Large Regional Banks Research Articles

Credit Market Conditions and Mental Health

Research offers conflicting predictions about the impact of credit conditions on mental health. We first assess how bank regulatory reforms that improved credit conditions, for example, by enhancing the efficiency of credit allocation and lowering lending rates, impacted mental health. We discover that among low-income individuals, these regulatory reforms reduced mental depression, boosted labor market outcomes, eased access to mortgage debt, and reduced the ranks of the “unbanked.” We also find that mergers of large regional banks that led to branch closures and tighter credit constraints in affected counties harmed the mental health of lower-income individuals in treated counties. This paper was accepted by Kay Giesecke, finance. Funding: C. Lin and M. Tai acknowledge financial support from the National Natural Science Foundation of China [Grant 72192841] and the Research Grants Council of the Hong Kong Special Administration Region, China [Project T35/710/20R]. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2023.00194 .

An analysis of the non-financial motivation system of JSB “Almazergienbank” in order to increase the efficiency of personnel work

This article considers the system of non-financial motivation of personnel of Joint-Stock Commercial Bank “Almazergienbank”, a large regional bank by asset size, registered in the territory of the Republic of Sakha (Yakutia). The key business lines are servicing corporate clients, municipal organizations and projects, attracting deposits and lending to individuals and legal entities. The relevance of this topic is due to the fact that in the conditions of fierce competition between organizations it is necessary to find ways to increase the productivity of employees. Improving the incentive system can be one of such ways. The purpose of the study is to determine the involvement of employees in the system of non-material motivation and to develop recommendations for improving the incentive system in the context of increasing the efficiency of work in the context of competition in the banking market. Intangible incentive, being a significant tool, allows to save resources and at the same time increase productivity and satisfaction of employees. The methodological basis of the research was a survey of bank employees, an analysis of the obtained data and the existing system of nonfinancial incentives. It was revealed that the most popular option for assessing the intangible incentive system among the respondents is the indicator “8”, which indicates incomplete satisfaction with the existing system. As a result of the study, recommendations were developed to improve the personnel incentive system in order to increase the efficiency of work in the competitive conditions of the banking market.

Exploring risks in syndicated loan networks: Evidence from real estate investment trusts

This study explores credit and systemic risks in the interconnected market for syndicated loans to Japan's real estate investment trusts (J-REITs). Although earlier studies have investigated various aspects of the syndicated loan market, few have considered the financial network and risk resilience perspectives. To bridge this gap, I conduct network analysis using credit exposures or Euclidean distance between loans and perform a macrostress test by extending Furfine's algorithm. The analysis results indicate that Japanese major banks, large regional banks, and J-REITs play a key role in terms of degree centrality. In addition, the test results show that no J-REIT's default causes default contagion of the lending institutions based on syndicated loans outstanding at the end of 2021. Overall, this study provides effective methodologies to evaluate the interconnectedness between loans as well as risk contagion from borrowers to lenders in a two-mode network for syndicated loans.

Technology Adoption: Optimal Timing, Pricing, and Employee Incentives

This paper models the incentive misalignment between firm owners and their employees as a barrier to technology diffusion, which is a critical yet understudied feature, in technology adoption settings. To do so, we consider a general continuous-time optimal stopping framework with the Stackelberg game to characterize the equilibrium outcome of a firm's technology adoption decision, its employees' usage decisions, and the technology supplier's pricing decision under incentive misalignment. Despite a complex setting with multiple players in a continuous-time framework, we are able to fully characterize the optimal adoption policy in closed-form. Specifically, the condition for adoption is characterized by a closed-form threshold that explicitly depends on the percentage of employees who choose to use the technology. Based on the structure of the optimal adoption policy, we further characterize three adoption regions (i.e., no-adoption, immediate-adoption, and delayed-adoption) to understand how the incentive misalignment affects the adoption decisions. Next, we study two actionable strategies to motivate employee technology usage: adjusting the base salary and increasing the bonus rate. Interestingly, we demonstrate that increasing the bonus rate always performs better than adjusting the base salary. Moreover, the firm's optimal revenue can be achieved by solely relying on increasing the bonus rate. Finally, we characterize the technology supplier's equilibrium price and discuss its structural properties. To supplement our theoretical results, we study a real-world case of artificial intelligence (AI) technology adoption in collaboration with a large regional bank in Asia. We first collect 992 surveys illuminating the incentive misalignment and then conduct numerical experiments to illustrate how practitioners can achieve better performance by adjusting the technology adoption timing and wage contracts per incentive misalignment.

Using Insured Deposits to Refine Estimates of the Large Bank Funding Advantage

The extraordinary government support for financial institutions during the financial crisis of 2007 to 2009 heightened interest in how much the perception that governments will bail out the largest institutions affects their funding costs. However, it is hard to separate the effects on funding costs of being a very large financial institution from the effects of a perceived too-big-to-fail policy. Previous researchers have employed varying identification strategies that have produced wide-ranging estimates of the funding cost advantage of large banks. This paper shows that a size-based funding advantage is present in fully insured small time deposits, even though it is very unlikely to be related to perceptions of an implicit too-big-to-fail policy. In studying other deposit products, it then uses that information to account for various unobserved characteristics that re- searchers have pointed to as confounding previous estimates. Using this strategy, the funding cost advantages at very large banks relative to their large regional bank competitors in small time deposits and liquid deposits, which together account for about half of large bank funding on average over the sample period, are often statistically insignificant. Differences in the average maturity of small time deposits and prevalence of insured liabilities in funding the two groups of banks are also small.

La economía política de la política monetaria estadounidense: Cómo la Reserva Federal obtuvo el control y lo utiliza

<p><strong>Resumen</strong></p> <p>Los economistas del mainstream explican el comportamiento de la Reserva Federal (Fed) como intentos (normalmente fracasados) de estabilizar a la economía en un sendero no inflacionario. En contraste, este trabajo lo explica en términos de conflictos de clase e intra-clase; el conflicto de clase tomó esta forma por el movimiento populista antes del New Deal y después el movimiento hacia la socialdemocracia. Mientras el conflicto intra-clase es analizado entre los grandes bancos regionales y los grandes bancos de Nueva York. Se verá que cuando estos dos grupos de bancos están unidos, constituyen una fuerza invencible en el conflicto de clases. Sin embargo, cuando los grandes bancos regionales entraron en conflicto con los grandes bancos de Nueva York, sobre el papel deseable de las cámaras de compensaciones durante el periodo populista y el periodo del mercado del Eurodólar durante el periodo socialdemócrata, entonces sí hay una apertura para reformas sociales progresivas.</p>

Case Article—Quantifying Operational Risk in Financial Institutions

Risk management is essential in today's business environment for banks and other financial institutions to survive in highly competitive and volatile markets. As the subprime mortgage debacle of 2008 has shown us, risk management, or the lack thereof, affects more than just the individual institution. Hence, banks and other financial institutions are subject to frequent reviews by federal regulators. The regulatory reviews require that the institutions set aside capital (cash reserves) to offset the potential risk of loss that they face every day. This case study focuses on a large regional bank, for which we use the pseudonym A Bank, and guides students through developing a risk model for operational risk. The students develop their models using maximum likelihood estimation, goodness-of-fit testing, convolution of distributions, and order statistics. The pedagogical objectives of the case study include applying statistics to a real-world problem while establishing connections among statistics, optimization, and simulation. The case can be used in different disciplines such as engineering (e.g., an engineering statistics class) or business (e.g., a hybrid operations research/statistics MBA class or an elective class on quantitative finance) and for graduate or undergraduate education by changing the intensity of the technical skills required and by using a different mix of case documents. Case Teaching Note: Interested Instructors please see the Instructor Materials page for access to the restricted materials. To maintain the integrity and usefulness of cases published in ITE, unapproved distribution of the case teaching notes and other restricted materials to any other party is prohibited.

Asymmetric information, dividend reductions, and contagion effects in bank stock returns

In an environment of asymmetric information, banks face information externalities due to their role as intermediaries of information. In particular, bank insiders will possess private information from monitoring loan customers. Accordingly, outsiders may interpret changes in a bank's financial policy as signals about the quality of its loan portfolio and to the extent that the assets (loans) of different banks are viewed as similar, they will interpret such signals as pertaining to non-announcing banks as well leading to contagion effects. We test for the presence of contagion effects in stock returns associated with announcements of dividend cuts by money-center banks. We find that dividend cuts induce negative abnormal returns in the stocks of non-announcing money-center banks and to a lesser extent in the stocks of large regional banks. The observed contagion effects appear consistent with informed rather than contagious panic behavior because these effects are systematically related to risks that are common to all affected banks.

Asymmetric Information, Dividend Reductions, and Contagion Effects in Bank Stock Returns

In an environment of asymmetric information, banks face information externalities due to their role as intermediaries of information. In particular, bank insiders will possess private information from monitoring loan customers. Accordingly, outsiders may interpret changes in a bank's financial policy as signals about the quality of its loan portfolio and to the extent that the assets (loans) of different banks are viewed as similar, they will interpret such signals as pertaining to non-announcing banks as well leading to contagion effects. We test for the presence of contagion effects in stock returns associated with announcements of dividend cuts by money-center banks. We find that dividend cuts induce negative abnormal returns in the stocks of non-announcing money-center banks and to a lesser extent in the stocks of large regional banks. The observed contagion effects appear consistent with informed rather than contagious panic behavior because these effects are systematically related to risks that are common to all affected banks.

Time-varying market, interest rate, and exchange rate risk premia in the US commercial bank stock returns

This paper examines the role of market, interest rate, and exchange rate risks in pricing a sample of the US Commercial Bank stocks by developing and estimating a multi-factor model under both unconditional and conditional frameworks. Three different econometric methodologies are used to conduct the estimations and testing. Estimations based on nonlinear seemingly unrelated regression (NLSUR) via GMM approach indicate that interest rate risk is the only priced factor in the unconditional three-factor model. However, based on ‘pricing kernel’ approach by Dumas and Solnik [(1995). J. Finance 50, 445–479], strong evidence of exchange rate risk is found in both large bank and regional bank stocks in the conditional three-factor model with time-varying risk prices. Finally, estimations based on the multivariate GARCH in mean (MGARCH-M) approach where both conditional first and second moments of bank portfolio returns and risk factors are estimated simultaneously show strong evidence of time-varying interest rate and exchange rate risk premia and weak evidence of time-varying world market risk premium for all three bank portfolios, namely those of Money Center bank, Large bank, and Regional bank.

Current modeling practices in bank courier scheduling

Ongoing restructuring of the US banking industry has resulted in significant changes in the role of mathematical modeling to support item processing operations. The importance of complex mathematical tools for integrated control of courier scheduling and item processing has declined in favor of simpler, automated modeling tools that more effectively exploit new information technology. Models that simultaneously coordinate courier scheduling and cash lettering to correspondent banks have been displaced by heuristic scheduling tools that require less stringent assumptions about the operating environment. The application of these heuristic tools at a large regional bank is described and demonstrated for sample problems modeled after an actual item processing facility.

FDICIA and bank failure contagion: Evidence from the two failures of first city bancorporation

We investigate contagion effects from the two failures of First City Bancorporation—the only large regional bank to fail before and after FDICIA. FDICIA imposes changes in the bank failure resolution process that expose uninsured depositors to substantially greater risk. We find that shocks to First City’s weekly returns affect the conditional volatility of all but the most financially sound banks in the 1985–1987 period. This risk spillover effect is not evident in the period leading up to First City’s 1992 failure, however, which suggests that the regulatory changes embodied in FDICIA have not contributed to a more risky banking system.

Employee Satisfaction, Customer Loyalty, and Financial Performance

The service profit chain is a simple conceptual framework linking employee satisfaction and loyalty, customer satisfaction and loyalty, and financial performance. Although widely used by practitioners, the service profit chain's series of hypothesized relationships between employee, customer, and financial outcomes has not been rigorously tested using data that span all components of the model. Panel data from the branches of a large regional bank are used to test individually each of the service profit chain's constituent hypotheses. The results generally support the model, but there are some exceptions. Further work is needed to refine and simplify several critical measures and to enhance the analysis to test the service profit chain as a complete system of related hypotheses.

Empowerment and Successful Management of an Organizational Change: The Case of a Bank Acquisition

The motivational benefits of employee empowerment in facilitating organizational change and promoting organizational effectiveness are widely recognized. But often it is not appropriate for an organization to utilize a participative, collaborative, or consultative change‐management strategy. We examined the effects of a small empowerment during the radical and directively‐managed transformation of 52 recently‐acquired branches of a large regional bank. Our findings indicate that even when used in conjunction with an autocratic change‐management strategy, significant benefits can be derived from seemingly minor opportunities for employee empowerment.

Economies of superscale in commercial banking

Most previous studies of scale economies in banking have excluded banks larger than $1 billion in assets. Thus study, by contrast, estimates cost functions for the 100 largest US commercial banks. ‘Hedonic’ terms are incorporated to correct for the aggregated nature of the Call Report data available for these banks. In addition, we attempt to quantify the cost benefit of diversification in the model. We estimate efficient bank scale to range from $15 billion to $37 billion in total assets, a thousandfold increase over some previous findings. These results are supported by comparison of actual average costs, as well as by casual historical observation and the level of widespread concern over interstate banking. Our findings suggest some cost incentive or benefit to expansion or consolidation among large regional banks, including interstate expansion or consolidation.

Recent Innovations in Interest Rate Risk Management and the Reintermediation of Commercial Banking

0 A dominant theme of commercial banking in the 1980s has been the search for off-balance sheet, feebased income to improve return on equity. As money center and large regional banks recover from the burdens of the international debt and energy loan crises, new product lines are being sought which meet those criteria. One promising line is Interest Rate Risk Management (IRRM). Commercial banks have become market makers in IRRM products such as forward rate agreements and interest rate swaps, caps, collars, and floors. These products are often versions of, and companions to, instruments that are used to manage a firm's foreign exchange risk exposure. The movement toward market making in IRRM products represents a new form of bank intermediation, a form distinct from the classic function of transforming household savings into corporate borrowings. In this new role commercial banks intermediate be-

Waveland Field, Unique Structural and Stratigraphic Trap: ABSTRACT

Waveland field, located in Hancock County, Mississippi, and currently being developed, was discovered in 1965 by Humble Oil and Refining Co. Gas Unit 1, Sec. 22, T8S, R15W. One additional field well was drilled, a northwest diagonal in Sec. 16, T8S, R15W. After these two field wells were completed and put on production, there was no additional development until 1975, when lease blocks were assembled by Phillips Petroleum Co., Saga Petroleum, Marshall R. Young Oil Co., and others. There is no massive deposition of Ferry Lake Anhydrite in the area. Because of the lack of massive anhydrite, actual definition of the formations of the Trinity Group (Lower Cretaceous) is difficult to impossible. However, it is interpreted that the primary reservoir of Waveland, a porous limestone, is the Mooringsport Formation. The depositional environment of the Mooringsport limestone reservoir is extremely complex because of the influence of the large regional carbonate banks on the south. For convenience, the Mooringsport porosity zones are lettered A through G. To date, the A and B zones are the primary contributors to production. The B zone may be subdivided within the field proper. The reservoir rock is best described as a two-porosity system--matrix porosity (range 6 to 12%) and vugular porosity (range 7 to 16%) directly related to the mineralogy, lithology, and diagenetic history. Matrix permeability is generally low, not exceeding 2 md and usually less than 1 md. Fractures are essential for good productivity and intense fracturing is present in all the higher crestal positions. The Waveland field comprises the crestal 19,000 productive acres (7,600 ha.) of a north-to-south-elongated nose having no apparent structural closure, fault closure, or north dip at the Mooringsport limestone level. Structural elevation at the Mooringsport level is a major factor in determining hydrocarbon saturation, but no direct relation has been found among pore-throat size, rock type, porosity, structural elevation, and hydrocarbon saturation. The Waveland field is a complex combined structural and stratigraphic trap. End_of_Article - Last_Page 1428------------