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Systemic risk and sovereign crises: modelling interconnections in the financial system
Klinger, Tomáš ; Teplý, Petr (advisor) ; Jakubík, Petr (referee)
This thesis focuses on the link between financial system and sovereign debt crises through sovereign support to banks on one hand and banks' exposures to weak sovereigns on the other. After illustrating the main relationships on the recent financial crisis, we construct an agent-based network model of an artificial financial system allowing us to analyse the effects of state support on systemic stability and the feedback loops of risk transfer back into the financial system. First, the model is tested with various parameter settings in Monte Carlo simulations and second, it is calibrated to the real world data using a unique dataset put together from various sources. Our analyses yield the following key results: Firstly, in the short term, all the support measures improve the systemic stability. Secondly, in the longer run, the effects of state support depend on several parameters but still there are settings in which it significantly mitigates the systemic crisis. Finally, there are differences among the effects of the different types of support measures.
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The Impact of Basel III on European Banks
Šútorová, Barbora ; Teplý, Petr (advisor) ; Lešanovská, Jitka (referee)
The aim of this thesis is to take a closer look on how the stricter capital requirements defined in the Basel III framework will influence European banks from a complex point of view - lending rates and volumes of provided loans, profitability, risk taking and market value of banks. Our analysis employing simultaneous equations and panel data models on exp post data on almost 600 banks operating in the EU in the 2005-2011 period reports following results: (1) Those banks that will be forced to effectively increase their common equity ratio (CE/RWA) will reflect a one percentage point increase in this ratio into higher lending rates by 18.8 basis points. (2) This should, in turn, lead to a modest impact on the volume of provided loans, i.e. as a result of an increase of CE/RWA to 9.5 % (the case of the strictest scenario), the loan volumes are expected to be lowered by 2% from the current volume. (3) Our study further reports that higher capital requirements will cause a decrease in banks' profitability accompanied by a drop in risk taking. Banks increasing their CE/RWA by one percentage point are expected to experience a decrease in their profitability (measured by ROAA) by 0.174 percentage points. (4) The above mentioned effects were identified as rather negative signals for equity owners, which should be...
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Foreign-Owned Banks and Host Economies
Fišerová, Tereza ; Teplý, Petr (advisor) ; Mejstřík, Michal (referee)
In the past two decades, significant changes have been shaping and transforming the banking sectors worldwide. Among these trends we find an intensive surge in foreign bank ownership which is especially remarkable in the countries of the Central, Eastern and South-Eastern European region. Using the sample of 17 countries and filtering out more than 140 domestically-operating foreign-owned banks, we examine the determinants of their performance in relation to host country conditions and home country banking sector performance over the period of seven years between 2005 and 2011. Due to the topic's currency, we additionally provide an insight into the link between sovereign debt and bank ownership. By means of system GMM model, or fixed effects model, we reveal that macroeconomic fundamentals of the host country affect the foreign-owned banks' performance but do not suffice in explaining it fully. Moreover, the depth of the current crisis as demonstrated in the home country impacts negatively on the host-country-operating foreign-owned banks. We did not find any convincing evidence of the host sovereign debt and bank ownership nature of relationship.
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Systemic risk and sovereign crises: modelling interconnections in the financial system
Klinger, Tomáš ; Teplý, Petr (advisor) ; Jakubík, Petr (referee)
This thesis focuses on the link between financial system and sovereign debt crises through sovereign support to banks on one hand and banks' exposures to weak sovereigns on the other. After illustrating the main relationships on the recent financial crisis, we construct an agent-based network model of an artificial financial system allowing us to analyse the effects of state support on systemic stability and the feedback loops of risk transfer back into the financial system. First, the model is tested with various parameter settings in Monte Carlo simulations and second, it is calibrated to the real world data using a unique dataset put together from various sources. Our analyses yield the following key results: Firstly, in the short term, all the support measures improve the systemic stability. Secondly, in the longer run, the effects of state support depend on several parameters but still there are settings in which it significantly mitigates the systemic crisis. Finally, there are differences among the effects of the different types of support measures.
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Counterparty Risk under Basel III
Macek, Petr ; Teplý, Petr (advisor) ; Rippel, Milan (referee)
The aim of this thesis is to address the implications of Basel III regulation on counterparty credit risk. We analysed the development of OTC market, we addressed systemic risk and the way how central counterparties could mitigate or spread the contagion among banks. We used simulated data to develop a stress test model to find out the impact of counterparty credit risk on banks' capital requirements, in case the interest rate increased extensively. Six pos- sible scenarios of interest rate levels were developed with ascending order of the IR level. From these scenarios we computed the exposure levels and credit valuation adjustment (CVA) as the market value of counterparty credit risk. We came to the following conclusions: (1) Czech banks have enough capital to withstand any interest rate increase in any scenario. (2) Banks with high expo- sure to derivatives like Bank of America, Citibank and JP Morgan would face severe problems if the interest rate increased. (3) There is no direct correlation between credit valuation adjustment and interest rate, the CVA increases faster with the increase of the interest rate.
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Risk management of savings accounts
Džmuráňová, Hana ; Teplý, Petr (advisor) ; Lebovič, Michal (referee)
This thesis deals with the risk management of savings accounts. Savings accounts are non- maturing liabilities bearing two embedded options. The first option is the client's right to withdraw deposits on notice. The second option is a bank's right to change the deposit rate on savings accounts whenever it wishes. This in practice means that a fierce competition may arise as banks can quickly react to competitor's change in the deposit rate. The embedded characteristics make the risk management of savings accounts challenging. We identify five key risks of savings accounts: liquidity risk, market risk (interest rate risk), systemic risk, reputational risk, and model risk. The thesis focuses on the interest rate risk and the method of replicating portfolios, which is a standard technique of the estimation of non-maturing liabilities' interest rate risk employed by banks. Using replicating portfolio approach, we derive that savings accounts are risky liabilities. We provide evidence that high deposit rates offered on numerous savings accounts in the Czech Republic have not been consistent with low market rates since January 2012, at least. We show that unsustainable deposit rates combined with competition among banks will lead to capital losses in some banks when market rates increase. JEL...
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The Introduction of Trusts in the Czech Republic
Jelínek, Tomáš ; Teplý, Petr (advisor) ; Janotík, Tomáš (referee)
Complete recodification of the Czech Civil Code among other changes establishes trusts, a very flexible tool which can be used by both natural and legal persons. Countless possibilities for the utilisation of trusts range from charities through intergenerational transfers of property or pension securitisation to the managing of a corporation and investment activities. The core of this paper is an analysis of three basic elements of trusts: the description of trusts, monitoring and analysing of the contemporary development, and perception of trusts by Czechs. The thesis contains detailed description of rights and duties of the settlor, the trustee and the beneficiary, also compares the Czech and foreign processing and then points out some differences and offers various recommendations. A fully processed questionnaire survey and analysis of the collected data is an integral part of this work. Low literacy about trusts has been discovered and its impact has been assessed. The survey results demonstrate the necessity of establishment of competitive conditions together with fighting negative perceptions towards trusts. The investigation further revealed important as well as unimportant features of trusts to potential settlors. These findings could be significant for the future development in this area....
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The Impact of BASEL III on Trade Finance
Krbilová, Helena ; Teplý, Petr (advisor) ; Želinský, Tomáš (referee)
The aim of this bachelor thesis is to discuss the evolution of BASEL regulatory framework with respect to trade finance. It does so by discussing existing literature in this field, critical review of the reports of the international banking and supervisory organization and confronting the view of trade finance professionals with the data. In the final part of the thesis I perform empirical analysis of the publicly available data, coming to the conclusion that there is not enough available data to perform relevant analysis of the impact of proposed BASEL III on trade finance, but supporting the critique of this regulatory plan.
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Market Microstructure of Stock Exchanges in the Visegrad Region
Fraňo, Filip ; Teplý, Petr (advisor) ; Buzková, Petra (referee)
The aim of this thesis is to compare stock exchanges in the Visegrad region with respect to the market microstructure theory, the field of economics studying the outcome of trading under specific rules. First, commonly used structures of markets are presented and the motivation why economists should be concerned with the design of markets is provided. In the main part of the work, besides the basic attributes of these markets, their market structures and trading systems are compared. Moreover, the price behavior of High Capitalization and Mid Capitalization segments of companies from the Budapest Stock Exchange (BSE), the Prague Stock Exchange (PSE), and the Warsaw Stock Exchange (WSE) is examined. Finally, the method developed by Roll (1984) is implemented to estimate the bid-ask spreads of the largest companies listed on the BSE, the PSE, and the WSE. The results that do not correspond with previous empirical studies probably stem from relatively low liquidity of these markets and unusual price behavior during crisis.
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