Abstract
A recent trend in commercial banking has been the rapid growth in the issuance of off-balance, sheet guarantees. Revised capital standards presume that banks are increasing the issuance of off-balance sheet guarantees to generate fee income and conserve primary capital while shifting out of low risk assets. The relationship between standby letters of credit, an off-balance sheet guarantee, and large bank capital is tested using Granger causality, and then estimated in a structural model. To accurately estimate the relationship, a simultaneous equation model is required to capture the positive effect of bank capital on standby letter of credit issuance.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
