Charter value, minimum bank capital requirement and deposit insurance pricing in equilibrium

Article Abstract:

The role of a bank's charter value in determining optimal policies on forbearance, alert status and closures is discussed. When charter value is less than an optimal threshold, the deposit insurer must be on the alert. However, the concerned bank must be allowed to open at least until the following audit period. It must also leave the bank open in the absence of an alert status. Results reveal that keeping open an insolvent bank with huge charter value mitigates the problem of the moral hazard.

Analysis, Bankruptcy, Value (Economics)

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Separating the likelihood and timing of bank failure

Article Abstract:

The determinants of bank failure are separated from the determinants of survival time by the use of split-population model survival time model. The paper finds that measures of bank liquidity such as investment securities and large certificates of deposit are not important determinants of bank survival time as only a select group of variables such as capital, troubled assets, and net income can relate significantly to timing of bank failure.

United States, Statistical Data Included, Economic aspects, Risk factors, Bank runs, Bank failures

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Property-casualty insurance guaranty funds and insurer vulnerability to misfortune

Article Abstract:

A decline in insurers' reserves for homeowners and commercial multi-peril insurance results from the enactment of property-casualty insurance guaranty fund statutes. The decline can be attributed to decicions of managers to lower reserves and replace guaranty fund coverage with capital. Tests show that guaranty fund enactments exerted a downward effect not on premium accruals, but on the growth rate in loss accruals aggregated across states.

Suretyship and guaranty, Guarantees, Sureties

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