1 Background
2 General literature review
3 Sample
Country | Commercial banks | Bank holdings & holding companies | Cooperative banks | Investment banks | Real estate & mortgage banks | Savings banks | Total |
---|---|---|---|---|---|---|---|
Austria | 71 | 7 | 110 | 7 | 17 | 106 |
318
|
Belgium | 30 | 7 | 7 | 4 | 2 | 6 |
56
|
Cyprus | 17 | 4 | 2 | 6 | 0 | 1 |
30
|
Estonia | 8 | 0 | 0 | 3 | 0 | 0 |
11
|
Finland | 24 | 1 | 2 | 0 | 3 | 4 |
34
|
France | 121 | 5 | 82 | 20 | 30 | 27 |
285
|
Germany | 136 | 16 | 971 | 29 | 42 | 517 |
1,711
|
Greece | 8 | 1 | 1 | 2 | 0 | 0 |
12
|
Ireland | 15 | 2 | 0 | 12 | 6 | 0 |
35
|
Italy | 85 | 12 | 421 | 19 | 4 | 37 |
578
|
Latvia | 20 | 0 | 0 | 0 | 0 | 0 |
20
|
Lithuania | 11 | 0 | 0 | 0 | 0 | 0 |
11
|
Luxembourg | 66 | 8 | 2 | 5 | 1 | 2 |
84
|
Malta | 9 | 0 | 1 | 5 | 0 | 1 |
16
|
Netherlands | 33 | 12 | 1 | 4 | 7 | 1 |
58
|
Portugal | 25 | 8 | 2 | 5 | 1 | 4 |
45
|
Slovak Republic | 12 | 1 | 0 | 1 | 2 | 2 |
18
|
Slovenia | 17 | 0 | 2 | 1 | 0 | 2 |
22
|
Spain | 51 | 5 | 60 | 9 | 1 | 28 |
154
|
Total
|
759
|
89
|
1,664
|
132
|
116
|
738
|
3,498
|
4 Description of the variables and connections with the literature
4.1 Dependent variable
Ln_z |
CAR (%)
|
ROAA (%)
|
SDROAA (%)
| |||||
---|---|---|---|---|---|---|---|---|
2000–2010
|
2011–2014
|
2000–2010
|
2011–2014
|
2000–2010
|
2011–2014
|
2000–2010
|
2011–2014
| |
Commercial banks | 2.602 | 2.651 | 12.143 | 12.722 | 0.683 | 0.266 | 1.140 | 0.823 |
Bank holdings & holding companies | 2.329 | 2.353 | 24.465 | 25.168 | 1.566 | 0.737 | 2.715 | 1.599 |
Cooperative banks | 3.783 | 3.858 | 7.800 | 9.037 | 0.399 | 0.290 | 0.271 | 0.177 |
Investment banks | 2.397 | 2.601 | 21.989 | 25.126 | 1.547 | 0.909 | 3.042 | 1.715 |
Real estate & mortgage banks | 3.030 | 2.926 | 9.712 | 11.192 | 0.477 | 0.212 | 0.618 | 0.667 |
Savings banks | 4.031 | 4.394 | 6.174 | 9.030 | 0.260 | 0.218 | 0.210 | 0.139 |
4.2 Explanatory variables
Variable | Measure | Symbol | Expected sign | Source |
---|---|---|---|---|
Basel 3 variables
| ||||
Capital requirement | Common equity to risk-weighted assets | CR | + | Bankscope |
Leverage ratio | Tangible common equity to tangible assets | LR | + | Bankscope |
Liquidity coverage ratio | Cash and due from banks and government securities to total deposits, money market and short-term funding | LCR | +/− | Bankscope |
Net stable funding ratio | Available stable funding to required stable funding | NSFR | + | Bankscope |
Bank-level variables
| ||||
Business model | commercial banks |
BM
m
| Bankscope | |
bank holdings and holding companies |
BM
h
| |||
cooperative banks |
BM
o
| |||
investment banks |
BM
i
| |||
real estate and mortgage banks |
BM
r
| |||
savings banks |
BM
s
| |||
Size | Natural logarithm of total assets | SIZE | +/− | Bankscope |
Efficiency | Cost‒income ratio | CIR | +/− | Bankscope |
Credit risk | Loans loss provisions to gross loans | LLP | − | Bankscope |
Country-level variables
| ||||
Gross domestic product | Annual real gross domestic product growth rate | GDPGR | +/− | The World Bank |
Concentration in the banking system | Share of assets held by the three largest banks to total banking system assets | CONC | +/− | Bankscope |
Central government debt | Central government debt to GDP ratio | CGD | − | The World Bank |
Inflation | Annual change in consumer price index | CPI | − | The World Bank |
4.2.1 Basel 3 variables
-
On these grounds, we expect a positive relationship between CR and ln_z.
-
Therefore, we expect a positive relationship between LR and ln_z.
-
Thus, the sign of the relationship between LCR and ln_z cannot be established a priori.
-
Overall, we expect a positive relationship between NSFR and ln_z.
Available Stable Funding
| |
Components
|
ASF factors
|
Customer Deposits—Current | 90% |
Customer Deposits—Savings | 95% |
Customer Deposits—Term | 95% |
Deposits from Banks | 0% |
Total Long Term Funding | 100% |
Non-interest Bearing Liabilities | 0% |
Hybrid Capital | 100% |
Total Equity | 100% |
Required Stable Funding
| |
Components
|
RSF factors
|
Loans (Residential Mortgage Loans+Consumer/Retail Loans+Corporate & Commercial Loans) | 85% |
Loans and Advances to Banks | 0% |
Government Securities | 5% |
At-equity Investments in Associates | 100% |
Total Securities—Government Securities—At-equity Investments in Associates | 50% |
Other Earning Assets | 100% |
Cash and Due from Banks | 0% |
Fixed Assets | 100% |
Intangibles (Goodwill and Other Intangibles) | 100% |
Other non-earning Assets | 100% |
Off Balance Sheet Items
| |
Guarantees | 5% |
Committed Credit Lines | 5% |
4.2.2 Control variables
Variable | Mean | Standard Deviation | Minimum | Maximum | ||||
---|---|---|---|---|---|---|---|---|
2000–2014
|
2000–2010
|
2011–2014
|
2000–2014
|
2000–2010
|
2011–2014
|
2000–2014
|
2000–2014
| |
ln_z
| 3.561 | 3.534 | 3.633 | 1.174 | 1.115 | 1.323 | − 1.451 | 6.524 |
CR
| 0.070 | 0.036 | 0.162 | 0.172 | 0.114 | 0.252 | 0.000 | 1.643 |
LR
| 0.092 | 0.088 | 0.104 | 0.111 | 0.107 | 0.118 | 0.004 | 0.936 |
LCR
| 0.314 | 0.285 | 0.403 | 1.745 | 1.629 | 2.067 | 0.000 | 20.693 |
NSFR
| 3.087 | 1.593 | 8.047 | 13.174 | 5.502 | 24.843 | − 16.090 | 116.673 |
BM
m
| 0.217 | 0.412 | 0 | 1 | ||||
BM
h
| 0.025 | 0.157 | 0 | 1 | ||||
BM
o
| 0.476 | 0.499 | 0 | 1 | ||||
BM
i
| 0.038 | 0.191 | 0 | 1 | ||||
BM
r
| 0.033 | 0.179 | 0 | 1 | ||||
BM
s
| 0.211 | 0.408 | 0 | 1 | ||||
SIZE
| 13.506 | 13.445 | 13.672 | 1.822 | 1.782 | 1.918 | 9.240 | 20.050 |
CIR
| 0.681 | 0.682 | 0.678 | 0.184 | 0.180 | 0.197 | 0.083 | 1.825 |
LLP
| 0.009 | 0.010 | 0.006 | 0.027 | 0.027 | 0.028 | − 0.049 | 0.333 |
GDPGR
| 0.012 | 0.014 | 0.007 | 0.026 | 0.027 | 0.019 | − 0.180 | 0.122 |
CONC
| 0.532 | 0.511 | 0.590 | 0.212 | 0.202 | 0.229 | 0.212 | 1.000 |
CGD
| 0.615 | 0.595 | 0.722 | 0.293 | 0.293 | 0.273 | 0.037 | 1.935 |
CPI
| 0.020 | 0.019 | 0.021 | 0.010 | 0.011 | 0.007 | -0.045 | 0.154 |
5 Empirical methodology
6 Empirical results
Years 2000–2010 | Years 2011–2014 | Test of differences | |
---|---|---|---|
Coefficient (WC-Robust st. err.) | Coefficient (WC-Robust st. err.) | ||
l.z-score (log of)
| 0.451*** (0.0530) | 0.914*** (0.0588) | |
Basel 3 variables
| |||
CR
| 0.0977** (0.0386) | − 0.0734*** (0.0265) |
***
|
LR
| 4.856*** (0.320) | 7.388*** (0.645) | |
LCR
| − 0.0129* (0.00670) | − 0.00573 (0.00623) |
**
|
NSFR
| 0.000367 (0.000399) | 0.000287 (0.000322) | |
Bank-level variables
| |||
SIZE
| − 0.216*** (0.0292) | 0.149** (0.0748) | |
CIR
| − 0.482*** (0.0468) | − 0.281** (0.126) | |
LLP
| − 1.996*** (0.395) | − 4.001*** (0.795) |
***
|
Country-level variables
| |||
GDPGR
| 1.052*** (0.381) | 0.707 (1.131) |
**
|
CONC
| − 0.128* (0.0717) | − 2.036*** (0.482) | |
CGD
| − 0.213 (0.132) | 0.253* (0.152) |
***
|
CPI
| 0.477 (0.584) | − 2.784*** (0.674) | |
Observations | 21,106 | 5,699 | |
Groups | 2,984 | 2,945 | |
Instruments | 87 | 39 | |
Regression χ2 | 6,243*** | 2,700*** |
Years 2001–2010 | Years 2011–2014 | Test of differences | |
---|---|---|---|
Coefficient (WC-Robust st. err.) | Coefficient (WC-Robust st. err.) | ||
l.z-score (log of)
| 0.381*** (0.0576) | 0.868*** (0.0537) | |
Basel 3 variables
| |||
CR
| 0.130*** (0.0504) | − 0.187* (0.100) |
**
|
CR * BMh | 0.483 (0.302) | 0.283** (0.131) | |
CR * BMo | − 0.224*** (0.0755) | 0.170* (0.0993) |
*
|
CR * BMi | − 0.152 (0.148) | 0.290 (0.488) |
*
|
CR * BMr | 1.887** (0.785) | 0.250** (0.108) |
*
|
CR * BMs | − 0.149*** (0.0533) | 0.130 (0.0972) |
***
|
LR
| 4.656*** (0.411) | 6.534*** (1.029) | |
LR * BMh | − 0.301 (1.405) | 3.968 (15.130) | |
LR * BMo | 4.739*** (0.579) | 2.684* (1.416) | |
LR * BMi | 0.684 (1.519) | 0.304 (2.412) | |
LR * BMr | − 0.788 (0.925) | 1.526 (8.560) |
***
|
LR * BMs | 8.560*** (2.252) | 3.868** (1.674) |
***
|
LCR
| − 0.0190 (0.0135) | − 0.0206 (0.0126) | |
LCR * BMh | 0.0867*** (0.0188) | − 0.0601 (0.0855) |
**
|
LCR * BMo | 0.0161 (0.0137) | 0.0194 (0.0133) |
*
|
LCR * BMi | − 0.0485 (0.0303) | 0.0279 (0.0262) | |
LCR * BMr | 0.0117 (0.0148) | 0.0361 (0.0484) |
**
|
LCR * BMs | − 0.0465* (0.0238) | − 0.0142 (0.0198) | |
NSFR
| 0.00242 (0.00303) | 0.00183 (0.00174) | |
NSFR * BMh | 0.0493 (0.0420) | − 0.000398 (0.0194) | |
NSFR * BMo | − 0.00217 (0.00304) | − 0.00172 (0.00169) | |
NSFR * BMi | − 0.00397 (0.00734) | 0.0000678 (0.00269) | |
NSFR * BMr | 0.0161 (0.0190) | − 0.00379 (0.00310) | |
NSFR * BM
s
| − 0.00260 (0.00322) | − 0.00489* (0.00253) | |
Bank-level variables
| |||
SIZE
| − 0.157*** (0.0295) | 0.110 (0.0978) | |
CIR
| − 0.371*** (0.0517) | − 0.317** (0.129) | |
LLP
| -1.554*** (0.410) | − 3.342*** (0.838) |
***
|
Country-level variables
| |||
GDPGR
| 1.245*** (0.378) | 1.106 (0.691) |
***
|
CONC
| − 0.257*** (0.0648) | − 2.598*** (0.459) | |
CGD
| − 0.396*** (0.137) | 0.293** (0.130) |
***
|
CPI
| 0.812 (0.563) | − 4.291* (2.231) | |
Observations | 21,106 | 5,699 | |
Groups | 2,984 | 2,945 | |
Instruments | 107 | 59 | |
Regression χ2 | 7,092*** | 3,418*** |
Business model | CE 2000–2010 | CE 2011–2014 | CE Test of differences | Δ 2000–2010 | Δ 2011–2014 | Δ Test of differences |
---|---|---|---|---|---|---|
BM
m
| 0.338*** | 0.410*** |
*
| --- | --- | --- |
BM
h
| 1.049** | 0.635 | 0.711 | 0.225 |
*
| |
BM
o
| 0.628*** | 0.629*** |
***
| 0.290*** | 0.219** |
**
|
BM
i
| 0.250*** | 0.515*** |
**
| − 0.0882 | 0.105 | |
BM
r
| 0.763*** | 0.563 | 0.425** | 0.153 | ||
BM
s
| 0.808*** | 0.622*** |
***
| 0.470*** | 0.212* |