Yener Altunbas | Bangor University (original) (raw)

Papers by Yener Altunbas

International finance discussion papers, Nov 1, 2015

In the years preceding the 2007-2009 financial crisis, forward-looking indicators of bank risk su... more In the years preceding the 2007-2009 financial crisis, forward-looking indicators of bank risk suggested unusually low expectations of bank default. We assess whether the ex-ante (i.e. prior to the crisis) crosssectional variability in bank characteristics is related to the ex-post (i.e. during the crisis) materialization of bank risk. Our tailor-made dataset crucially accounts for the different dimensions of realized bank risk including access to central bank liquidity during the crisis. We consistently find that less reliance on deposit funding, more aggressive credit growth, larger size and leverage were associated with larger levels of realized risk. The impact of these characteristics is particularly relevant for capturing the systemic dimensions of bank risk and tends to become stronger for the tail of the riskier banks. The majority of these characteristics also predicted bank risk as materialized before the financial crisis.

Social Science Research Network, May 14, 2021

This paper should not be reported as representing the views of the European Central Bank (ECB). T... more This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.

Social Science Research Network, Jun 1, 2017

This paper investigates the effects of macroprudential policies on bank risk through a large pane... more This paper investigates the effects of macroprudential policies on bank risk through a large panel of banks operating in 61 advanced and emerging market economies. There are three main findings. First, there is evidence suggesting that macroprudential tools have a significant impact on bank risk. Second, the responses to changes in macroprudential tools differ among banks, depending on their specific balance sheet characteristics. In particular, banks that are small, weakly capitalised and with a higher share of wholesale funding react more strongly to changes in macroprudential tools. Third, controlling for bank-specific characteristics, macroprudential policies are more effective in a tightening than in an easing episode.

Social Science Research Network, 2007

and participants on the 3rd Bundesbank-Kleistvilla 2007 Workshop on financial structure and, in p... more and participants on the 3rd Bundesbank-Kleistvilla 2007 Workshop on financial structure and, in particular, an anonymous referee for their helpful comments. We are grateful to Lorenzo Isla (Barclays Capital), Marcus Schueler and Rob Deneker (Deutsche Bank), Rick Watson and Marco Angheben (the European Securitization Forum), Dirk Vanderbroek (Goldman Sachs), Jean-Michel Six and Brian Kane (Standard and Poor's) for sharing their views on securitization in Europe. We also thank Roberta Cristino (Moody's), Katharine Venus (Standard and Poor's), Patrick Steimer and Christine Wilkin (European Commission) for kindly providing data on securitisation from euro-area issuers. The opinions expressed in this paper are those of the authors only and do not involve the responsibility of the institutions to which they are affiliated.

Social Science Research Network, 2023

Palgrave Macmillan UK eBooks, 2006

The determinants of bank lending to developing countries have been investigated in the existing a... more The determinants of bank lending to developing countries have been investigated in the existing academic literature within the risk-return framework, but the conclusions of earlier research have often been only partial or even contradictory. The analysis of a large sample of individual syndicated credit facilities allows the application of the risk-return framework to study the determinants of syndicated lending to developing countries in a more systematic manner. That is the approach taken in this chapter.

Journal of Post Keynesian Economics, Jul 28, 2022

Journal of Financial Intermediation, Oct 1, 2017

We find that certain bank characteristics-aggressive credit growth, less reliance on deposit fund... more We find that certain bank characteristics-aggressive credit growth, less reliance on deposit funding, and size-prior to the 2007-2009 crisis are consistently related to the systemic dimensions of bank risk during the crisis. Exposures to real estate play a major role explaining this relationship: Banks with larger real estate betas exhibited higher levels of systemic risk during the crisis. The impact of real estate betas on systemic risk increases for larger banks, following aggressive credit growth policies in the presence of housing bubbles. We show that the relationship between bank characteristics and risk could also be detected using measures of systemic risk calculated prior to the financial crisis.

Journal of Financial Stability, Sep 1, 2010

Non-technical summary 1 Introduction 2 The econometric model and the data 3 Results 4 Conclusions... more Non-technical summary 1 Introduction 2 The econometric model and the data 3 Results 4 Conclusions References Tables and fi gures European Central Bank Working Paper Series

Finance Research Letters, Mar 1, 2020

We test for a link between CEO power and risk taking in US banks. Banks are more likely to take r... more We test for a link between CEO power and risk taking in US banks. Banks are more likely to take risks if they have powerful CEOs and relatively poor balance sheets. There is little evidence that executive board size and independence have a dampening effect on the channels through which powerful CEOs influence risk-taking and some evidence that institutional investors reinforce the risk-taking preferences of powerful CEOs.

Palgrave Macmillan UK eBooks, 2006

Syndicated loans are credits granted by a group of banks to a borrower. They are hybrid instrumen... more Syndicated loans are credits granted by a group of banks to a borrower. They are hybrid instruments combining features of relationship lending and publicly traded debt. They allow the sharing of credit risk between various financial institutions without the disclosure and marketing burden that bond issuers face. Syndicated credits are a very significant source of international financing, with signings of international syndicated loan facilities accounting for no less than a third of all international financing, including bond, commercial paper and equity issues (Figure 2.1). This chapter describes the functioning of this increasingly global market, focusing on participants, pricing mechanisms, primary origination and secondary trading.

Palgrave Macmillan UK eBooks, 2006

Excessive borrowing by companies, households or governments lies at the root of almost every econ... more Excessive borrowing by companies, households or governments lies at the root of almost every economic crisis of the past two decades, from Mexico to Japan and from East Asia to Russia. Following the financial crises in Mexico (1995) and South-East Asia (1997, 1998) the determinants of bond and loan financing to developing countries and the pricing of these instruments have been analysed widely in the academic literature (see, for instance, Hernandez and Rudolph, 1995; Eichengreen and Mody, 1997, 1998; Kamin and von Kleist, 1999; Chowdhry and Goyal, 2000). As stressed by Hale (2005), bonds and loans compete in the market for emerging market finance and it is important to gauge the relative importance of each instrument for planning purposes by lenders and borrowers alike. Indeed, while banks can cancel loans relatively easily — posing more potential liquidity threats to emerging market borrowers — bonds are harder to restructure, not least because of the dispersion of the bondholders.

Journal of Financial Stability, Oct 1, 2022

This paper should not be reported as representing the views of the European Central Bank (ECB). T... more This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.

RePEc: Research Papers in Economics, Mar 1, 2010

The literature on the economics of fiscal decentralization stresses the potential for both positi... more The literature on the economics of fiscal decentralization stresses the potential for both positive and negative effects on governance in a country. Using a data set comprising sixty-four developed and developing economies and several different measures of fiscal decentralization, the authors find that countries in which a larger share of fiscal revenues and expenditures are located at the level of subnational governments appear to be less corrupt. The authors also find that the beneficial impact of fiscal decentralization on corruption is mitigated in the presence of mechanisms enforcing vertical administrative decentralization. The results indicate that fiscal decentralization appears to reduce corruption even in countries in which there is a high degree of political representation. The results are robust to alternative estimation methodologies and to specifications that control for the influence of variables that have been identified as affecting governance.

Palgrave Macmillan UK eBooks, 2006

This chapter extends the work of Altunbas, Chakravarty and Kara (2004) and examines the effect of... more This chapter extends the work of Altunbas, Chakravarty and Kara (2004) and examines the effect of the IMF’s imprimatur (seal of approval) on the cost of borrowing in the international syndicated loan markets between 1993 and 2001. It appears that the IMF-assisted countries paid higher spreads over LIBOR for short-term loans and had obtained fewer long-term loan contracts compared to their non-IMF peers for the financing of similar purpose projects. This may indicate a lack of confidence on the part of creditors that IMF prescriptions would have the desired effect in the long run on the economies of the client nations. Also, the pricing of syndicated loans for projects in these countries is inversely related to the level of short-term debt, signalling that creditors perhaps expect a bailout if a financial crisis occurs in the assisted nations. The academic critique of IMF policies and their implications for political economy, moral hazard and financial instability, is discussed first. Subsequently, an analysis of borrowing costs is undertaken by focusing on the impact of microeconomic loan characteristics and debt-distressed countries’ macroeconomic indicators on loan spreads.

Palgrave Macmillan UK eBooks, 2006

In 2004, international syndicated lending represented more than one-third of new international ca... more In 2004, international syndicated lending represented more than one-third of new international capital market financing, and is deemed to have generated more underwriting revenue in recent years than either the equity or the bond market (Madan, Sobhani and Horowitz, 1999). In particular, leveraged lending has been growing rapidly, as commercial borrowers have increasingly displayed a preference for leveraged borrowing over junk-bond financing (Jones, Lang and Nigro, 2000).1 Specific tranches of such syndicated loans are purchased by non-bank investors. These non-bank tranches are in most cases equivalent to public bonds and subject to an ‘arm’s-length’ relationship in the case of problems (Altman and Suggitt, 2000). This means that banks arranging syndicated credits, especially at the leveraged end of the credit quality spectrum, have de facto been acting as investment banks, collecting fees for putting together syndicates, but not always warehousing the loans themselves, leaving that activity to commercial banks or even non-banks.2 Indeed, in the aftermath of the banks’ reduced lending following the Russian crisis, BIS locational banking statistics show a marked decline after 1995 of banks’ international loan portfolios relative to their total foreign claims including holdings of securities (Figure 5.1).

RePEc: Research Papers in Economics, Oct 1, 2004

Palgrave Macmillan UK eBooks, 2006

Any person who does any unauthorized act in relation to this publication may be liable to crimina... more Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages.

European Journal of Finance, Jun 1, 2020

Although theory suggests that financial market imperfections-mainly information asymmetries, mark... more Although theory suggests that financial market imperfections-mainly information asymmetries, market segmentation and transaction costs-prevent poor people from escaping poverty by limiting their access to formal financial services, new financial technologies (FinTech) are seen as key enablers of financial inclusion. Indeed, the UN 2030 Agenda for Sustainable Development (UN-2030-ASD) and the G20 High-Level Principles for Digital Financial Inclusion (G20-HLP-DFI) highlight the importance of harnessing the potential of FinTech to reduce financial exclusion and income inequality. This paper investigates the interrelationship between FinTech, financial inclusion and income inequality for a panel of 140 countries using the Global Findex waves of survey data for 2011, 2014 and 2017. We posit that FinTech affects inequality directly and indirectly through financial inclusion. We invoke quantile regression analysis to investigate whether such effects differ across countries with different levels of income inequality. We uncover new evidence that financial inclusion is a key channel through which FinTech reduces income inequality. We also find that while financial inclusion significantly reduces inequality at all quantiles of the inequality distribution, these effects are primarily associated with higher-income countries. Overall, our results support the aspirations of the UN-2030-ASD and G20-HLP-DFI. Highlights • Harnessing the potential of FinTech to reduce financial exclusion and income inequality has been proposed by the UN and G20. • We posit that FinTech affects income inequality directly and indirectly through financial inclusion. • We invoke quantile regression analysis to investigate whether the effects of FinTech differ across countries with different levels of income inequality. • We find that financial inclusion is a key channel through which FinTech reduces income inequality, at all quantile levels, primarily among higher-income countries.

International finance discussion papers, Nov 1, 2015

In the years preceding the 2007-2009 financial crisis, forward-looking indicators of bank risk su... more In the years preceding the 2007-2009 financial crisis, forward-looking indicators of bank risk suggested unusually low expectations of bank default. We assess whether the ex-ante (i.e. prior to the crisis) crosssectional variability in bank characteristics is related to the ex-post (i.e. during the crisis) materialization of bank risk. Our tailor-made dataset crucially accounts for the different dimensions of realized bank risk including access to central bank liquidity during the crisis. We consistently find that less reliance on deposit funding, more aggressive credit growth, larger size and leverage were associated with larger levels of realized risk. The impact of these characteristics is particularly relevant for capturing the systemic dimensions of bank risk and tends to become stronger for the tail of the riskier banks. The majority of these characteristics also predicted bank risk as materialized before the financial crisis.

Social Science Research Network, May 14, 2021

This paper should not be reported as representing the views of the European Central Bank (ECB). T... more This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.

Social Science Research Network, Jun 1, 2017

This paper investigates the effects of macroprudential policies on bank risk through a large pane... more This paper investigates the effects of macroprudential policies on bank risk through a large panel of banks operating in 61 advanced and emerging market economies. There are three main findings. First, there is evidence suggesting that macroprudential tools have a significant impact on bank risk. Second, the responses to changes in macroprudential tools differ among banks, depending on their specific balance sheet characteristics. In particular, banks that are small, weakly capitalised and with a higher share of wholesale funding react more strongly to changes in macroprudential tools. Third, controlling for bank-specific characteristics, macroprudential policies are more effective in a tightening than in an easing episode.

Social Science Research Network, 2007

and participants on the 3rd Bundesbank-Kleistvilla 2007 Workshop on financial structure and, in p... more and participants on the 3rd Bundesbank-Kleistvilla 2007 Workshop on financial structure and, in particular, an anonymous referee for their helpful comments. We are grateful to Lorenzo Isla (Barclays Capital), Marcus Schueler and Rob Deneker (Deutsche Bank), Rick Watson and Marco Angheben (the European Securitization Forum), Dirk Vanderbroek (Goldman Sachs), Jean-Michel Six and Brian Kane (Standard and Poor's) for sharing their views on securitization in Europe. We also thank Roberta Cristino (Moody's), Katharine Venus (Standard and Poor's), Patrick Steimer and Christine Wilkin (European Commission) for kindly providing data on securitisation from euro-area issuers. The opinions expressed in this paper are those of the authors only and do not involve the responsibility of the institutions to which they are affiliated.

Social Science Research Network, 2023

Palgrave Macmillan UK eBooks, 2006

The determinants of bank lending to developing countries have been investigated in the existing a... more The determinants of bank lending to developing countries have been investigated in the existing academic literature within the risk-return framework, but the conclusions of earlier research have often been only partial or even contradictory. The analysis of a large sample of individual syndicated credit facilities allows the application of the risk-return framework to study the determinants of syndicated lending to developing countries in a more systematic manner. That is the approach taken in this chapter.

Journal of Post Keynesian Economics, Jul 28, 2022

Journal of Financial Intermediation, Oct 1, 2017

We find that certain bank characteristics-aggressive credit growth, less reliance on deposit fund... more We find that certain bank characteristics-aggressive credit growth, less reliance on deposit funding, and size-prior to the 2007-2009 crisis are consistently related to the systemic dimensions of bank risk during the crisis. Exposures to real estate play a major role explaining this relationship: Banks with larger real estate betas exhibited higher levels of systemic risk during the crisis. The impact of real estate betas on systemic risk increases for larger banks, following aggressive credit growth policies in the presence of housing bubbles. We show that the relationship between bank characteristics and risk could also be detected using measures of systemic risk calculated prior to the financial crisis.

Journal of Financial Stability, Sep 1, 2010

Non-technical summary 1 Introduction 2 The econometric model and the data 3 Results 4 Conclusions... more Non-technical summary 1 Introduction 2 The econometric model and the data 3 Results 4 Conclusions References Tables and fi gures European Central Bank Working Paper Series

Finance Research Letters, Mar 1, 2020

We test for a link between CEO power and risk taking in US banks. Banks are more likely to take r... more We test for a link between CEO power and risk taking in US banks. Banks are more likely to take risks if they have powerful CEOs and relatively poor balance sheets. There is little evidence that executive board size and independence have a dampening effect on the channels through which powerful CEOs influence risk-taking and some evidence that institutional investors reinforce the risk-taking preferences of powerful CEOs.

Palgrave Macmillan UK eBooks, 2006

Syndicated loans are credits granted by a group of banks to a borrower. They are hybrid instrumen... more Syndicated loans are credits granted by a group of banks to a borrower. They are hybrid instruments combining features of relationship lending and publicly traded debt. They allow the sharing of credit risk between various financial institutions without the disclosure and marketing burden that bond issuers face. Syndicated credits are a very significant source of international financing, with signings of international syndicated loan facilities accounting for no less than a third of all international financing, including bond, commercial paper and equity issues (Figure 2.1). This chapter describes the functioning of this increasingly global market, focusing on participants, pricing mechanisms, primary origination and secondary trading.

Palgrave Macmillan UK eBooks, 2006

Excessive borrowing by companies, households or governments lies at the root of almost every econ... more Excessive borrowing by companies, households or governments lies at the root of almost every economic crisis of the past two decades, from Mexico to Japan and from East Asia to Russia. Following the financial crises in Mexico (1995) and South-East Asia (1997, 1998) the determinants of bond and loan financing to developing countries and the pricing of these instruments have been analysed widely in the academic literature (see, for instance, Hernandez and Rudolph, 1995; Eichengreen and Mody, 1997, 1998; Kamin and von Kleist, 1999; Chowdhry and Goyal, 2000). As stressed by Hale (2005), bonds and loans compete in the market for emerging market finance and it is important to gauge the relative importance of each instrument for planning purposes by lenders and borrowers alike. Indeed, while banks can cancel loans relatively easily — posing more potential liquidity threats to emerging market borrowers — bonds are harder to restructure, not least because of the dispersion of the bondholders.

Journal of Financial Stability, Oct 1, 2022

This paper should not be reported as representing the views of the European Central Bank (ECB). T... more This paper should not be reported as representing the views of the European Central Bank (ECB). The views expressed are those of the authors and do not necessarily reflect those of the ECB.

RePEc: Research Papers in Economics, Mar 1, 2010

The literature on the economics of fiscal decentralization stresses the potential for both positi... more The literature on the economics of fiscal decentralization stresses the potential for both positive and negative effects on governance in a country. Using a data set comprising sixty-four developed and developing economies and several different measures of fiscal decentralization, the authors find that countries in which a larger share of fiscal revenues and expenditures are located at the level of subnational governments appear to be less corrupt. The authors also find that the beneficial impact of fiscal decentralization on corruption is mitigated in the presence of mechanisms enforcing vertical administrative decentralization. The results indicate that fiscal decentralization appears to reduce corruption even in countries in which there is a high degree of political representation. The results are robust to alternative estimation methodologies and to specifications that control for the influence of variables that have been identified as affecting governance.

Palgrave Macmillan UK eBooks, 2006

This chapter extends the work of Altunbas, Chakravarty and Kara (2004) and examines the effect of... more This chapter extends the work of Altunbas, Chakravarty and Kara (2004) and examines the effect of the IMF’s imprimatur (seal of approval) on the cost of borrowing in the international syndicated loan markets between 1993 and 2001. It appears that the IMF-assisted countries paid higher spreads over LIBOR for short-term loans and had obtained fewer long-term loan contracts compared to their non-IMF peers for the financing of similar purpose projects. This may indicate a lack of confidence on the part of creditors that IMF prescriptions would have the desired effect in the long run on the economies of the client nations. Also, the pricing of syndicated loans for projects in these countries is inversely related to the level of short-term debt, signalling that creditors perhaps expect a bailout if a financial crisis occurs in the assisted nations. The academic critique of IMF policies and their implications for political economy, moral hazard and financial instability, is discussed first. Subsequently, an analysis of borrowing costs is undertaken by focusing on the impact of microeconomic loan characteristics and debt-distressed countries’ macroeconomic indicators on loan spreads.

Palgrave Macmillan UK eBooks, 2006

In 2004, international syndicated lending represented more than one-third of new international ca... more In 2004, international syndicated lending represented more than one-third of new international capital market financing, and is deemed to have generated more underwriting revenue in recent years than either the equity or the bond market (Madan, Sobhani and Horowitz, 1999). In particular, leveraged lending has been growing rapidly, as commercial borrowers have increasingly displayed a preference for leveraged borrowing over junk-bond financing (Jones, Lang and Nigro, 2000).1 Specific tranches of such syndicated loans are purchased by non-bank investors. These non-bank tranches are in most cases equivalent to public bonds and subject to an ‘arm’s-length’ relationship in the case of problems (Altman and Suggitt, 2000). This means that banks arranging syndicated credits, especially at the leveraged end of the credit quality spectrum, have de facto been acting as investment banks, collecting fees for putting together syndicates, but not always warehousing the loans themselves, leaving that activity to commercial banks or even non-banks.2 Indeed, in the aftermath of the banks’ reduced lending following the Russian crisis, BIS locational banking statistics show a marked decline after 1995 of banks’ international loan portfolios relative to their total foreign claims including holdings of securities (Figure 5.1).

RePEc: Research Papers in Economics, Oct 1, 2004

Palgrave Macmillan UK eBooks, 2006

Any person who does any unauthorized act in relation to this publication may be liable to crimina... more Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages.

European Journal of Finance, Jun 1, 2020

Although theory suggests that financial market imperfections-mainly information asymmetries, mark... more Although theory suggests that financial market imperfections-mainly information asymmetries, market segmentation and transaction costs-prevent poor people from escaping poverty by limiting their access to formal financial services, new financial technologies (FinTech) are seen as key enablers of financial inclusion. Indeed, the UN 2030 Agenda for Sustainable Development (UN-2030-ASD) and the G20 High-Level Principles for Digital Financial Inclusion (G20-HLP-DFI) highlight the importance of harnessing the potential of FinTech to reduce financial exclusion and income inequality. This paper investigates the interrelationship between FinTech, financial inclusion and income inequality for a panel of 140 countries using the Global Findex waves of survey data for 2011, 2014 and 2017. We posit that FinTech affects inequality directly and indirectly through financial inclusion. We invoke quantile regression analysis to investigate whether such effects differ across countries with different levels of income inequality. We uncover new evidence that financial inclusion is a key channel through which FinTech reduces income inequality. We also find that while financial inclusion significantly reduces inequality at all quantiles of the inequality distribution, these effects are primarily associated with higher-income countries. Overall, our results support the aspirations of the UN-2030-ASD and G20-HLP-DFI. Highlights • Harnessing the potential of FinTech to reduce financial exclusion and income inequality has been proposed by the UN and G20. • We posit that FinTech affects income inequality directly and indirectly through financial inclusion. • We invoke quantile regression analysis to investigate whether the effects of FinTech differ across countries with different levels of income inequality. • We find that financial inclusion is a key channel through which FinTech reduces income inequality, at all quantile levels, primarily among higher-income countries.