An investigation into bank behaviour up to the 2007-08 global financial crisis

Jin, Yi (2013). An investigation into bank behaviour up to the 2007-08 global financial crisis. University of Birmingham. Ph.D.

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Abstract

This thesis includes four empirical studies on the effects of bank behaviour on bank performance in European and North American countries up to the 2007-08 financial crisis. First, we investigate the effects of non-traditional bank activities, i.e., off-balance-sheet (OBS) items and traditional activities, i.e., loans, on bank performance, and then considering a risk-based capital requirement show an optimal bank portfolio. Second, we examine the impact of interbank lending on bank risk-taking, considering the consequence of “Too big to fail” (TBTF) and show differences in bank activities and risk-taking between large and small banks. We then study the effect of changes in bank behaviour on the determinants of interest margins. Finally, we identify the reasons of individual bank failure towards understanding the mechanism of the recent financial crisis. Our empirical findings provide following results. First, the negative effect of OBSs on bank performance is found and banks prefer moving away from OBSs, given the risk-based capital requirement. Second, interbank lending increases the large banks’ risk level under TBTF. Third, product diversification has a negative impact on interest margins. Finally, the housing price index has a significant impact on the probability of bank failure in the context of the recent financial crisis.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):