Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments June 23, 2022 erstellt
Description:
This paper studies the relationship between the asset-liability mismatch and the losses on bank failures over the last 20 years in the U.S. banking system. We first develop a simple theoretical model in which banks can choose to misreport their losses to the regulator if they draw sufficiently large negative shocks to their assets. We show that, under certain conditions, a greater mismatch leads to larger losses hidden from the regulator. We then test this prediction empirically and find that the relationship is positive and statistically significant. A one standard deviation increase in a bank's mismatch is associated with a 3.2 percentage points increase in the losses if the bank fails (roughly 40% of the losses' one standard deviation). We also study the channels through which this relationship can work. Our results show that the relationship is fueled mostly by the banks' internal factors rather than external characteristics (business models of the local rivals). Nonetheless, we show that both channels are significant only in more competitive local banking markets. From the policy perspective, the results imply that the policy of promoting local bank competition may have certain limits beyond which too much competitive pressure may force a greater banks' asset-liability mismatch and thus raise the scope of the losses on bank failures