Repo Rate Dynamics: The Role of Dealers, Hedge Funds, and Issuance

Author: Mr. Roberto Steiner and Mr. Adolfo Barajas

This study examines how depositors choose among different banks and over time in Colombia, focusing on whether they discipline bank behavior. By controlling for a more comprehensive set of risk/return factors, the study improves upon conventional market discipline tests. Panel data estimations for 1985-99 show that depositors prefer banks with stronger fundamentals, and that banks tend to improve their fundamentals after being "punished" by depositors. Banks with stronger fundamentals benefit from lower interest costs and higher lending rates. Market (or "regulatory") discipline therefore appears to exist in Colombia, perhaps thanks to certain key design features of the deposit insurance scheme.

Volume/Issue: Volume 2000 Issue 214

Publication date: December 2000

ISBN: 9781451874983

$20.00

Add to Cart by clicking price of the language and format you'd like to purchase

Available Languages and Formats

	Paperback	PDF	ePub	Mobi
English

Prices in red indicate formats that are not yet available but are forthcoming.

Topics covered in this book

This title contains information about the following subjects. Click on a subject if you would like to see other titles with the same subjects.

Banks and Banking , Finance , Investments and Securities-General , WP , market discipline , depositor behavior , bank fundamentals , bank management , deposit growth , banking system , deposit insurance , Colombia , extent bank fundamentals , bank behavior , bank performance , Deposit rates , Moral hazard , Nonperforming loans , Bank deposits

Also of interest

Public Investment Management Bottlenecks in Low-income Countries

Demand for Ethanol Considering Spatially Differentiated Fuel Retailers

Measuring Soft Power: A New Global Index

Central Bank Digital Currencies and Financial Stability: Balance Sheet Analys...

Summary

This study examines how depositors choose among different banks and over time in Colombia, focusing on whether they discipline bank behavior. By controlling for a more comprehensive set of risk/return factors, the study improves upon conventional market discipline tests. Panel data estimations for 1985-99 show that depositors prefer banks with stronger fundamentals, and that banks tend to improve their fundamentals after being “punished” by depositors. Banks with stronger fundamentals benefit from lower interest costs and higher lending rates. Market (or “regulatory”) discipline therefore appears to exist in Colombia, perhaps thanks to certain key design features of the deposit insurance scheme.