Consequences of Adverse Shocks on Bank Behavior

Project Start:01/2013
Status:Completed
Researchers:
Category: Financial Intermediation, Systemic Risk Lab
Funded by:LOEWE

The project conducts an empirical assessment on how banks adjust their capital ratios following an exogenous shock to their asset portfolios. Using Hurricane Katrina as a natural experiment, findings suggest that banks in the disaster areas increase their risk-based capital ratios after the hurricane relative to unaffected banks. The damage caused by Hurricane Katrina represents an unexpected adverse shock to the affected region.

The study is complemented in a second project exploring consequences of largely expected adverse shocks. Using more than 50 years of historical hazard data, the team identifies regional banks located in regions subject to catastrophic risk and analyzes whether the default risk of these banks is significantly different from the default risk of banks located in unaffected regions.

 

Related Published Papers

Author/sTitleYearProgram AreaKeywords
Claudia Lambert, Felix Noth, Ulrich SchüwerHow Do Banks React to Catastrophic Events? Evidence from Hurricane Katrina
Review of Finance
2019 Financial Intermediation, Systemic Risk Lab catastrophic events, bank regulation, capital ratios, natural experiment

Related Working Papers

No.Author/sTitleYearProgram AreaKeywords
167Felix Noth, Ulrich SchüwerNatural Disaster and Bank Stability: Evidence from the U.S. Financial System2017 Financial Intermediation, Systemic Risk Lab natural disasters, bank stability, non-performing assets, bank performance
38How do Insured Deposits Affect Bank Risk? Evidence from the 2008 Emergency Economic Stabilization Act2013 Financial Intermediation, Systemic Risk Lab financial crisis, deposit insurance, bank regulation
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