed.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Edward Kane, 1997.
"Ethical Foundations of Financial Regulation,"
Journal of Financial Services Research,
Springer;Western Finance Association, vol. 12(1), pages 51-74, August.
- Jeremy C. Stein, 1998.
"An Adverse-Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy,"
RAND Journal of Economics,
The RAND Corporation, vol. 29(3), pages 466-486, Autumn.
- Jeremy C. Stein, 1995. "An Adverse Selection Model of Bank Asset and Liability Management with Implications for the Transmission of Monetary Policy," NBER Working Papers 5217, National Bureau of Economic Research, Inc.
- Stewart C. Myers & Raghuram G. Rajan, 1995.
"The Paradox of Liquidity,"
NBER Working Papers
5143, National Bureau of Economic Research, Inc.
- Christina D. Romer & David H. Romer, 1990. "New Evidence on the Monetary Transmission Mechanism," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 21(1), pages 149-214.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Anil K Kashyap & Jeremy C. Stein, 1994.
"The Impact of Monetary Policy on Bank Balance Sheets,"
NBER Working Papers
4821, National Bureau of Economic Research, Inc.
- Kashyap, Anil K. & Stein, Jeremy C., 1995. "The impact of monetary policy on bank balance sheets," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 42(1), pages 151-195, June.
- Anil K Kashyap & Jeremy C. Stein, 1997. "What Do a Million Banks Have to Say About the Transmission of Monetary Policy?," NBER Working Papers 6056, National Bureau of Economic Research, Inc.
- Douglas W. Diamond, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Oxford University Press, vol. 51(3), pages 393-414.
- Krasa, Stefan & Villamil, Anne P, 1992. "A Theory of Optimal Bank Size," Oxford Economic Papers, Oxford University Press, vol. 44(4), pages 725-749, October.
- Flannery, Mark J, 1994.
"Debt Maturity and the Deadweight Cost of Leverage: Optimally Financing Banking Firms,"
American Economic Review,
American Economic Association, vol. 84(1), pages 320-331, March.
- Mark J. Flannery, 1991. "Debt maturity and the deadweight cost of leverage: optimally financing banking firms," Proceedings, Federal Reserve Bank of San Francisco, issue Nov.
- Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
- Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-329, May.
- James, Christopher, 1987. "Some evidence on the uniqueness of bank loans," Journal of Financial Economics, Elsevier, vol. 19(2), pages 217-235, December.
- Richard Cantor & Frank Packer, 1994. "The credit rating industry," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 1-26.
When requesting a correction, please mention this item's handle: RePEc:fip:fednrp:9805. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.