Bank size, credit and the sources of bank market risk
By: by Ryan Stever.
Contributors: Bank for International Settlements. Monetary and Economic Dept.
Series: BIS working papers -- no. 238
Publisher: Bank for International Settlements
Published: 2007
Place of publication: Basel, Switzerland
Language: eng
Format: Electronic resource
Description: This study examines bank risk by investigating the equity and loan portfolio characteristics of publicly-traded bank holding companies. Unlike the pattern for non-financial firms, equity betas of large banks are two to five times greater than those of small banks. In explaining this, we note that regulation imposes an effective cap on banks' equity volatility. Because the portfolios of small banks are less diversified, this cap has a greater effect on small banks than large banks. But we reject the hypothesis that small banks lower their equity volatility through lower leverage. Instead, we find that the reduced ability of small banks to diversify forces them to either pick borrowers whose assets have relatively low credit risk or make loans that are backed by relatively more collateral.
Notes: Title from PDF file (viewed on Dec. 27, 2007).

"Monetary and Economic Department."

"November 2007."

Includes bibliographical references.

Also available in print.

System requirements: Adobe Acrobat Reader.

Mode of access: World Wide Web.