Events

Finance Seminars, Dietmar Leisen - Gutenberg University in Mainz
Title: When the remedy is the problem: Risk governance in independent bank boards
We study the independence ratio, as well as the financial expertise of independent directors for 625 U.S. bank holding companies (BHC) from 2000 to 2015, to concentrate on causes of the subprime crisis: short-termism, poor monitoring, and excessive risk-taking. Following Enron and Sabanes-Oxley, independence ratios rised; while official responses to the subprime crisis claim that (even then) bank directors were not independent enough, we find that higher independence ratios decrease the monitoring quality of the board and increase short-term incentives for the CEO. Finally, boards with a higher fraction of independent directors decrease standard measures of bank risk, but promote tail risk taking.

Due to the covid19, the presentation will be remotely through zoom.
Link: https://ide-fgv-br.zoom.us/j/98504105929?pwd=VkdaaG1oazZSdFd1WHhXRGt0M20rdz09

ID: 985 0410 5929
Password: Dietmar14

Finance Seminars, Marco Bonomo - Insper
Title: Effects of sharing positive credit information on the credit market

Finance Seminars, Patricio Valenzuela – University of Chile.
Title: Sovereign Credit Risk, Financial Fragility, and Global Factors
This study explores the relationship between sovereign credit risk, financial stability, and global factors in emerging market economies, by using a novel model-based semi-parametric metric (JLoss) that computes the expected joint loss of the banking sector in the event of a large financial meltdown. Our metric of financial fragility is positively associated with sovereign bond spread and negatively associated with higher sovereign credit ratings, after controlling for the standard determinants of sovereign credit risk. The results additionally indicate that countries with more fragile banking sectors are exposed to a global (exogenous) financial factors than those with more resilient banking sectors. These findings underscore that regulators must ensure that stability of the banking sector to improve governments’ borrowing costs in international debt markets.

Finance Seminars, Rafael Schiozer, FGV EAESP.
Title: Bank loan forbearance: evidence from a million restructured loans
Forbearance is a concession granted by a lending bank to a borrower for reasons of financial difficulty. This paper examines why and when delinquent bank loans are forborne, using a novel dataset with over 13 million delinquent loans to non-financial firms in Brazil, from which 1.1 million are forborne. Our evidence shows that renegotiations of delinquent loans typically involve an extension in maturity. We also show that larger loans are more likely to be forborne, and that the greater the difficulty to seize collateral, the larger the probability of forbearance. Previous forbearances to a borrower are also positively associated with the probability of forbearance, which may be an indicative of loan evergreening. We also show that more than 80% of forbearance events occur in less than four months after a loan becomes more than 60 days past due (after which the bank may no longer accrue interest). Finally, we find that a regulatory rule that forces banks to increase provisions of non-delinquent loans when the same borrower also has a delinquent loan creates incentives for banks to forbear delinquent loans. Because loan evergreening may pose macroeconomic resource allocation problems and forbearance may be used to conceal loan losses, decrease provisions and manage earnings and capital, our findings have implications for the design of regulation and supervisory processes.