The Business of Banking

Models, Risk and Regulation

herausgegeben von: Giusy Chesini, Dr. Elisa Giaretta, Dr. Andrea Paltrinieri

Verlag: Springer International Publishing

Buchreihe : Palgrave Macmillan Studies in Banking and Financial Institutions

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book offers new insights on banking business models, risks and regulation proposals in the aftermath of the European financial crisis. It investigates the main issues affecting the business of banking nowadays, such as low interest rates and non-performing loans. The combined effect of low to negative interest rates and weak economic growth has encouraged banks to shift their business towards new areas less associated with interest rates, which financial markets and institutional investors are currently evaluating. Contributions also shed new light on topics not yet fully investigated by current literature, such as banks’ short selling bans after Brexit, the European Deposit Guarantee Scheme and banks’ risk appetite framework. This book will be of interest to researchers, scholars and practitioners.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introduction

Abstract

This text comprises a selection of papers that offers new insights into banking business models, risks and regulation proposals in the aftermath of European financial crises. It investigates the main issues affecting the business of banking nowadays such as low interest rates and non-performing loans.

Giusy Chesini, Elisa Giaretta, Andrea Paltrinieri

Chapter 2. Interest Rates and Net Interest Margins: The Impact of Monetary Policy

Abstract

In this chapter, we examine the determinants of bank net interest margin, focusing on the effect of interest rates, and thus monetary policy decisions. The analysis is carried with a panel of banks from 32 OECD countries over the period 2003–2014. The results show a quadratic relationship between net interest margins and interest rates, implying that the variation of the latter has a greater effect when interest rates are low. An important policy implication of the results is that there is a trade-off between economic growth and financial stability associated with the impact of expansionary monetary policy when the level of interest rates is very low. As a result, if the current scenario of low and even negative interest rates persists for much longer in certain countries (such as in the Eurozone), it will have a negative effect on bank profitability and consequently on financial stability.

Paula Cruz-García, Juan Fernández de Guevara, Joaquín Maudos

Chapter 3. The Swedish Mortgage Market: Bank Funding, Margins, and Risk Shifting

Abstract

This chapter analyzes the Swedish mortgage market, especially focusing on bank funding and margins. We discuss the move from mortgage-backed bonds to covered bonds regime in Sweden and its implications for bank funding and margins. The chapter concludes by offering a discussion about the risk of a new financial crisis in Sweden.

Viktor Elliot, Ted Lindblom

Chapter 4. Incapability or Bad Luck? Testing the “Bad Management” Hypothesis in the Italian Banking System

Abstract

Using specific evidences from the Italian banking sector and following a microeconomic approach, in this chapter we test the “bad management” hypothesis first introduced by Berger and Deyoung (1997), which suggest that poor managerial practice causes an increase in problem loans after a lag. The chapter gives a contribution to the existing literature in this field, in that it investigates nonperforming loans (NPLs) and other soured loans jointly. Our results confirm the “bad management” hypothesis, in that we discover a positive (lagged) relation between the value of past due/overdrawn loans and NPLs which, in a management perspective, indicates the incapability of the credit manager to anticipate or to recover (at least partially) problematic credits.

Fabrizio Crespi, Mauro Aliano

Chapter 5. Why Do US Banks React Differently to Short Selling Bans?

Abstract

Financial crisis brought significant decreases in market indices, led to active selling of stocks, and raised the possibility of a total collapse. Short selling ban was expected to bring lower stock price volatility and raise investor’s confidence. In this context, a policy intervention can change the net expected present value of an individual bank, basically because such kind of interventions aims to reduce the speculative selling pressure on a single title stock, according to policy regulators. Consequently, it should calm down the price reduction and net expected present value of every single stock. Second, the intervention may reduce both volatility and probability of default of financial companies.

Daniele Angelo Previati, Giuseppe Galloppo, Mauro Aliano, Viktoriia Paimanova

Chapter 6. Reputational Risk in Banking: Important to Whom?

Abstract

Financial crisis and post-crisis restructuring have resulted in an increased interest in the issues of trust and corporate culture and in the creation of stable and functional risk culture in global banks. Reputational risk is not a new concept, but the efforts to manage it as a self-standing type of risk and not within an operational risk framework are quite recent. Thus the aim of this paper is to analyze why reputational risk is important for banks, and what are the incentives to manage it. In the empirical part, the panel data models for listed banks in CEE-11 countries have indicated that proper management of reputational risk may not be important for an assessment of bank performance. Consequently, there seems to be incentives to disregard reputational risk in an operational and strategic bank management and deal with it only with crisis events.

Protecting a financial institution’s reputation is among the most significant challenges facing financial firms, and trust in the integrity of the financial sector is the cornerstone of its stability and growth. The financial crisis of 2007–2009 and the post-crisis restructuring period have brought an increased interest in the reputational risk, particularly in the banking and financial sector.

Ewa Miklaszewska, Krzysztof Kil

Chapter 7. The Business Model of Banks: A Review of the Theoretical and Empirical Literature

Abstract

The business model (BM) has become a key concept in banking literature. The topic’s relevance is due to the impact of the crisis on bank profitability and risk levels, leading to new challenges for bank managers, analysts and regulators. The paper draws on the strategic management studies to deepen and specify the concept of corporate strategy, business strategy and business model. This theoretical frameworg guides our review of banking business model literature.

Stefano Cosma, Riccardo Ferretti, Elisabetta Gualandri, Andrea Landi, Valeria Venturelli

Chapter 8. On European Deposit Protection Scheme(s)

Abstract

This chapter aims to provide a dynamic overview of the Deposit Protection Schemes (DPSs) across the EU28. Using data gathered by the World Bank’s Bank Regulation and Supervision Surveys, the analysis critically systematises the different features that shape the national DPSs’ design. Finally, this study highlights the area where legislative intervention is most needed in order to reach a fully-fledged European Deposit Insurance Scheme (EDIS).

Milena Migliavacca

Chapter 9. A Technical Approach to Deposit Guarantee Schemes

Abstract

This chapter fits within the debate on deposit guarantee schemes in the European Union, currently under revision, investigating the changes proposed by directive 2014/49/EU of the European Parliament and the Council and regulated by the European Banking Authority. For Italian banks, new rules proposed by the European Banking Authority results in better classification.

Francesca Arnaboldi

Backmatter

Titel: The Business of Banking
herausgegeben von: Giusy Chesini
Dr. Elisa Giaretta
Dr. Andrea Paltrinieri
Verlag: Springer International Publishing
Electronic ISBN: 978-3-319-54894-4
Print ISBN: 978-3-319-54893-7
DOI: https://doi.org/10.1007/978-3-319-54894-4