Economic Consequences of the AOCI Filter Removal for Advanced Approaches Banks

• 成果类型: Article
• 署名作者: Kim, Sehwa; Kim, Seil; Ryan, Stephen G.
• 署名单位: Columbia University; City University of New York (CUNY) System; Baruch College (CUNY); New York University
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/accr-52436
• 发表日期: 2019
• 页码: 309-335
• 关键词: fair-value; RISK-MANAGEMENT; panacea

摘要

We examine economic consequences of U.S. bank regulators' phased removal of the prudential filter for accumulated other comprehensive income for advanced approaches banks beginning on January 1, 2014. The primary effect of the AOCI filter is to exclude unrealized gains and losses on available-for-sale securities from banks' regulatory capital. We predict and find that, to mitigate regulatory capital volatility resulting from the filter removal, advanced approaches banks increased the proportion of investment securities classified as held-to-maturity, thereby limiting their financing and interest rate risk management options, and they decreased securities risk, thereby reducing their interest rate spread. We further predict and find that these banks borrow more under securities repurchase agreements potentially collateralized by held-to-maturity securities and reduce loan supply owing to their reduced financing options, and that they increase loan risk to mitigate the decrease in their interest rate spread.