DOCSLIB.ORG

2004 Annual Report

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
2004 Annual Report 2004 ANNUAL REPORT Our commitment: your trust 2004 ANNUAL REPORT BCV AT A GLANCE BCV AT A GLANCE KEY FIGURES (in CHF millions) 2003 2004 Change (as %) Total assets 34 252 32 295 –5.7 Total income 943 944 +0.1 Gross profit 389 399 +2.5 Net profit 157 337 +114.1 Assets under management 60 248 64 071 +6.3 Ratios (%) Cost / income ratio (C / I)* 71 67 Return on equity (ROE) 6.5 12.4 BIS Tier I capital-adequacy ratio 13.4 16.5 BIS Tier II capital-adequacy ratio 15.1 17.4 * Excluding goodwill amortization and goodwill write-downs Highlights in 2004: The Bank confirmed the turnaround in its financial performance: – Net profit jumped 114.1% to CHF 336.6 million. – Capital adequacy, calculated according to rules set out by Switzerland’s Implementing Ordinance on Banks and Savings Institutions, improved from 156.3% to 184.6%. – S&P raised its credit rating on BCV from A– with negative outlook to A– with stable outlook. The strategic realignment on core businesses was completed: – BCV withdrew fully from ship financing and oil-trading financing. – BCV Finance (France) was sold, bringing strategic withdrawals from foreign subsidiaries to an end. – The Yverdon-based retail subsidiary CEPY was integrated within the parent company (effective January 2005). The Bank drew up a statement of its core values: responsibility, performance and close ties to cus- tomers and the community at large. The Bank developed a buyback plan for its participation certificates. The plan was jointly proposed by BCV and the Cantonal Government for approval by the Cantonal Parliament. BCV and its majority shareholder, Vaud Canton, signed an information-exchange agreement governing communications between the Canton and the Bank. Organizational streamlining continued with the creation of the Business Support Division, which pools most back-office and support units (from January 1, 2005). 2004 ANNUAL REPORT TABLE OF CONTENTS TABLE OF CONTENTS Letter from the Chairman 2 Letter from the CEO 3 The Executive Board 4 Key Figures – 5-year overview 7 An Overview of BCV 9 The Economic Environment in 2004 12 BCV in 2004 16 Business Development and Strategy 16 Highlights of the Year 17 Key Financial Data 18 Thorough Reorganization at the Corporate Center 19 Business Trends at Main Subsidiaries 19 Strategic Directions 21 BCV’s Missions 23 Contributing to the Development of Vaud Canton’s Economy 23 Meeting Clients’ Needs 25 Creating Value for Shareholders 26 Being a Benchmark Employer 26 Playing an Active Role in the Community 27 Business Sector Report 30 Retail Banking 30 Corporate Banking 32 Wealth Management 34 Trading 37 Investor Information 41 Financial Statements 43 Corporate Governance 100 Organization Chart 125 Compliance 126 Risk Management 128 Retail Network 135 1 2004 ANNUAL REPORT LETTER FROM THE CHAIRMAN LETTER FROM THE CHAIRMAN BCV’s performance in 2004 confirmed that we have successfully completed our strategic and financial realignment. The Bank now has a comfortable level of equity capital, an improved balance- sheet structure, a clearly defined set of core businesses and a state-of-the-art risk management system. As a result, BCV Group is prepared to deal with the sizeable challenges awaiting it in the years ahead. BCV complies with modern corporate governance criteria. The Board of Directors’ brief complements those of the Executive Board and the Bank’s other entities. Against the backdrop of an exceptionally busy year for the Board in 2003, organizational and procedural changes were made, including the creation of Board committees tasked with streamlining the decision-making process. These changes have allowed the Board to sharpen its focus on its main responsibility, building tomorrow’s BCV. A large part of the Board’s work in 2004 involved clarifying BCV’s relationship with its majority shareholder, Vaud Canton. This resulted in a significant development in September, with the conclusion of an agreement concerning the exchange of information between the Canton and the Bank. The terms of the agreement guarantee transparency for BCV’s other shareholders and stakeholders, and are also fully consis- tent with the recommendations of the Vaud Cantonal Parliament’s committee of enquiry and those contained in the ensuing parliamentary initiative. In accordance with the announcement made at the 2004 Shareholders’ Meeting regarding capital structure, the Bank and the Vaud Cantonal Government jointly pro- posed a repurchase plan for the participation certificates issued by the Bank in 2003. In line with the philosophy underpinning the Bank’s recapitalization, the terms of the proposed buyback safeguard the interests of Vaud Canton, minority shareholders, minority participation-certificate holders and BCV. The plan does not define a specific calen- dar for the buyback, thus ensuring that the Bank will be Olivier Steimer, Chairman of the Board of Directors able to meet capital-adequacy requirements. In the months ahead, the Board will focus its attention on human resources and information technology. Our intellectual and technological capital is vital to our ability to keep pace with a rapidly changing environment, respond effectively to growing competition and anticipate the needs of our increasingly demanding clientele. The Bank must therefore continue to be a benchmark employer, one that can attract and keep the top-notch talent on which innovation and creativity depend. At the same time, our IT strategy must keep us technologically competitive over the long term, which means “hard-wiring” flexibility into our platform now, so that it can meet changing needs in the future. Tomorrow’s BCV is taking shape, in a step-by-step process that is making the Bank stronger, sounder, more transparent, more talented and better equipped – in short, better able to serve its customers and create value for its shareholders. This process is beginning to pay off. The Board will therefore have the pleasure of proposing a higher dividend for 2004, as our way of thanking our share- holders for their continuing trust. Olivier Steimer, Chairman of the Board of Directors 2 2004 ANNUAL REPORT LETTER FROM THE CEO LETTER FROM THE CEO 2004 was a great year for BCV, which posted solid operational and financial results. The Bank completed its strategic re-alignment on core business areas. We have with- drawn from oil trading and ship financing and have sold off or wound up most of the Group’s foreign-based wealth management subsidiaries. In addition, we continued to scale back the Bank’s portfolio of impaired loans, thus reducing our risk exposure. These measures have put BCV on more solid ground going forward, as does the more pro-active approach to asset and liability management that has been implemented. The Bank made organizational changes, launched new products, and initiated projects in 2004, and this is having a positive impact on our business. We intend to set the tone once again in our core markets and home region and consolidate our position as a cornerstone of the local economy in 2005 and beyond. To play this key role we must fulfill our corporate mandate, perform well financially, and strengthen the ties between the Bank and the people of Vaud Canton. As a community bank that is close to the individuals and businesses it serves, BCV creates value for both Vaud Canton and its other shareholders. We have a clear objective: to be the Canton’s best universal bank. In this, we never forget that our customers are our raison d’être. To respond to their changing needs we will continue to focus on our core areas of expertise: retail banking, corporate banking, wealth management and trading. This fundamental vision underpins our plans for 2005, which include initiatives in the areas of client relationship management, lending operations, and information tech- nology as well as new product launches. These projects are all designed to improve the Bank’s position in its markets and sharpen its profile in the face of increasing competition. The goal is to bring in new business while enhancing service quality. Our staff has been a key factor in the Bank’s on- Alexandre Zeller, CEO going operational improvement. In 2005, we will once again be counting on their creativity, integrity, flexibility and client-focused approach. Tomorrow’s BCV is still in the making. However, its foundations have been laid. We can now build on them to meet the challenges of tomorrow’s banking markets. Alexandre Zeller, CEO 3 2004 ANNUAL REPORT THE EXECUTIVE BOARD THE EXECUTIVE BOARD Alexandre Zeller, Pascal Kiener, CEO CFO, Finance & Risks Olivier Cavaleri, Trading 4 2004 ANNUAL REPORT THE EXECUTIVE BOARD Jacques R. Meyer, Philippe Sauthier, Retail Business Support Christopher E. Preston, Jean-François Schwarz, Wealth Management Corporate Banking 5 2004 ANNUAL REPORT KEY FIGURES – 5-YEAR OVERVIEW 2000 2001 2002 2003 2004 Balance Sheet as of December 31 (in CHF millions) Total assets 37 963 36 104 35 138 34 252 32 295 Advances to customers 26 038 25 986 25 026 23 208 22 112 Customer deposits and bonds 27 700 27 499 27 208 25 683 24 566 Shareholders’ equity 2 664 1 499 1 167 2 563 2 920 Assets Under Management* (in CHF billions) 63.1 55.3 54.8 60.2 64.1 Key Income-Statement Data (in CHF millions) Total income 978 840 858 943 944 Operating expenses 505 510 539 554 546 Gross profit 474 330 320 389 399 Depreciation and write-offs 97 101 108 151 86 Value adjustments, provisions and losses 220 1 226 1 184 77 44 Net profit / loss 166 –381 –1 200 157 337 Headcount** Full-time equivalent 2 243 2 393 2 679 2 483 2 423 BIS Risk-Weighted
Load more

Recommended publications
  • 2013 Annual Report Swift Code: BCVLCH2L Clearing Number: 767 [email protected] BCV at a Glance
    Head Office Place St-François 14 Case postale 300 Rapport 2013 annuel 1001 Lausanne Switzerland Phone: +41 21 212 10 10 2013 Annual Report Swift code: BCVLCH2L Clearing number: 767 www.bcv.ch [email protected] BCV at a glance 2013 highlights Our business remained on firm track in a mixed BCV decided to take part in the US Department of environment Justice’s program aimed at settling the tax dispute • Business volumes in Vaud were up, spurred by a between Switzerland and the USA resilient local economy. • Given the uncertainty surrounding the program • Nevertheless, the low-interest-rate environment and and in keeping with the Bank’s sound approach to the cyclical slowdown in international trade finance risk management, BCV decided to participate in the activities weighed on revenues, which came in at program, for the time being as a category 2 financial CHF 991m. institution. • Firm cost control kept operating profit at CHF 471m We maintained our distribution policy (–3%). • We paid out an ordinary dividend of CHF 22 and BCV’s AA rating was maintained by S&P distributed a further CHF 10 per share out of paid- • Standard & Poor’s confirmed BCV’s long-term rating in reserves, thus returning a total of more than of AA and raised the Bank’s outlook from negative to CHF 275m to our shareholders. stable. We launched stratégie2018 • We achieved virtually all of the goals we had set in our previous strategy, BCVPlus, with concrete results in all targeted areas. • Our new strategy builds on this success and takes its Thanks cue from two key words: onwards and upwards.
    [Show full text]
  • 80 Investors: Longevity in Switzerland 3Wventures
    80 Investors: Longevity in Switzerland 3wVentures 3wVentures provides seed money and venture capital to international internet startups. As 3wVentures' clients focus on early stage projects and prototypes, the company's investments and co-investments target a volume of up to USD 250,000. 3wVentures is located in Switzerland and backed by Yves Latour and Arvin Zuberbuehler. 3wVentures has invested early stage venture capital in these startup companies: forAtable.com, Lunchgate, UEPAA! etc. Web site: 3wventures.com Number of Investments: 44 Total Investments: $23.3M Founded in: 2007 Based in: Herisau, Switzerland Sector: P3, AgeTech Investment in Switzerland companies: Pregnolia, Abionic Stages: Early Stage Venture, Seed 231 Aescap Venture Aescap 2.0 is an open-end fund that invests in publicly listed biotech / life sciences companies. It invests in highly innovative companies that develop and market new medicines and to a lesser extent diagnostics and/or medical devices. Entry into and exit from the fund is possible twice per month. The life sciences market is a large and fast-growing market where breakthrough innovations can be harnessed in a global and profitable manner. Aescap 2.0 has a focused portfolio, investing in approximately 18 companies. Within this focus it will ensure that the portfolio is diversified over different diseases and company development phases. The Fund’s objective is to make an annual net return (after deduction of costs) of 20% over the mid-term (4-5 years). Web site: aescap.com Number of Investments: 26 Total Investments: $30.5M Founded in: 2005 Based in: Amsterdam, The Netherlands Sector: Regenerative Medicine Investment in Switzerland companies: Vivendy Therapeutics Stages: Early Stage Venture, Late Stage Venture 2 Angel Investment Network Angel Investment Network is a London-based investment company founded in 2004 whose aim is to connect entrepreneurs and investors.
    [Show full text]
  • No Place Left to Hide – Swiss Banks Under Scrutiny from US Regulators Author: Alexander Troller, Simone Nadelhofer and Nicolas Ollivier
    No place left to hide – Swiss banks under scrutiny from US regulators Author: Alexander Troller, Simone Nadelhofer and Nicolas Ollivier 20 Sep 2013 | 00:00 | Tags: Banking & finance, Regulatory Alexander Troller, Simone Nadelhofer and Nicolas Ollivier say the Wegelin case shows that the US is willing to target senior managers, lawyers and trustees On 28 August, the Swiss Government and the US Department of Justice (DOJ) issued a joint statement announcing an 'accord' over a unilateral program launched by the DOJ and allowing most Swiss banks to seek a non-prosecution agreement (NPA) from the DOJ and pay heavy fines. This would allow them to avoid or defer prosecution in relation to the custody of undeclared assets of former or existing US customers, or – subject to demonstrating the bank's US tax compliance in relation to each and any former and existing customers – a non-target letter (the "Program"). The Program will be available to any of Switzerland's 300 banks, save for those 14 institutions already prosecuted by the DOJ, among which are Credit Suisse, Julius Baer, Zurich Cantonal Bank and Pictet to name only a few. The decision whether or not to join the Program lies with each bank. Participating banks will be split into four categories, depending on their degree of responsibility in relation to tax offences committed by their US customers. The categories explained Category 1 includes the 14 banks already under investigation and to which the Program does not apply. Category 2 covers those banks who believe they may have committed a US tax offence in the way they handled assets of US persons, and Categories 3 and 4 includes those banks who can show a clean bill of (tax) health in relation to US customers or demonstrate having an exclusively non-US client base only.
    [Show full text]
  • Zurich Cantonal Bank to Go Live on Reuters Trading for Foreign Exchange Service
    Zurich Cantonal Bank to go live on Reuters Trading for Foreign Exchange service February 20, 2006 Zurich – Reuters (LSE: RTR, NASDAQ: RTRSY) today announced that Zurich Cantonal Bank is the latest bank to go live on Reuters Trading for Foreign Exchange. Zurich Cantonal Bank, the first Swiss bank to join RTFX, has also signed up for Reuters Electronic Trading – Automated Dealing to support its e-commerce needs. Zurich Cantonal Bank, one of the leading FX liquidity providers in Switzerland and central Europe with an AAA rating, brings its core strength in Swiss franc and the other major currencies to the Reuters Trading for Foreign Exchange (RTFX) platform. Initially, Zurich Cantonal Bank will target inter-bank customers in Europe, Middle East and Asia and buy-side customers in Europe. Zurich Cantonal Bank's prices will be fed to the RTFX platform using the Reuters Electronic Trading – Automated Dealing pricing engine. Daniel Corbaz, Director and Head of FX at Zurich Cantonal Bank, commented: “Reuters Trading for Foreign Exchange allows us to offer our clients additional access to our FX services and leverage the global Reuters footprint to serve our customer base in the German speaking part of Europe, Middle East and Asia with attractive FX pricing and extend it globally. These will be provided by the Reuters Electronic Trading rate engine from Reuters and will give us the best in class prices to compete successfully in the FX e-trading markets.” RTFX allows banks and their customers to trade foreign exchange from their Reuters desktop. Zurich Cantonal Bank will go live in March and bring banks, corporate and other financial participants using Reuters desktops the ability to trade 13 currency pairs 24- hours a day with the triple A rated bank.
    [Show full text]
  • 2003 Annual Report
    2003 Annual Report Our commitment: your trust contentsContents Key Figures 3 Letter from the Chairman 4 Letter from the CEO 5 Executive Board (photo) 6 Business Report: Divisions and Subsidiaries in 2003 8 Significant Events in 2003 22 Extraordinary General Meeting of 5 February 22 General Meeting of 22 May 23 Participation-certificate capital 23 Ongoing proceedings 23 Mortgage rate 24 Rating 24 Structural realignment 24 Risk Management 26 Compliance Office 29 Comments on the Consolidated Financial Statements for 2003 31 Consolidated Financial Statements 38 Balance Sheet, Income Statement, Cash Flow Statement 38 Accounting principles 42 Risk management 47 Scope of consolidation 51 Notes to the Consolidated Financial Statements 54 Report of the Group Auditors 68 Company Financial Statements 69 Proposals of the Board of Directors 76 Report of the Statutory Auditors 77 Corporate Governance 78 Group structure and shareholder base 78 Group operational structure 79 Capital structure 80 Governing bodies 82 Compensation, shareholdings and loans 90 Shareholders’ rights 92 Takeovers and defensive measures 93 Auditors 93 Information policy 95 Organizational Structure 96 BCV Group 99 1 keyKey figures Figures 1999 2000 2001 2002 2003 Balance sheet (in CHF millions) Total assets 34 978 37 963 36 104 35 138 34 252 Advances to customers 25 678 26 038 25 985 25 026 23 208 Customer deposits and bonds 26 244 27 700 27 499 27 208 25 683 Shareholders’ equity 2 627 2 664 1 499 1 167 2 563 Income Net interest income 367 413 436 429 419 Net fee and commission
    [Show full text]
  • An Alternative Source of Finance - International Law
    The Mortgage Bond System: An Alternative Source of Finance - International Law ... Seite 1 von 8 Securitization & Structured Finance - Switzerland The Mortgage Bond System: An Alternative Source of Finance Contributed by Walder Wyss & Partners Ltd April 14 2009 Background Past Transactions UBS AG Mortgage Bond Transaction and Mortgage Bonds System Security System Characteristics of Mortgage Bonds System Outlook The ongoing disruption of credit and capital markets has led banks to invent and pursue refinancing solutions that have previously been used only rarely or that have been used in a different context. Credit portfolios are now sold and transferred to selected investors at substantial discounts rather than to the broader capital markets. Governments around the world have intervened to support financial institutions. Securities satisfying certain collateral eligibility criteria set up by central banks have been created in the framework of securitization transactions, thus allowing banks to access various liquidity programmes introduced by central banks. In a recent deal, UBS AG issued a Sfr2 billion Swiss Pfandbrief (ie, covered mortgage bond) through the Swiss mortgage bond bank (Pfandbriefbank) in a private placement aimed at three Swiss local retail banks. It is the first transaction of such a volume in which Swiss Pfandbriefe have been issued and privately subscribed for by three financial institutions only and under which the proceeds of such issues have been used for lending purposes to one specific member bank only. Further deals have been announced, also involving Credit Suisse. Background Since late Spring 2007, the disruption in the credit market has forced banks to create new structures for refinancing credit portfolios and gaining access to liquidity.
    [Show full text]
  • The Banking Sector and the Swiss Financial Account During the Financial and European Debt Crises1
    Aussenwirtschaft 67.2 The banking sector and the Swiss financial account during the financial and European debt crises1 Raphael A. Auer and Cédric Tille Swiss National Bank and CEPR; Graduate Institute Geneva and CEPR The US financial crisis and the later Eurozone crisis have substantially affected capital flows into and out of financial centers like Switzerland. We focus on the pattern of capital flows involving the Swiss banking industry. We first rely on balance-of-payment statistics and show that net banking inflows rose during the acute phases of the crises, albeit with a contrasting pattern. In the wake of the collapse of Lehman Brothers, net inflows were driven by a large retrenchment towards the domestic market by Swiss banks. By contrast, the net inflows from mid-2011 to mid-2012 were driven by large flows into Switzerland by foreign banks. We then use more detailed data from the Swiss banking statistics which allow us to contrast the situation across different banks and currencies. We show that the cycle during the US crisis in bank flows was driven strongly by exposures in US dollars, and to a large extent by Swiss-owned banks. During the Eurozone crisis by contrast, the flight to the Swiss franc and the move away from the Euro was also driven by banks that are located in Switzerland, yet are foreign-owned. In addition, while the demand for the franc was driven by both foreign and domestic customers during mid-2011 to early 2013, domestic demand took a prominent role thereafter. JEL codes: E51, G15, G21, F21, F32, F36, F65 Key words: capital flows, safe haven, Switzerland, financial globalization, international banking 1 Introduction The global financial crisis and the subsequent Eurozone crisis had pronounced effects on the behavior of international capital flows.
    [Show full text]
  • Financial Stability Report 2008
    Financial Stability Report 2008 ISSN 1661-7835 (printed version) ISSN 1661-7843 (online version) Swiss National Bank Financial Stability Report Published by Swiss National Bank Financial Stability CH-8022 Zurich Telephone +41 44 631 31 11 Languages The report is published in English, French and German Further information [email protected] Subscriptions, individual issues, change of address Swiss National Bank, Library P.O. Box, CH-8022 Zurich Telephone +41 44 631 32 84 Fax +41 44 631 81 14 E-mail: [email protected] Internet The publications of the Swiss National Bank are available on the internet at www.snb.ch, Publications Composition Neidhart + Schön AG, Zurich Copyright Data and data sources Reproduction and publication of figures The banking statistics used in this report are permitted with reference to source based on official data submitted by the individual banks. As of 1995, the data on the Publication date big banks are analysed on a consolidated June 2008 basis. Before 1995 and for the other banks, non-consolidated figures are used. ISSN 1661-7835 (printed version) This document is based on data available ISSN 1661-7843 (online version) as at 30 May 2008. Table of contents 5 Overall assessment Chapters 10 1 General economic and financial conditions 21 2 Profitability 25 3 Risks 32 4 Capital base 36 5 Market assessment Boxes 8 1 Lessons learned 18 2 Chronology of the financial turmoil 22 3 Structure of the Swiss banking sector 30 4 Stress testing the stability of the Swiss banking sector 35 5 Capital regulation 38 6 Stress index for the Swiss banking sector 2008 Financial Stability Report SNB 4 2008 Financial Stability Report Foreword over, the default rate among borrowers – excluding In accordance with the National Bank Act sub-prime mortgages in the US – continues to be (art.
    [Show full text]
  • Resolution Report 2020 Management Summary
    Resolution Report 2020 Management summary 2 In the event of a disorderly failure, systemically The two global systemically important banks were important financial institutions can jeopardiseentire required to submit an effective emergency plan to economies and are therefore referred to as “too FINMA for review by the end of 2019. This makes it big to fail” (TBTF). Following the financial crisis of a suitable point in time for FINMA to inform publicly 2007/2008, the Swiss legislator promulgated special about progress. At the same time, FINMA sets out in rules for the stabilisation, restructuring or liquidation this document how it would proceed in the event of Management summary of such institutions. The rules require higher capital a resolution. and liquidity buffers as well as plans for recovery and FINMA | Resolution Report 2020 resolution. There are four main instruments in this Recovery plans have been approved context: and the global banks’ Swiss emergency plans are effective 1. Recovery plan: The systemically important bank All five systemically important Swiss banks have sub- or financial market infrastructure sets out how it mitted recovery plans to FINMA, which have been would stabilise itself in a crisis. This plan requires approved. FINMA carried out a detailed review of FINMA‘s approval. the effectiveness of the Swiss emergency plans sub- 2. Swiss emergency plan: In this plan the systemically mitted by the end of 2019. At Credit Suisse FINMA important bank details how it would ensure unin- deems the statutory requirements for a ready-to-im- terrupted continuity of its systemically important plement emergency plan to have been met.
    [Show full text]
  • 2011 Annual Report BCV at a Glance
    2011 Annual Report BCV at a glance Key figures (in CHF millions) 2011 2010 Change as % Total assets 37 903 35 585 7 Total income 1 017 996 2 Operating profit 486 480 1 Net profit 301 314 – 4 Assets under management 77 097 75 849 2 Ratios Cost / income ratio1 60% 59% ROE 9.3% 9.8% BIS capital adequacy ratios Tier 1 capital ratio 16.8% 17.6% Total capital ratio 16.8% 17.6% 1) Excluding goodwill amortization and write-downs. 2011 highlights BCV turned in strong 2011 financial results: • Business volumes continued to rise on the back of a • We made numerous customer service improvements, dynamic local economy. such as the launch of our BCV Mobile app for • Revenues increased 2%, surpassing the CHF 1bn smartphones and tablets, and our new youth savings mark. account, which offers a preferential interest rate and • Net profit came in at CHF 301m. is aimed at helping our younger customers get used to managing their savings. BCV was upgraded by both S&P and Moody’s: • Standard & Poor’s raised our long-term credit rating We continued to deliver attractive returns to our by one notch, making BCV one of only a handful of shareholders: banks not backed by a formal government guarantee • We paid out CHF 22 per share in the form of an to be rated AA (stable). ordinary dividend and a further CHF 10 per share out • Moody’s raised our Bank Financial Strength Rating to of paid-in reserves, thus returning a total of more than the long-term equivalent of A3 from Baa1.
    [Show full text]
  • The Pass-Through of Bank Capital Requirements to Corporate Lending Spreads∗
    The Pass-through of Bank Capital Requirements to Corporate Lending Spreads∗ Robert Bichsely Luisa Lambertiniz Abhik Mukherjeex Dan Wunderli{ May 27, 2019 Abstract This paper studies the impact of higher bank capital requirements on corporate lending spreads. We conduct an empirical analysis using granular bank- and loan-level data for Switzerland. Overall, we find a positive relationship between capital ratios, actual and required, and lending spreads. The relationship is statistically significant but economically small. According to our results, a one-percentage point increase of capital ratios (risk- weighted) leads to an increase in lending spreads between 0 and 5 basis points. This figure is higher - between 5 and 20 basis points - for unweighted capital ratios (leverage ratios), partly but not only reflecting scaling effects. We find support in favor of gradual phasing-in of new requirements as banks with capital shortfalls relative to their short-run regulatory requirements charge higher spreads relative to institutions with surpluses while the effects are weaker for look-through capital shortfalls. Holding additional capital when requirements are raised is associated with lower spreads vis-`a-vispeers. JEL codes: E44, G21, G28 Keywords: bank capital requirements; lending spreads; bank regulation ∗The views expressed in this paper are those of the authors and do not necessarily represent those of the Swiss National Bank. We thank the following for helpful comments: Lucas Fuhrer, Hans Gersbach, Stephen Ongena, Jean-Charles Rochet and participants of the ETH/UZH Seminar on Contract Theory, Money and Banking; the 2016 Money, Banking and Finance Conference in Rome; the 2017 Conference of the European Economic Association; the 2017 Australasian Finance and Banking Conference; the Federal Reserve Bank of New Zealand Seminar and the Swiss National Bank brownbag seminar.
    [Show full text]
  • Banking Regulation Review
    Banking Regulation Review Tenth Edition Editor Jan Putnis lawreviews © 2019 Law Business Research Ltd Banking Regulation Review Tenth Edition Reproduced with permission from Law Business Research Ltd This article was first published in June 2019 For further information please contact [email protected] Editor Jan Putnis lawreviews © 2019 Law Business Research Ltd PUBLISHER Tom Barnes SENIOR BUSINESS DEVELOPMENT MANAGER Nick Barette BUSINESS DEVELOPMENT MANAGER Joel Woods SENIOR ACCOUNT MANAGERS Pere Aspinall, Jack Bagnall ACCOUNT MANAGERS Olivia Budd, Katie Hodgetts, Reece Whelan PRODUCT MARKETING EXECUTIVE Rebecca Mogridge RESEARCH LEAD Kieran Hansen EDITORIAL COORDINATOR Gavin Jordan HEAD OF PRODUCTION Adam Myers PRODUCTION EDITOR Anne Borthwick SUBEDITOR Hilary Scott CHIEF EXECUTIVE OFFICER Paul Howarth Published in the United Kingdom by Law Business Research Ltd, London 87 Lancaster Road, London, W11 1QQ, UK © 2019 Law Business Research Ltd www.TheLawReviews.co.uk No photocopying: copyright licences do not apply. The information provided in this publication is general and may not apply in a specific situation, nor does it necessarily represent the views of authors’ firms or their clients. Legal advice should always be sought before taking any legal action based on the information provided. The publishers accept no responsibility for any acts or omissions contained herein. Although the information provided is accurate as at April 2019, be advised that this is a developing area. Enquiries concerning reproduction should
    [Show full text]