Lone (Loan) Wolf Bank Risk

Seminar abstract

We propose an early-warning bank risk measure based on bank syndicate concentration. At the bank level, higher value of bank syndicate concentration predicts, for at least three years ahead, increasing bank risks (i.e., loan loss provision, idiosyncratic return volatility, default probability, and frequency of lawsuits as a defendant) and lower bank profitability, more so for opaque and complex banks, and is related to lower bank valuation. We also find that banks that fail the Federal Reserve’s forward-looking stress tests exhibit a reduction in bank syndicate concentration relative to control banks after the stress-test-failure shocks, further validating bank syndicate concentration as an early-warning risk measure. At the aggregate level, higher syndicate concentration in the financial system predicts greater financial sector risks and future economic slowdowns measured by both inputs and outputs, such as private-sector investment, business activity, total factor productivity, industrial production, and gross domestic product.

How to attend this seminar

This seminar is free to attend and will be held online on Zoom Wednesday 25 May 2022 at 10am

Please contact Dr Anna Sarkisyan for details on how to join

Speaker bio

Dr Eliza Wu is an Associate Professor in the Discipline of Finance at the University of Sydney Business School. She currently serves as the Head of Discipline (Finance). Eliza’s expertise lies within finance and banking and her specific research interests are on asset price movements, risk and information transmission in the global financial system and the impact of financial regulations and information intermediaries on financial market participants and financial institutions. She is the Co-Director of the Business Financing and Banking Research Group at the University of Sydney. Eliza is a Senior Fellow of Advance HE and she is the unit of study coordinator for the undergraduate Banking Capstone unit. She has received the Dean’s Citation for Teaching Excellence and the Unit of Study Award at the University of Sydney Business School and is currently supervising several PhD students.