The Oxford Handbook of Banking 3rd edition by Allen Berger, Philip Molyneux, John Wilson ISBN 0198824637 978-0198824633

1. Banking: A Decade on from the Global Financial Crisis

1.1 Introduction

1.2 Banking: A Decade After The Financial Crisis

1.3 Emerging Research Themes

1.4 Book Structure and Chapter Summaries

Part I: The Theory of Banking

2. The Roles of Banks in Financial Systems

2.1 Introduction

2.2 Delegated Monitoring and Banks

2.3 The Risk-Sharing Role of Banks

2.4 Banking Crises

2.5 Banks and Growth

2.6 The Corporate Governance Role of Banks

2.7 Relationship Banking

2.8 Concluding Remarks

3. Commercial Banking and Shadow Banking: The Accelerating Integration of Banks and Markets and its Implications for Regulation

3.1 Introduction

3.2 Understanding Banks as Information-Processing Intermediaries

3.3 Bank Lending, Securitization, and Capital Market Funding

3.4 Banks, Equity, and Private Equity Firms

3.5 Role of Credit Rating Agencies

3.6 Regulation and the Second Raison D’être for Banks: Liquidity Creation

3.7 Conclusions

4. Corporate Complexity and Systemic Risk: A Progress Report

4.1 Introduction

4.2 Why the Complex, Opaque, International Corporate Structure of G-Sibs Jeopardizes Systemic Stability

4.3 Corporate Complexity of G-Sibs: An Update 10 Years After the Crisis

4.4 What Drives the Corporate Complexity of G-Sibs?

4.5 Policies to Enhance the Resolvability of G-Sibs

4.6 Conclusions

5. Corporate Governance and Culture in Banking

5.1 Introduction

5.2 Why Banks are Different and the Implications for Bank Governance

5.3 Compensation in Banking

5.4 The Board of Directors and Shareholder-Oriented Governance

5.5 Board Diversity: Does it Matter who Runs Banks?

5.6 Culture in Banks

5.7 Policy Implications and Conclusions

6. Private Information and Risk Management in Banking

6.1 Introduction

6.2 Risk Measurement

6.3 Risk Management

6.4 Private Information Within Large Complex Banking Organizations

6.5 Why Do We Care About Risk In The Banking Sector?

7. Creation and Regulation of Bank Liquidity

7.1 Introduction

7.2 Banks as Liquidity Creators

7.3 From Originate-To-Hold (OTH) to a Mix of OTH and Originate-To-Distribute (OTD) and the Emergence of the Shadow-Banking System

7.4 Regulation to Preserve Uninterrupted Liquidity Creation Going Forward

7.5 Conclusion

II Activities and Performance

8. The Performance of Financial Institutions: Modeling, Evidence, and some Policy Implications

8.1 Introduction

8.2 Banking Technology and Performance

8.3 Applications of the Structural Approach

8.4 Applications of the Non-Structural Approach

8.5 Conclusions and Policy Implications

Acknowledgments

9. Technological Change and Financial Innovation in Banking: Some Implications for FinTech

9.1 Introduction

9.2 Financial Innovation: Definition and Determinants

9.3 Process Innovation

9.4 Product Innovation

9.5 Organizational Innovation

9.6 Conclusions

10. Payments

10.1 Payments Overview

10.2 Retail Payments

10.3 Wholesale Payments

10.4 End Note

Acknowledgments

11. Community Banking Institutions: Commercial Banks, Savings Banks, Cooperative Banks, and Credit Unions

11.1 Introduction

11.2 Institutional Overview

11.3 Local Specialization and Comparative Advantages of Community Banks

11.4 Transformation in Market Structure across Community Banking Institution Types

11.5 Bank Accessibility and Social Implications

11.6 Current Challenges

12. Islamic Banking: A Review of the Empirical Literature and Future Research Directions

12.1 Introduction

12.2 Growth of Islamic Banking around the World

12.3 Characteristics of Islamic Banking

12.4 Review of the Literature Comparing Islamic and Conventional Banks: Micro-Level Evidence

12.5 Review of the Literature Comparing Islamic and Conventional Banks: Macro-Level Evidence

12.6 Conclusion and Directions for Future Research

13. Can We Improve the Impact of Microfinance? A Survey of the Recent Literature and Potential Avenues for Success

13.1 Introduction

13.2 Group Lending With and Without Joint Liability

13.3 The Shift to Individual Lending and the Commercialization of Microfinance

13.4 Is Microfinance a Success?

13.5 The Design of Microcredit Contracts

13.6 Microfinance-Plus: The Need to Enhance Technical Skills of Microcredit Borrowers

13.7 Should We Subsidize Microfinance?

14. Small Business Lending: The Roles of Technology and Regulation from Pre-crisis to Crisis to Recovery

14.1 Introduction

14.2 Lending Technologies

14.3 The “Hardening” of Small Business Lending Information Over Time

14.4 Empirical Research on the Bank Consolidation Channel

14.5 Empirical Research on the Bank Competition Channel

14.6 The Global Financial Crisis and Recovery

14.7 Conclusion

Acknowledgments

15. Residential Mortgages

15.1 Introduction

15.2 Residential Mortgage Features

15.3 Household Decision-Making

15.4 Residential Mortgages as a Financial Asset

15.5 Regulation of Mortgages

15.6 Financial Stability and Residential Mortgages

15.7 Conclusion

16. Securitization

16.1 Introduction

16.2 The Evolution of Securitization

16.3 Mechanics of Securitization

16.4 Benefits and Risks of Securitization

16.5 Concluding Remarks: Regulatory Reforms and the Future of Securitization

17. Shadow Banking

17.1 What is Shadow Banking?

17.2 How Does One Define and Measure Shadow Banking?

17.3 Why Does Shadow Banking Exist?

17.4 How does Shadow Banking differ from Market-Based Finance?

17.5 Why Should We Care About Shadow Banking?

17.6 How can Supervision and Regulation be Strengthened?

17.7 Case Studies of Policy Challenges on the Horizon

17.8 Conclusion

Part III: Regulatory and Policy Perspectives

18. Modern Central Banking

18.1 Introduction

18.2 The Science of Central Banking

18.3 Governance of Central Banks

18.4 Monetary Policy

18.5 Financial Stability Policy

18.6 Concluding Remarks

19. Lender of Last Resort: A New Role for the Old Instrument

19.1 Introduction

19.2 Pure Liquidity Shocks

19.3 Distinguishing Between Insolvent and Illiquid Banks

19.4 Systemic Crises and Contagion

19.5 LOLR Policy

19.6 Conclusions

20. Bank Bailouts and Bail-Ins

20.1 Introduction

20.2 Bailouts

20.3 Bail-Ins

20.4 Other Approaches: Failure and Bankruptcy

20.5 Conclusions

Acknowledgments

21. Bank Runs and Moral Hazard: A Review of Deposit Insurance

21.1 Introduction

21.2 Economic Rationale for Deposit Insurance

21.3 Brief History of Adoption and Recent Changes

21.4 Economic Benefits of Deposit Insurance

21.5 Economic Costs of Deposit Insurance

21.6 Deposit Insurance Design and the Institutional Environment

21.7 Concluding Thoughts

22. Bank Capital Requirements after the Financial Crisis

22.1 Introduction

22.2 Literature Review

22.3 Recalibrating the Existing Framework

22.4 Major Structural Changes to the Framework

22.5 Quantitative Impact

22.6 Conclusion

23. Market Discipline in Regulation: Pre and Post Crisis

23.1 Introduction

23.2 What is Market Discipline?

23.3 Evidence

23.4 The Effects of Recent Reforms on Market Discipline

23.5 The Evolution of Pillar 3

23.6 Conclusions

No Single Representative Investor

Pooling of Securities

Financial Intermediaries

Econometric Impediments to Indirect Market Discipline

What is in a Credit Spread?

Biases in Forecasting Discrete Outcomes

Summary

24. Competition in the Banking Sector

24.1 Introduction

24.2 Measuring Banking Competition and Market Power

24.3 Competition: Conduct and Strategy

24.4 Banking Regulation and Competition

24.5 Information Sharing and Competition

24.6 Conclusion

Acknowledgments

25. Behavioral Economics, Financial Literacy, and Consumers’ Financial Decisions

25.1 Introduction

25.2 Psychology and Economic Behavior

25.3 Rationality of Credit Card Use

25.4 Financial Literacy

25.5 Limited Information and Heuristic Decision-Making in Market Environments

25.6 Conclusions

Part IV: Macroeconomic Perspectives

26. Systemic Risk in Banking after the Great Financial Crisis

26.1 Introduction

26.2 The Concept of Systemic Risk

26.3 Theoretical Models of Systemic Risk in Banking

26.4 Empirical Evidence on Systemic Risk in Banking

26.5 Conclusion

27. Hardy Perennials: Banking Crises Around the World

27.1 Introduction

27.2 Early History

27.3 Diverse Origins: Management, Government, and Macroeconomics in Recent Crises

27.4 Panic and Contagion: Explaining Sudden and Fast-Moving Banking Crises

27.5 Costs of Crises

27.6 Crisis Response and Prevention

27.7 The Crisis of 2007 and the Euro Crisis: Some Things Old and New

27.8 Toward Dynamic Regulation

Acknowledgments

28. Bank Failures, The Great Depression, and Other “Contagious” Events

28.1 Introduction

28.2 “Contagion” versus Fundamentals as Causes of Bank Failures

28.3 US Bank Distress During the Great Depression

28.4 Microeconomic Studies of Local Contagion

28.5 US Bank Distress in the Pre-Depression Era

28.6 Other Historical Experiences with Bank Failures

28.7 Bank Failures in the Late Twentieth Century

28.8 Conclusion

29. Banking Globalization: Cross-border Entry, Complexity, and Systemic Risk

29.1 Introduction

29.2 Stylized Facts on Cross-Border Entry and Complexity

29.3 Determinants of Cross-Border Bank Entry Through Acquisitions

29.4 Effects of Cross-Border Entry on Efficiency and Competition

29.5 Effects of Cross-Border Entry on Risk

29.6 Summary and Outlook for Future Work

Acknowledgments

30. Banking and Real Economic Activity: Foregone Conclusions and Open Challenges

30.1 Introduction

30.2 The Causality Debate

30.3 Banks Matter

30.4 How Do Banks Matter?

30.5 The Role of Bank Competition

30.6 Banks and Industry Dynamics in Product Markets

30.7 Unintended Consequences of the Great Recession

30.8 Conclusions

Part V: Banking Systems Around the World

31. Banking in the United States

31.1 Introduction

31.2 The Evolution of the US Banking Industry

31.3 Two Strategic Groups

31.4 Industry Consolidation Continues

31.5 The Future of Banking in the US

31.6 In Summary

32. Banking in Europe: Integration, Reform, and the Road to a Banking Union

32.1 Introduction

32.2 Structure and Performance of European Banking

32.3 Crisis in European Banking

32.4 New Regulatory Architecture and Banking Union

32.5 Summary

33. Banking in Japan: A Post-global Financial Crisis Perspective

33.1 Introduction

33.2 Overview of the Japanese Banking System

33.3 Selected Topics in Japanese Banking

33.4 Conclusion

Acknowledgments

34. Banking in Africa

34.1 Introduction

34.2 Stock-Taking: Where Does Africa Stand?

34.3 Overcoming Barriers to Financial Inclusion: Branch Expansion, Field Experiments, and Technology

34.4 Beyond Financial Inclusion: New Challenges

34.5 Conclusion

35. Banking in China

35.1 Introduction

35.2 The Structure and Performance of the Chinese Financial Sector

35.3 Shadow Banking: Causes and Consequences of its Spectacular Growth

35.4 Financial Inclusion in China

35.5 Conclusions

Acknowledgments

36. Banking in the Transition Countries of Central, Southern, and Eastern Europe and the Former Soviet Union

36.1 Introduction

36.2 History of Transition Banking

36.3 Banking Industry Today: Is Transition Over?

36.4 Financial Inclusion in Transition Countries

36.5 Conclusion

37. Banking in Latin America: Developments and Prospects

37.1 Introduction

37.2 Banking Consolidation in Latin America: A Quick Overview

37.3 The Evolution of Financial Policy in Latin America

37.4 Financial Penetration in Latin America

37.5 The Effects of Banking Consolidation

37.6 Regulatory Developments Post GFC

37.7 Latin American Development Banks: Some New Developments or an Impasse?

37.8 Conclusion

38. Banking in Australia and New Zealand—Geographic Proximity, Market Concentration, and Banking Integration

38.1 Introduction

38.2 Size and Significance of the Australian and NZ Banking Industries

38.3 Market Competition

38.4 Balance Sheets—Sources of Funding

38.5 Balance Sheets—Uses of Funding

38.6 Efficiency and Profitability

38.7 Explicit and Implicit Government Support for Banks

38.8 Resilience of the Australian and New Zealand Banking Systems

38.9 Conclusions

Index