This paper examines how bank regulation and supervision measures affect the synchronicity of bank stock returns, a measure that is negatively related to variations in bank-specific fundamentals and stock price informativeness. Using data from World Bank surveys in 35 countries, we find that bank stock returns are less synchronous in countries with more stringent capital regulations, more supervision that emphasizes private monitoring, and less government bank ownership. On the other hand, direct government control of bank activities, as well as direct government monitoring and disciplining, do not reduce stock return synchronicity

This paper investigates the role of off-balance sheet securitization on US bank leverage pro-cyclicality. Effective leverage (taking into account off-balance sheet securitization) is especially relevant for the US, where GAAP accounting rules for securitization allowed until 2009 a underestimation of on balance sheet items. Over 2001–2010, we document that US BHCs which are more involved in securitization have a more pro-cyclical leverage. We also show that in the pre-crisis period securitization dominates the business model in determining the leverage pro-cyclicality to the point that even commercial banks highly involved in securitization had a pro-cyclical behavior. We document that the period-long relation between securitization and capital ratios was week. The effect on leverage pro-cyclicality of the 2004 changes in regulation (the new SEC net capital rule and the exemption from the FASB directive on consolidation of SPVs) was absent for investment banks, and mixed for commercial banks highly involved in securitization. The evidence of this paper supports the view of the Basel III committee that macro-prudential regulation must include constraints on effective leverage

We study the behavior of private pension funds as large depositors in a banking system. Using panel data analysis, we examine whether, and if so how, pension funds influence market discipline in Argentina in the period 1998–2001. We find that the disciplining role of pension funds depends on whether or not banks are connected to the pension fund industry through ownership of pension fund management companies. We find evidence that pension funds exert market discipline on unconnected banks but not on connected ones. On balance, pension funds undermine market discipline in the banking system as a result of conflicts of interest. We conclude that regulations aimed at averting these conflicts can enhance market discipline

The use of collateral has become one of the most widespread risk mitigation techniques. While it brings stabilizing effects to the individual cash lender, it may exacerbate systemic risk by accelerating bank deleveraging under funding stress. We show how a liquidity shock to the cash lender may propagate as a solvency shock via liquidity hoarding even if the cash lender remains solvent in all states of nature. Albeit a privately optimal response of the cash lender to a liquidity shock, bank deleveraging may lead to excessive bankruptcy among its borrowing counterparties while, at the same time, triggering contagion across asset classes. To buttress financial system resilience, we lay out a menu of macroprudential policies that deactivate this channel of financial contagion