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Aan de hand van SVB casus, een pleidooi voor het waarderen tegen fair value.

We show that risk mitigating incentives dominate risk shifting incentives in fragile banks. Risk shifting could be particularly severe in banking since it is the most opaque industry and banks are one of the most leveraged corporations with very low skin in the game. To analyze this question, we exploit security trading by banks during financial crises, as banks can easily and quickly change their risk exposure within their security portfolio. However, in contrast with the risk shifting hypothesis, we find that less capitalized banks take relatively less risk after financial market stress shocks. We show this using the supervisory ISIN-bank-month level dataset from Italy with all securities for each bank. Our results are over and above capital regulation as we show lower reach-for-yield effects by less capitalized banks within government bonds (with zero risk weights) or within securities with the same rating and maturity in the same month (which determines regulatory capital). Effects are robust to controlling for the covariance with the existence portfolio, and less capitalized banks, if anything, reduce concentration risk. Further, effects are stronger when uncertainty is higher, despite that risk shifting motives may be then higher. Moreover, three separate tests – based on different accounting portfolios (trading book versus held to maturity), the distribution of capital and franchise value – suggest that bank own incentives, instead of supervision, are the main drivers. Results are confirmed if we consider other sources of balance sheet fragility and different measures of risk-taking. Finally, evidence from the recent COVID-19 shock corroborates findings from the Global Financial Crisis and the Euro Area Sovereign Crisis.

Monetary policy transmission may be impaired if banks rebalance their portfolios towards securities to pursue e.g. risk-shifting or liquidity hoarding. We identify the bank lending and risk-taking channels by exploiting – Italian’s unique – credit and security registers. In crisis times, with softer ECB’s monetary policy conditions, less capitalized banks increase securities over credit supply, with associated firm-level real effects. However, less capitalized banks buy securities with lower yield (haircuts), even within securities with identical regulatory risk weights, thus reaching-for-safety/liquidity. Results are only present in marked-to-market portfolios. The evidence suggests that liquidity and risk-bearing capacity – rather than riskshifting or regulatory arbitrage – are key drivers of banks’ behavior. Differently, in pre-crisis times, securities do not crowd-out loan application granting by less capitalized banks. Peydró acknowledges financial support from the Spanish Ministry of Science, Innovation and Universities (Grant No. ECO2015-68182-P and through the Severo Ochoa Programme for Centres of Excellence in R&D, SEV-2015-0563) and from the European Research Council Grant (ERC) under the European Union’s Horizon 2020 research and innovation programme (grant No. 648398).

In March 2001, the current value accounting of derivative was introduced, and it targets on valuable securities, derivative trading in current value appraisal. Only after the burst of Bubble Economy, when many companies went bankrupted, it was exposed that a great number of companies had liabilities in excess of assets. This was due to the fact that there existed many hidden loss which was not included in a balance sheet. One of the aims at introducing current value accounting is to eliminate ambiguity that a balance sheet does not state, and to correctly disclose the asset of the company. In other words, it is supposed that the Current Value Accounting was aimed at providing the information that enables the investors and the parties concerned to judge such as "a company that is on the verge of collapse" or "a company in collapse". According to studies of current value accounting and price fluctuation accounting that have been done since old days, the situation where appraisal profit occurs is comparatively more remarked. There seemed to be more arguments on the cases in which the value of possessed assets rises, the current price exceeds acquired cost, and the difference between those two emerges as a profit. In other words, the studies mainly been done under the economic environment namely inflation. However, this time, the current value accounting required in our country is the one, which is required in a totally opposite economic envirorment to inflation, namely deflation. In this regard, the studies were in a different situation from previous studies of current value accounting. In the previous studies on current value accounting, the accounting transactions both in the case of inflation and deflation were considered. However there seemed to be little studies on the case in which the current value accounting is introduced in the time of deflation since the need in introducing it often appears in the time of inflation. As stated above, the current value accounting in our country was introduced in the time of deflation. Therefore, the introduction was under bad situations where stock prices decrease, the appraisal loss of derivative occurs while the assets such as lands, buildings, and credits lose their values. In this paper, re-investigation of the current value accounting carried out in our country is done. The points in which re-investigation takes place are firstly, if the appraisal standards of valuable securities by the purposes of possession was done properly, and secondly if it was appropriate that the result of the appraisal was placed on financial reports as forms of adding up to a statement of profit and loss, and a change of a balance sheet price. The re-investigation is carried out based on these two points. Additionally, the corporate ways of reacting to these 2 matters is investigated. By investigating this, it shall be possible to verify whether the effects of introducing current value accounting expected initially was realized or not.