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This paper dresses a literature systematic review based on 83 peer-reviewed papers studying the impact of income diversification on bank performance. This review is motivated especially by the mixed literature findings about the effectiveness of income diversification on bank performance. Findings indicate that the nature of the effect of diversification on bank performance depends on a range of factors concerning the research methodology adopted. Indeed, the results reveal that the mixed results may be caused by the fact that researchers have examined the diversification–performance relationship in different study settings (US, Europe, MENA, Asia) using different study periods, different measures of diversification, and performance, different estimation methods and different regression models including different control variables. We think that our review would be important for practitioners and regulators to assess the empirical benefits of this profound change in the traditional banking business. Also, our paper might highlight the related pertinent academic issues that should be addressed in the future. [ABSTRACT FROM AUTHOR]

Purpose: This paper examines the impact of International Financial Reporting Standards (IFRS) 9 on earnings management (EM) using data from 2011 to 2019 of 100 commercial banks in Europe. Design/methodology/approach: Using data from 2011 to 2019 of 100 commercial banks in Europe, the authors conducted several empirical investigations to test the mediating role of IFRS 9 on earnings manipulation through loan loss provision (LLP) by banks. Findings: The result shows that the new accounting standards (IFRS 9) significantly affect the way banks report LLP. This paper provides evidence that non-listed banks in the EU engage in EM through LLP following IFRS 9 but experience less volatility of net income following the adoption. The findings indicate that such behaviour by banks cannot be suppressed by level of audit quality; suggesting that an improvement in accounting standards might not always guarantee accounting quality. Originality/value: This finding has some policy implications; and regulators will need to identify additional tools to regulate or supervise EM behaviour. [ABSTRACT FROM AUTHOR]

This paper analyses the volatility transmission between European Global Systemically Important Banks (GSIBs) and implied stock market volatility. A Dynamic Conditional Correlation Generalized Autoregressive Conditional Heteroskedasticity model is applied to determine the dynamic correlation between returns of Europe's GSIBs and the world's most prominent measure of market "fear", the CBOE Volatility Index (VIX). The results identify a higher negative co-relationship between the VIX and GSIB returns during the COVID-19 period compared with the Global Financial Crisis (GFC), with one-day lagged changes in the VIX negatively Granger-causing bank returns. The asymmetric impact of changes in implied volatility is examined by quantile regressions, with the findings showing that in the lower quartile–where extreme negative bank returns are present–jumps in the VIX are highly significant. This effect is more pronounced during COVID-19 than during the GFC. Additional robustness analysis shows that these findings are consistent during the periods of the Swine Flu and Zika virus epidemics. [ABSTRACT FROM AUTHOR]

This paper assesses the market effects of regulatory events associated with the implementation of a bail-in regime for failing European banks. The bail-in regime was designed to make banks efficiently resolvable in order to abolish Implicit Government Guarantees (IGGs). We use a seemingly-unrelated-regressions framework to estimate the effects on Credit Default Swap (CDS) spreads and equity returns of key events associated with the two cornerstones of the European bail-in regime, the Bank Recovery & Resolution Directive (BRRD) and the Single Resolution Mechanism Regulation (SRM-R), and other relevant events. Contrary to the regulations' objectives, we find that regulatory events associated with the implementation of BRRD and SRM-R led to tighter CDS spreads and higher equity returns over the 2009–2017 period. The pattern varies with bank heterogeneity and is particularly pronounced for global systemically important banks (G-SIBs), i.e. banks whose systemic risk profile is deemed to be of such importance that the bank's failure would trigger a wider financial crisis and threaten the global economy, suggesting that the regime does not effectively solve the systemic problem of bailout expectations in the European banking sector. [ABSTRACT FROM AUTHOR]

This paper goes beyond the relationship between a bank ESG performance (ESGP) and corporate financial performance (CFP). Here, the link between ESG factors and financial benchmarks is analysed to verify whether banks may find in the market reaction sufficient stimuli (higher CFP) to adopt ESG conduct spontaneously. Using panel estimation methods on European banks listed in STOXX Europe 600, between 2008 and 2019, this paper tests the relationship between ESGP and CFP considering different dimensions of financial performance at once, both accounted‐based (ROA and ROE) and market‐based (Capitalisation to Book Value, Tobin's Q). Besides, we employ VBM (EVA Spread) not previously considered. The main findings support the current approach of banking authorities, focusing on bank ESG risks, more than ESG opportunities, in order to "force" banks into adopting a new ESG business model, at this early stage of transition to sustainability. [ABSTRACT FROM AUTHOR]

Purpose: This study intends to test the relationship between banks' board diversity, detected with age and gender characteristics, and banks' social performance. The resource dependence theory posits that board diversity is a strategic tool able to enrich the board of directors by expanding skills and the number of links with stakeholders, which have a strategic role in achieving a competitive advantage and sustainable goals, especially in the banking sector. Design/methodology/approach: The research hypotheses are tested using a sample of 46 European banks observed from 2009 to 2017. The gender and age diversity data of bank board members are hand-collected from banks' social reports. Findings: The empirical results show that bank social performance is positively influenced by board gender and age diversity. Thus, the human capital determined by a higher bank's board diversity constitutes an essential resource for adopting more sustainable business models. Originality/value: This paper analyses the association between board diversity and social performance, providing empirical evidence for the European banking sector in the period after the 2008 global financial crisis. The banking literature provides scarce evidence on the topic; however, the empirical results claim the strategic importance of the appointment of directors to the banks' boards to balance corporate strategy with social and environmental issues generating a positive impact on sustainable growth. [ABSTRACT FROM AUTHOR]

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Copyright of European Journal of Applied Economics is the property of Singidunum University and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

One of the key pillars of the European Green Deal is a renewed sustainable finance strategy to finance sustainable growth and to channel private investments towards projects that support the transition to a climate-neutral economy. The aim of this policy is to make the private sector take into account sustainability-related non-financial factors when making financing and investment decisions. Within this framework, the EU Taxonomy provides a uniform definition and classification system of environmentally sustainable economic activities. In addition, the EU Taxonomy itself provides the basis for further legislation and regulation. Banks as the main financiers of firms in Europe and therefore important players in directing capital flows towards sustainable projects are thus targeted with several requirements based on the Taxonomy. The question then is how banks' lending to firms is affected by these regulatory changes and whether an impact on the greening of firms' economic activities can be achieved. The existing literature provides evidence that firms' environmental, social and governance (ESG) risks, profiles and performance influence their loan conditions, but it is unclear whether better funding conditions lead to reduced carbon emissions or "greener" activities at the firm level. [ABSTRACT FROM AUTHOR]

This article examines the gender gap in subjective financial literacy of retail clients of a large commercial bank in Europe. Under the European regulatory context (MiFID), clients of banks and financial institutions have to complete risk‐profiling questionnaires; these data are especially useful for financial advisors. Using a database of banking records and MiFID questionnaire answers of more than 50,000 retail clients, we find that the gender gap in subjective financial literacy is significantly higher for individuals living as part of a couple. We consider 7,382 dual‐income couples with matched‐partner data and find some heterogeneity in their gender gap in subjective financial literacy. We identify the couple characteristics that explain either a classical (i.e., women exhibit a significantly lower self‐assessed financial knowledge than men) or an inverse gap and point out that subjective financial literacy of spouses is related to their financial management styles. [ABSTRACT FROM AUTHOR]

Studying protein dynamics and conformational heterogeneity is crucial for understanding biomolecular systems and treating disease. Despite the deposition of over 215 000 macromolecular structures in the Protein Data Bank and the advent of AI-based structure prediction tools such as AlphaFold2, RoseTTAFold, and ESMFold, static representations are typically produced, which fail to fully capture macromolecular motion. Here, we discuss the importance of integrating experimental structures with computational clustering to explore the conformational landscapes that manifest protein function. We describe the method developed by the Protein Data Bank in Europe – Knowledge Base to identify distinct conformational states, demonstrate the resource's primary use cases, through examples, and discuss the need for further efforts to annotate protein conformations with functional information. Such initiatives will be crucial in unlocking the potential of protein dynamics data, expediting drug discovery research, and deepening our understanding of macromolecular mechanisms. [ABSTRACT FROM AUTHOR]

With an emphasis on the effects of regional differences and the COVID- 19 epidemic, this study examines the link between Environmental Performance Index (EPI) ratings and the financial performance of European banks while considering the role of governance and law. Our study, which uses panel data regressions spanning five years and 71 listed banks in 21 European nations, shows a negative link between EPI scores and bank performance, which is most noticeable in Southern Europe. These results highlight the significance of taking regional variations in bank size and characteristics into account when assessing EPI performance in the banking industry. [ABSTRACT FROM AUTHOR]

As the relevant European Union directives require in-depth sustainability reporting from large institutions, banks are among the concerned with disclosure obligations. Several institutions prepare self-structured recommendations by which companies are indirectly fostered to make their operation more sustainable through reporting and to help compliance with the upcoming Corporate Sustainability Reporting Directive (CSRD) regulations. However, in the preparation period, differences can be found in the actual sustainability disclosure practices across Europe (primarily by a western–eastern European relation). To examine this issue, this study aimed to investigate if there was any variation in the reporting compliance with aspects (key performance indicators—KPIs) of three reporting guidelines (Global Reporting Initiative—G4, Financial Services Sector Disclosures—GRI; Alliance for Corporate Transparency—ACT; ISO 26000:2010—ISO) between top European and Hungarian banks according to their 2021 sustainability/ESG reports, using content analysis-based disclosure scoring. The results revealed no significant differences among the general (aspect-pooled) scores for different guidelines, while the differences were significant for each guideline between the two bank groups. In the aspect-level evaluation, the European banks had higher scores in most cases, with the Hungarian banks receiving higher scores in 4 of 49 GRI, 1 of 16 ACT, and 2 of 37 ISO aspects. Significant correlations were indicated in disclosure score values between the two bank groups, which suggested similar preferences for the aspects demonstrated; however, elaboration levels differed. These findings showed that the European and Hungarian banks could be differentiated by their sustainability disclosure patterns. The results suggest a better CSRD-level preparedness of the top European banks than of the Hungarian ones, with the latter being introduced as a model group of the region. This reflects the need for more efficient adoption of best practices by financial institutions in the eastern parts of Europe. [ABSTRACT FROM AUTHOR]

This article investigates the role of local banking development, per se, in European SME debt policies, using a cross-country dataset. Moreover, it assesses whether the debt policies of SMEs are mainly driven by local or national banking development. We find that higher levels of local banking development increase the amount of debt used by SMEs. Results suggest that national banking institutions reduce the influence of local banking sectors on SME financial behavior. Several robustness and further tests validate our results, suggesting that whilst the process of international integration and digitalization of financial markets, local banking development is still relevant despite the moderating role of national banking policies. Consequently, policy makers should first and foremost allow headquarters and central banks to better support local banks in integrating national banking policies in order to reduce the financial constraints on SMEs and spur their economic growth. [ABSTRACT FROM AUTHOR]

Addressing recent calls by European regulatory and supervisory authorities, we develop a new bottom-up climate risk assessment method to examine the resilience of the European banking industry regarding transitory climate risks. We illustrate our approach by estimating the impact of a 50–100 EUR carbon tax per tCO 2 equivalent on the valuation and default risk of STOXX Europe 600 firms. For about 5% of the sample firms, we find asset devaluation shocks larger than 30% and for about 16% of the firms probabilities of default (PDs) dropping below investment-grade level of 3%. At the sector level, our results yield asset devaluations shocks of 15–36% and new PDs of 5–34% for the six most affected sectors. Running a stress test on credit risk based on these results, we find a decrease in capital ratios between - 1.2 and - 1.6 percentage points for key regulatory capital ratios in the most adverse scenario while only addressing 36% of the bank's total risk-weighted assets. Our analysis sheds light on the substantial transitory climate risk for asset portfolios of banks and contributes to the pressing question how to integrate climate risk into risk management and regulation of financial institutions. [ABSTRACT FROM AUTHOR]

Liquidity creation, as a core functions of banks, affects the stability of the financial system and economic development significantly. However, the existing literature has largely ignored the impact of complex interbank linkages on liquidity creation. This may distort the understanding of liquidity creation away from its essence to some extent in the context of an increasingly interconnected financial system. Using a sample of 1406 banks from 29 European countries during 2010–2021, we use a complex network to model the interbank market and study its impact on liquidity creation. Our results indicate that dominant borrowers in the network create less liquidity as a result of their more prudent liquidity management. Higher bank capital weakens this negative relationship due to its risk-absorbing capacity. Conversely, dominant lenders in the network create more liquidity because of their more optimistic expectations and more lax liquidity management. Higher non-interest income weakens this positive relationship because of the higher risk of non-traditional business, which requires banks to hold more precautionary liquidity. Moreover, we test for endogeneity and use the full sample to verify the robustness of our results. [ABSTRACT FROM AUTHOR]

We explore the role of staff training and experience for banks' efficiency and profitability, while accounting for size, solvency, liquidity and business model of the banking sector. We try answering two questions: (i) are banks with higher levels of staff training and experience more efficient and profitable and (ii) do banks that spend more to increase the quality of their staff have better outcomes in terms of NPLs, in case of a downturn? We use two novel sources of microdata from a one‐off survey about banks' HR policies and a database on banks' balance sheets and P&Ls regarding the Romanian banking sector. We apply the Data Envelopment Analysis (DEA) approach to estimate production frontiers and rank banks by cost and income efficiency. Our main findings support the conclusion that it pays off to invest more in the quality of bank staff, from both risk management and revenue efficiency perspectives. [ABSTRACT FROM AUTHOR]

The aim of this study is to examine the impacts of board size, gender diversity and independence on ESG performance whilst also examining the impact of country-level social trust on such performance. We perform a panel data analysis and the least squares method for a sample of 75 European banks and a time span of 4 years from 2016 to 2019. We find that ESG performance is positively associated with board gender diversity and independence, and negatively associated with board size. Surprisingly, we find a negative relationship between country-level social trust and ESG performance. This is an important finding that we interpret as being related to the loss of confidence in the banking sector in the wake of the 2008 financial crisis. To regain such trust, the banking sector is likely to have suffered higher social pressure to engage in ESG activities in countries where social trust is lower. [ABSTRACT FROM AUTHOR]

This study investigates the foundations underpinning open banking models in Europe and identifies levers to improve their performance. Based on a review of the literature, it distinguishes four contexts for open banking: platformisation, data sharing, FinTech and regulation. The users of open banking services are surveyed to determine factors driving adoption and identify those entities that customers trust with their data and funds. The results indicate that the slow adoption of open banking services is in large part due to customers' poor understanding of such services. The results also show the importance of usefulness and trust in driving adoption. These findings highlight the disproportionate attention being given to service provider infrastructure and the ecosystems of new entrants, and indicate that more consideration should be given to the actual users of open banking frameworks. In response to the findings, the study proposes a roadmap to mitigate the main weaknesses in current open banking models. The conclusions of this study are relevant not only to the development of open banking regulations in other territories, such as the USA and Canada, but also to the extension of data-sharing regulations to non-banking sectors. [ABSTRACT FROM AUTHOR]

Public banks have played an important role in financing public water and sanitation services in Europe for over a century, but these activities have been largely ignored in the academic literature. This special issue is an initial corrective to this research gap, providing conceptual insights and empirical information on eight countries and regions in Europe, covering a wide range of public banks working with public water operators. This introductory article provides background rationale for the research, outlines our methodologies, frames the theoretical potentials of public banks in the water sector, highlights key findings and points to future possible research directions. [ABSTRACT FROM AUTHOR]

This study aims to determine the level of movement of individuals between the Icelandic and Northwest Mainland European (NWME) Whooper Swan Cygnus cygnus populations, and to assess the extent to which this interchange affects total population estimates. Ringing, resighting and recovery data for Whooper Swans ringed across Europe since the early 1900s were compiled from the EURING Data Bank, national ringing schemes and individual ringers. Birds were assigned to the biogeographical population (Icelandic or NWME) in which they were ringed. Of >18 000 Whooper Swans ringed in 17 European countries, 172 individuals (0.94%) were later found outside the nominal range of their assigned biogeographical population. The proportion of ringed swans from the Icelandic population that were subsequently found 'out of range' did not differ significantly from the proportion recorded for the NWME population, indicating no directional bias in population interchange. Population switching by Whooper Swans in western Europe occurs consistently, but currently at very low levels. Our results reinforce the view that such levels of population interchange are unlikely to have caused major inaccuracies or biases in the total numbers recorded during the coordinated censuses used to estimate population size. [ABSTRACT FROM AUTHOR]

We examine the spillovers, portfolio allocation, and diversification potential of bank equity portfolios from developed and emerging countries in Europe (henceforth, developed and emerging Europe) using a directional spillover index and nonlinear portfolio optimisation methods. Empirical results indicate that in developed Europe the largest spillover receivers and transmitters are the banks from France and Spain, whereas in emerging Europe are those from Greece and Poland. Cross‐country spillover transmission and reception is larger across banks from developed Europe than across banks from emerging Europe. Banks from emerging Europe offer greater diversification potential and have a lower risk for financial resource allocation. [ABSTRACT FROM AUTHOR]