Universität zu Köln

Kund, Arndt-Gerrit ORCID: 0000-0002-6537-0104 (2021). Essays on Systemic Risk and Financial Stability. PhD thesis, Universität zu Köln.

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Abstract

This dissertation consists of three self-containing, yet interrelated essays on systemic risk and financial stability. The first and second essay focus on systemic risk, whereas the third essay discusses financial stability. In more detail, the first essay analyses whether systemic risk measures help predict bank defaults. Using a data set spanning multiple thousand U.S. banks, for more than 30 years, I show that there is no unambiguous answer to this question. Generally, systemic risk measures help identify failing banks. However, in some instances their contribution is only marginal. Through multiple robustness tests, I generate evidence, suggesting that if a systemic risk measure where to be used, it should be SRISK. This result has profound policy implications, as it aids the regulatory triage and substantiates the choice of policy makers to look to particular measures of systemic risk. In the second paper, I empirically analyze contingent convertible bonds (CoCo-bonds), which are a subset of hybrid capital instruments. More specifically, I analyze, whether this particular type of hybrid capital makes banks more resilient against systemic risk. I find that CoCo-bonds increase the loss-absorbency of banks, and through this transmission mechanism reduce the systemic risk of the issuing bank. My results are intriguing because they show that issuing CoCo-bonds fosters the financial system. What is more, they show that this statement is generally the case, irrespective of the de facto design features of the CoCo-bond. The third paper discusses financial stability, in particular at the intersection of bank regulation and accounting. It investigates the impact of IFRS 9, which entails a change of the loan loss provisioning regulation in the context of financial stability. Initially, two opposing forces are released with the introduction of IFRS 9. As loan losses are anticipated and to this end reflected earlier in banks' balance sheets, this approach entails the front loading of losses, which have not yet occurred. At the same time, this expected loss approach smoothens the so called cliff effect, where the realization of losses has led to jumps in impairments. Against this inherent tension, I empirically analyze the net impact of IFRS 9 on financial stability using the EBA bank stress test data. I find that the benefit of IFRS 9 is negative in the short-term, whereas it becomes positive over longer periods. This result has profound policy implications, in particular with regard to the ongoing implementation of a similar approach called CECL in the United States.

Item Type:	Thesis (PhD thesis)
Translated title:	Title Language Aufsätze zu systemischen Risiken und Finanzstabilität German
Creators:	Creators Email ORCID ORCID Put Code Kund, Arndt-Gerrit arndt.kund@gmail.com https://orcid.org/0000-0002-6537-0104 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-533165
Date:	26 May 2021
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences > Business Administration > Finance > Professorship for Business Administration and Bank Management
Subjects:	Economics Management and auxiliary services
Uncontrolled Keywords:	Keywords Language Financial Stability English Systemic Risk English Bank Regulation English Default Prediction English IFRS 9 English CoCo-bond English
Date of oral exam:	26 May 2021
Referee:	Name Academic Title Hartmann-Wendels, Thomas Univ.-Prof. Dr Hess, Dieter Univ.-Prof. Dr.
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/53316