مزیت سرمایه گذاری و نظم بازار در بخش بانکداری کانادا

We employ a comprehensive data set and a variety of methods to provide evidence on the magnitude of large banks’ funding advantage in Canada in addition to the extent to which market discipline exists across different securities issued by the Canadian banks. The banking sector in Canada provides a unique setting in which to examine market discipline along with the prospects of proposed reforms because Canada has no history of government bailouts, and an implicit government guarantee has been in effect consistently since the 1920s. We find that large banks have a funding advantage over small banks after controlling for bank-specific and market risk factors. Large banks on average pay 80 basis points and 70 basis points less, respectively, on their deposits and subordinated debt. Working with hand-collected market data on debt issues by large banks, we also find that market discipline exists for subordinated debt and not for senior debt.

Do banks face market discipline when they raise funds from wholesale deposits and bonds? This is an important question because current reform proposals aim to increase the incentive of bondholders to monitor banks more effectively instead of relying on costly government intervention to limit excessive risk taking by large banks. Market-oriented proposals to this end include mandatory subordinated debt, bail-ins and non-viability contingent capital (NVCC) (Evanoff et al., 2011, Evanoff and Wall, 2002, Basel Committee on Banking Supervision, 2010a and Basel Committee on Banking Supervision, 2010b). Under the latter two proposals the debt-holders of a systemically important bank1 face an administratively imposed or contractual partial conversion of debt into equity should the bank experience distress. NVCC forces the conversion of a bank’s subordinated debt, while a bail-in extends NVCC and further enhances a bank’s capital buffer by forcing the conversion of part of the banks’ senior unsecured debt as well.

Larger banks are effectively shielded from market discipline if the market perceives that they will be bailed out in times of distress. To alleviate moral hazard problems and to control banks’ excessive risk taking, proposed reforms seek to minimize government intervention and to enhance the incentive of bondholders to monitor banks more effectively. Two major proposals designed specifically for the resolution of failed/close-to-failure large banks with emphasis on market mechanisms are non-viability contingent capital (NVCC) and debt bail-in. Under the former, subordinated debt converts into equity (upon a trigger at the point of non-viability) providing additional capital before taxpayers become involved. A bail-in extends NVCC to enhance a bank’s capital buffer, forcing senior creditors to bear losses by contributing to the recapitalization and, hence, to the resolution of a failed (or weak) institution. Given its critical role in these proposed reforms, it is important to measure the extent to which market discipline already exists.