Bank Solvency and Funding Cost
IMF Working Papers, March 15, 2016
Source details
- Canonical URL
- Bank Solvency and Funding Cost
Other formats
Bibliographic details
- Authors: Christoph Aymanns, Carlos Caceres, Christina Daniel, Liliana B Schumacher
- Published: March 15, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781513591131.001
Main findings
- (1) Solvency is negatively and significantly related to measures of funding cost, but the effect is small in magnitude.
- (2) On average, the relationship is stronger for interbank funding cost than for average funding cost.
- (3) During periods of stress interbank funding cost is more sensitive to solvency than in normal times.
- (4) The relationship between funding cost and solvency appears to be non-linear, with higher sensitivity of funding cost at lower levels of solvency.
Measures and analysis
- Funding cost measures analyzed:
- (a) average funding cost
- (b) interbank funding cost as a proxy of wholesale funding cost
- Analysis approach:
- Study of the sensitivity of bank funding cost to solvency measures while controlling for various other measures of bank fundamentals.
- Emphasis on implications for stress-testing given the interaction between bank solvency and funding cost.
Subjects and keywords
- Subject: Bank solvency, Banking, Capital adequacy requirements, Econometric analysis, Estimation techniques, Financial regulation and supervision, Financial sector policy and analysis, Financial statements, Public financial management (PFM), Solvency
- Keywords: bank fundamentals, Bank solvency, Capital adequacy requirements, default probability, Estimation techniques, FDIC bank default dataset, federal funds, Financial statements, funding cost, Global, return on assets, Solvency, solvency measure, solvency shock, stress testing, WP