Impact of the Subprime Crisis in the Provision of Credit Risk of Major National Banks

Financial institutions are directly exposed to the credit risk, that is, the risk of the borrower not fulfill with their obligations, paying their debts in its stated periods established previously. The bank predict this type of risk, including them in their balance-sheets. In 2006/2007 there was the impact of a new financial crisis that spread around the world, known as the crisis of subprime. The objective of this study is to analyze if the provisions for credit risk or liquidation increased the sprouting of the crisis of subprime in ten major national banks, chosen accordant to their total assets. To answer this question, the balance-sheets of each one of these banks in the period of 2005 to 2007 were analyzed. This research is characterized, as for its objectives, as descriptive and as for the procedures as documentary research. It is also characterized as having a qualitative approach. The results show that the crisis of subprime has caused little impact in the credit risk provision of the analyzed institutions. It was noticed a slight increase in the provision indicators at the peak of the crisis in 2006. These percentages were reduced in, 2007, probably reflecting the economic stability of Brazil and the stagnation of the crisis Of subprime in that year, at least in relation to in our country.

Estudo sobre o efeito de contágio nos mercados financeiros de acções: aplicação aos índices de acções europeus, americanos, asiáticos e brasileiro no período de Janeiro de 1996 a Junho de 2009 e no sub-período da crise subprime

Mestrado em Contabilidade

Especulação em mercado bolsista : análise técnica : o caso Nasdaq-100 perante a crise subprime

Mestrado em Controlo de Gestão e dos Negócios

Bank capital and stock performance around the subprime lending risis

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

U.S. subprime financial crisis contagion on BRIC and European Union stock markets

ABSTRACTThe Copula Theory was used to analyze contagion among the BRIC (Brazil, Russia, India and China) and European Union stock markets with the U.S. Equity Market. The market indexes used for the period between January 01, 2005 and February 27, 2010 are: MXBRIC (BRIC), MXEU (European Union) and MXUS (United States). This article evaluated the adequacy of the main copulas found in the financial literature using log-likelihood, Akaike information and Bayesian information criteria. This article provides a groundbreaking study in the area of contagion due to the use of conditional copulas, allowing to calculate the correlation increase between indexes with non-parametric approach. The conditional Symmetrized Joe-Clayton copula was the one that fitted better to the considered pairs of returns. Results indicate evidence of contagion effect in both markets, European Union and BRIC members, with a 5% significance level. Furthermore, there is also evidence that the contagion of U.S. financial crisis was more pronounced in the European Union than in the BRIC markets, with a 5% significance level. Therefore, stock portfolios formed by equities from the BRIC countries were able to offer greater protection during the subprime crisis. The results are aligned with recent papers that present an increase in correlation between stock markets, especially in bear markets.

Prime Property Institutions for a Subprime Era: Exploring Innovative Models of Residential Development and Finance

This paper breaks new ground toward contractual and institutional innovation in models of homeownership, equity building, and mortgage enforcement. Inspired by recent developments in the affordable housing sector and in other types of public financing schemes, this paper suggests extending institutional and financial strategies such as timeand place-based division of property rights, conditional subsidies, and credit mediation to alleviate the systemic risks of mortgage foreclosure. Alongside a for-profit shared equity scheme that would be led by local governments, we also outline a private market shared equity model, one of bootstrapping home buying with purchase options.

Prime property institutions for a subprime era: Toward innovative models of homeownership

This Article breaks new ground toward contractual and institutional innovation in models of homeownership, equity building, and mortgage enforcement. Inspired by recent developments in the affordable housing sector and other types of public financing schemes, we suggest extending institutional and financial strategies such as time- and place-based division of property rights, conditional subsidies, and credit mediation to alleviate the systemic risks of mortgage foreclosure. Two new solutions offer a broad theoretical basis for such developments in the economic and legal institution of homeownership: a for-profit shared equity scheme led by local governments alongside a private market shared equity model, one of "bootstrapping home buying with purchase options".

Velkaisuus-tunnuslukujen vaikutus suomalaisten pörssiyritysten suhteellisiin markkina-arvoihin subprime-kriisin aikana

Tutkimuksessa perehdyttiin subprime-kriisin vaikutuksiin ja tutkittiin velkaisuutta kuvaavien tunnuslukujen vaikutusta suomalaisten yritysten suhteellisiin markkina-arvoihin kriisin aikana. Tulosten ja muuttujien merkitsevyyttä ja selitysasteita käytiin läpi regressioanalyysin avulla ja sen jälkeen tunnuslukuja vertaillen. Tunnuslukujen vertailuarvojen perusteella muodostettiin sitten portfolioita. Pääomarakenteella voidaan normaalissa taloustilanteessa olettaa olevan vaikutusta yrityksen arvoon siten, että velkaantuneisuuden kasvaessa myös yrityksen markkina-arvo heikentyy, joka taas vaikuttaa osakekurssiin negatiivisesti. Tutkimuksessa testattiin kolmen eri tunnusluvun avulla (omavaraisuusaste, gearing, suhteellinen velkaantuneisuus), voidaanko tunnuslukujen avulla selittää suhteellisten markkina-arvojen muutosta. Regressioanalyysin tutkimustulosten perusteella omavaraisuusastetta ja gearingia voidaan pitää hyvinä tunnuslukuina kuvaamaan muutosta, mutta suhteellinen velkaantuneisuus ja kaikki tunnusluvut yhdessä eivät sovellu kuvaamaan muutoksia.

The us subprime crisis and stock market integration: evidence from the BRICS

The aim of this study is to examine the level of stock market co-movement in the BRICS countries and three major industrialized countries (Japan, UK and USA). While analyzing the interdependence and integration of markets, two subsets are examined: before (2000 – 2007) and during the global financial crisis (2007-2011). Generally, interdependence across markets is likely to increase during a highly volatile period. This is problematic because if it were true, the main benefit of international diversification would be reduced at times when it is most needed. The results reveal the dominant role of the US financial markets over the examined time period. Empirical studies of this research paper indicate that cross-market linkages have become slightly stronger during the ongoing subprime crisis than before crisis. However, results also show that an investor may obtain some international diversification benefits by investing especially in the BRICS countries despite the fact of unstable economic condition and growing globalization.

Subprime-kriisi ja luottoriskin hallinta

Tutkielma käsittelee subprime-lainausta ja subprime-kriisiin johtaneita syitä. Lisäksi tutkielmassa käsitellään pankin luottoriskin hallintaa eri näkökulmista. Luottoriski on keskeisin luottolaitostoimintaan liittyvistä riskeistä ja siksi pankkien luottoriskin hallintaa tulee jatkuvasti parantaa. Luottotappiot ja niihin johtaneet syyt ovat keskeisesti tarkastelun alaisina, kun syitä subprime-kriisiin haetaan. Tutkielma perustuu kirjallisuuteen ja siinä pyritään tuomaan esiin eri tekijöitä, jotka vaikuttivat vuonna 2007 alkaneeseen subrime-kriisiin. Työ sisältää lyhyen pankkitoiminnan luonteen ja alan rakennemuutoksen, esittelen aluksi lyhyesti pankkitoiminnan perusperiaatteita ja yleistä toimintaa sekä kuvaan lyhyesti rahoitusmarkkinoiden kehitystä viime vuosikymmenten aikana. Seuraavana esittelen laajemmin luottoriskin roolia subprime-kriisissä sekä sen epäonnistunutta hallintaa osasyynä kriisiä. Tarkemmin käsittelen Value at Risk -mallia luottoriskin mittaamiskeinona ja credit scoring -luottopisteytysmenetelmän osana luottoriskin hallintaa. Toinen tutkimuksen pääaihe on subrime-lainaus. Subrime-kriisin syntyyn vaikuttaneena olennaisena tekijänä pidetään Yhdysvaltojen asuntomarkkinoita ja erityisesti subprime-asuntolainoja, jotka olivat luottoluokitukseltaan heikkoja. Näiden heikkojen lainojen yleistyessä koko rahoitusmarkkinoiden pohja heikkeni. Rahoitusjärjestelmän suurien ongelmien taustalla vaikuttivat osaltaan arvopaperistaminen ja sen avulla muodostetut sijoitusinstrumentit, yli-innokas lainaaminen markkinoilla tarjolla olleen runsaan likviditeetin seurauksena, huolimaton sijoittaminen, riskinottoa liian voimakkaasti painottavat kannustinjärjestelmät, laaja-alainen epäonnistuminen luottoriskinhallinnassa ja sääntelyssä. Näitä tekijöistä tutkielmassa tarkastellaan tarkemmin arvopaperistamista ja kasvanutta lainaamista subrime-kriisin syntymisen osatekijöinä.

The impact of liquidity on senior credit index spreads during the subprime crisis

This paper examines the effects of liquidity during the 2007–09 crisis, focussing on the Senior Tranche of the CDX.NA.IG Index and on Moody's AAA Corporate Bond Index. It aims to understand whether the sharp increase in the credit spreads of these AAA-rated credit indices can be explained by worse credit fundamentals alone or whether it also reflects a lack of depth in the relevant markets, the scarcity of risk-capital, and the liquidity preference exhibited by investors. Using cointegration analysis and error correction models, the paper shows that during the crisis lower market and funding liquidity are important drivers of the increase in the credit spread of the AAA-rated structured product, whilst they are less significant in explaining credit spread changes for a portfolio of unstructured credit instruments. Looking at the experience of the subprime crisis, the study shows that when the conditions under which securitisation can work properly (liquidity, transparency and tradability) suddenly disappear, investors are left highly exposed to systemic risk.

Análise da estrutura de dependência da volatilidade durante a crise do subprime

Este estudo testa a hipótese de contágio entre setores da economia dos Estados Unidos e do Brasil durante a crise do Subprime. A metodologia econométrica baseia-se em modelos de correlações condicionais dinâmicas e na aplicação de testes LM robustos para testar a presença de quebras estruturais na estrutura de dependência das séries. Eventos considerados relevantes para o desfecho da crise do Subprime, assim como interações entre momentos das próprias séries foram utilizados para identi car as quebras de interesse. A principal conclusão deste trabalho é que houve contágio relacionado a praticamente todos os indicadores entre os setores dos Estados Unidos. O mesmo não ocorreu no Brasil, onde apenas alguns eventos específicos pareceram responsáveis por mudanças nas relações de dependência entre os setores.