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The article comments on the papers "The Changing Role of U.S. Banks in International Financing," by George H. Chittenden, "The International Money Market: Structure, Scope and Instruments," by Fred H. Klopstock, and "The Integration of European Capital Markets," by Oscar L. Altman, all published within the issue. The author looks at changes occurring in European capital markets, international money markets, and commercial bank lending. The movement toward better organized markets for long-term capital in Western Europe is discussed.

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]

This short paper applies the pitch template developed by Faff (2015a), for a proposed accounting research project on financial reporting of European banks and the global financial crisis. I begin by giving a brief background to writing the pitch. I then give a brief commentary on my pitch, followed by a few key personal reflections on the pitch exercise itself. [ABSTRACT FROM AUTHOR]

This intention of this paper is to empirically forecast the daily betas of a few European banks by means of four generalized autoregressive conditional heteroscedasticity (GARCH) models and the Kalman filter method during the pre-global financial crisis period and the crisis period. The four GARCH models employed are BEKK GARCH, DCC GARCH, DCC-MIDAS GARCH and Gaussian-copula GARCH. The data consist of daily stock prices from 2001 to 2013 from two large banks each from Austria, Belgium, Greece, Holland, Ireland, Italy, Portugal and Spain. We apply the rolling forecasting method and the model confidence sets (MCS) to compare the daily forecasting ability of the five models during one month of the pre-crisis (January 2007) and the crisis (January 2013) periods. Based on the MCS results, the BEKK proves the best model in the January 2007 period, and the Kalman filter overly outperforms the other models during the January 2013 period. Results have implications regarding the choice of model during different periods by practitioners and academics. Copyright © 2016 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Major European banks are significantly undercapitalized as compared to large American banks, and, more importantly, as compared to the capital levels they would need to survive another severe financial crisis. Bank capital shortfalls in Italy, Spain, Germany, France and the United Kingdom, in particular, are largely the consequence of European bank regulations that: (1) apply static risk weights to assets like mortgages and sovereign debt; (2) fail to require an overall market‐based capital ratio that is high enough to enable banks to survive a severe financial crisis; (3) fail to get banks to promptly write down their impaired assets to market value; (4) subject banks to weak stress tests that can create a false impression of capital adequacy; and (5) fail to compel banks to retain sufficient earnings and to raise sufficient capital externally to eliminate capital shortfalls promptly, all apparently out of fear that being tougher might cause investors and customers to lose confidence in the banks. This article summarizes important recent independent bank stress testing that has quantified the capital shortfalls in European banks. The recent highly publicized regulatory interventions to resolve failing European banks were inevitable due to these shortfalls. The authors recommend steps European bank regulators should take to address the problem and to eliminate the risk of serious capital shortfalls. In the absence of such steps, bank depositors, customers, and security holders should be prepared to expect further unwelcome surprises as the risks inherent in allowing undercapitalized banks to operate will continue to materialize in more bank failures. [ABSTRACT FROM AUTHOR]

Contemporary discussion of the implications of the set of proposals for 'completing the internal market' within the European Community by 1992 seems largely based upon educated guesses as to the potential ramifications (see Pelkmans and Winters, 1988). In this paper we seek to contribute to that debate by a quantitative assessment of the current European market for banking securities, in terms of international integration of the capital markets employed by major European banks. It is hoped that this exercise will cast some light on what the limits on potential gains from reform are.
In the events surrounding the City of London's 'Big Bang' in October 1986 much was made of the possibilities for 'globalization'; indeed this tended to be portrayed as a key feature underlying the deregulation of financial markets[1] (Plender and Wallace, 1985, pp. 40-42). More recently, despite the financial sector retrenchment in the wake of the late 1987 stock market crash, senior banking figures (see Quinton, 1988) continue to encourage an awareness of the increasing integration of the European market for banking services. A wide literature on the integration of international securities markets already exists, including early contributions from Grubel (1968) and Grubel and Fadner (1971) and continuing with the development of an international asset market analog of the capital asset pricing model for security valuation (see Solnik, 1974; and Adler and Dumas, 1983).
Current research in the econometric analysis of time series (Granger and Engle, 1987) is leading us towards a new understanding of the conditions necessary for equilibrium in international asset markets. The analysis of time series data from financial markets has an established tradition, dating from the early studies of the Paris Bourse by Bachelier (1900) to Granger's classic study of commodity prices (Granger, 1979). In this paper we examine security markets for the presence of stable exploitable trading... [ABSTRACT FROM AUTHOR]

Cross-border activity in the EU is widely viewed as a necessary condition for the implementation of a single banking market and therefore as a positive factor for the enhancement of competition and cost performance in the region. In this paper, we analyse the relevance of this view by investigating whether cross-border activity really promotes competition and cost efficiency in EU banking markets. We also consider the potential role of a bank's mode of entry by comparing existing domestic banks that foreign banks take over (mergers and acquisitions) with new branches created by foreign banks, often through subsidiaries (greenfield operations). We consider the impact of cross-border banks on cost efficiency (measured by the stochastic frontier approach), profitability (assessed through return on assets) and competition (measured by the Lerner index). We find that greenfield banks enhance cost efficiency and competition, while mergers and acquisitions hamper competition and cost efficiency. Therefore, our results suggest that EU authorities should promote only greenfield banks rather than all cross-border entries. [ABSTRACT FROM AUTHOR]

This paper provides a comparison between the developed and developing European countries through investigating the profit-structure relationship in the banking industries. The reduced-form profit equations are estimated for each group of countries for the period 1995-2006. The results suggest that the inclusion of X-efficiency and scale efficiency directly in the reduced-form profit equation is crucial in explaining the bank profit-structure relationship in the European banking markets. When we control for direct measures of efficiency, the market share and concentration coefficient become insignificant in all regressions. The results support the efficiency versions of the efficient-structure hypothesis over the relative market power and structure-conduct-performance hypothesis. For the developing economies of Europe, the findings of the paper indicate that efficiency is a crucial factor for establishing a sound banking system and the banks in these countries should increase their scale of operations to attain an optimal profit level. [ABSTRACT FROM AUTHOR]

This paper examines twelve banking crises that occurred in developed countries between the 1970s and 1990s and highlights the macroeconomic adjustment paths experienced during these episodes. The banking crises were generally preceded by financial deregulation, which sparked rapid real credit growth and asset price inflation. During the booms, the lending standards of banks deteriorated and prudential supervision was inadequate. The most serious crises coincided with deep and prolonged slowdowns in economic activity, starting with falling credit growth and asset prices, followed by a sharp fall in investment and a slowing in consumption, partly offset by a rise in net exports. Governments responded with a range of policies to restore the health of the banking sector, along with monetary and fiscal stimulus. The paper concludes by comparing these past crises with the recent banking crises in the United States and parts of Europe, where the deterioration of lending standards appears to have been an important factor once again. [ABSTRACT FROM AUTHOR]

Conventional wisdom suggests that central banks implement monetary policy in a gradual fashion. Some researchers claim that this gradualism is due to ‘optimal cautiousness’; in contrast, Rudebusch ( Journal of Monetary Economics, Vol. 49 (2002), pp. 1161–1187) states that the observed policy rate sluggishness is mainly due to serially correlated exogenous shocks. In this paper we use models in first differences to assess the ‘endogenous’ versus ‘exogenous’ gradualism hypothesis for the Euro area. Our results suggest that the joint formalization of the two hypotheses is likely to offer the best simple approximation of the Euro area monetary policy conduct. [ABSTRACT FROM AUTHOR]

This paper reviews the progress in European banking integration over the last twenty years, and evaluates the current system of banking supervision and deposit insurance based on ‘home country’ control. The public policy implications to draw from the paper are threefold: First, after a relatively slow start, European banking integration is gaining momentum, in terms of cross-border flows, market share of foreign banks in several domestic markets, and cross-border M&As of significant size. If this trend continues, the issue of adequate supervision and safety nets in an integrated European banking market will become even more pressing. Second, although until recently banks have relied mostly on subsidiary structures to go cross-border, this is changing with the recent creation of the European company statute, which facilitates cross-border branch banking. A review of the case of the Scandinavian bank, Nordea Bank AB, helps to understand some remaining barriers to integration, and the supervisory issues raised by branch banking. Third, it is argued that the principle of ‘home country’ supervision is unlikely to be adequate in the future for large international banks. Because the closure of an international bank would be likely to have cross-border spillovers, and because some small European countries might be unable to finance the bail-out of their very large banks, centralization, or at least Europe-wide coordination, of the decision to close or bail-out international banks is needed. This raises the issue of European funding of bail-out costs, European banking supervision, and European deposit insurance. [ABSTRACT FROM AUTHOR]

This paper examines the spillover effect of Eurozone sovereign rating changes announced by Standard and Poor's, Moody's, and Fitch on domestic bank share prices in the period 2002-2012. This spillover effect appears negative in the case of downgrades, but insignificant for upgrades. Surprisingly, announcement of sovereign negative credit watches results in increased bank stock returns. Bank share price losses following sovereign downgrades increase as bank leverage, efficiency, and equity performance increase, and they decrease as bank systematic risk and payout ratio increase. On the contrary, bank share prices rise following sovereign negative credit watches, as leverage and bank size decrease and as bank systematic risk increases. [ABSTRACT FROM AUTHOR]

This paper examines the strategic challenges for the European banking industry, arising from the process of European Monetary Union (EMU). The adoption of the euro will have profound impacts on the structure, conduct and performance of all players in the market. Strategic responses will have to focus on how to secure new profit streams in the context of both national and pan-European banking. This paper represents a timely contribution to the strategic development of banking in this final, most critical, stage of the EMU project. © 1998 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper studies the impact of European bank mergers on changes in key safety and soundness measures of both acquirers and targets. We find that acquirers in cross-border deals tend to perform better when their home country prudential supervisors and deposit insurance funding systems are stricter than that of the target. For target banks, we find that stronger supervision and tougher deposit insurance funding regimes result in positive post merger changes in liquidity and performance. Overall, while bank mergers have undermined bank safety and soundness in some cases, our evidence indicates that strong regulation and supervision can partly ameliorate this. [ABSTRACT FROM AUTHOR]

The volume of literature on the credit-creating powers of the Euro-dollar market, although small, is growing. This paper contends that the stock of net Euro-dollar deposits (E[sub n]) can be expressed as the product of a Euro-dollar base (B) and a Euro-dollar multiplier (k). As in domestic models, the terms of the multiplier reflect asset choices of the sectors reflected by them. A parallel between the flow of funds within the Euro-dollar market and most domestic banking systems exists. Except that no single institution serves as a Euro-dollar central bank, the two systems are highly comparable. [ABSTRACT FROM AUTHOR]

The article comments on the papers "The Changing Role of U.S. Banks in International Financing," by George H. Chittenden, "The International Money Market: Structure, Scope and Instruments," by Fred H. Klopstock, and "The Integration of European Capital Markets," by Oscar L. Altman, all published within the issue. The author looks at changes occurring in European capital markets, international money markets, and commercial bank lending. The shortage of international liquidity is discussed. The author feels that broadened exchange controls among major countries are not as effective as simply remaining solvent.

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]

ABSTRACT This paper presents three process assessments that took place in Luxembourg in 2012. It depicts the TIPA® process assessment framework and reports on its usage in three different partially outsourced contexts: a telecommunication service provider, a European institution, and a bank. Finally, this paper presents the lessons learned from these experimentations and some improvement perspectives. Copyright © 2014 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

Corporate value statements communicate what a firm aspires for and what drives their value creation. In addition, corporate values often also define which behaviors are acceptable and which are not. Ideally, corporate values are representations of a firm's informal corporate values and organizational culture. However, in practice, there is an inherent tension between the aspirations and actual values and ensuing behaviors of and within a firm—let alone the potentially different interpretations of abstract corporate value statements. In this paper, we set out to provide more clarity on what corporate values are, how they are inherently ambiguous, and how in practice they compare to firm involvement in scandals. For this purpose, we study the corporate values of the 25 largest European banks after the financial crisis. “Integrity” appeared to be the most common value among the 25 banks, followed by “customer focus.” Nonetheless, over the past 6 years, 15 out of the 25 studied banks were involved in one or more scandals. Scandals can be systematic or caused by rogue employees, and benefitting the firm or their customers—in the latter case, providing an interesting interpretation of the customer focus value. Additionally, we found that courage or its synonyms were barely mentioned among banks' corporate values, potentially providing an additional explanation for the fast size of the financial crisis. Finally, we found that banks that had inclusive social principles such as respect, solidarity, and equality did not face large‐scale scandals. [ABSTRACT FROM AUTHOR]

National measures of competition and macroeconomic activity have traditionally been used to examine performance and risk features across banks. Such measures may be inappropriate in cases where banks operate with a regional focus. In this paper we construct measures of competition and economic activity using regional data to examine bank stability in 10 European countries over the period 2000-8. The results suggest that an inverted U-shaped relationship exists between regional bank competition and stability. Regional economic conditions are also found to play a significant role in determining the stability of European banks. [ABSTRACT FROM AUTHOR]

This paper examines financial integration, interdependence and exogeneity within and between Latin American banking and Eurobanking systems during a period of relative stability after the oil and debt crises of the 1980s. Significant evidence of cointegration in both long- and short-term relationships is reported. Within Latin America, exogeneity lies mainly with the Brazilian system. Within Eurobanking, the U.S. system is the dominant influence. Between Eurobanking and Latin American banking systems, the U.S. system is the major driving force. With continued interdependence of these banking systems, systemic risk lingers, and vigilance is required in banking supervision. [ABSTRACT FROM AUTHOR]

Recent competitive pressures have progressively driven banks to strategically focus on generating returns to shareholders. Therefore, the investigation of the determinants of bank performance and their relationship with share prices has become increasingly important. This paper extends the literature on market-based accounting to examine the relationship between stock prices and efficiency. Specifically, it investigates if changes in stock performance can be explained by changes in operating efficiency, derived by parametric and non-parametric methods. Results seem to suggest that changes in efficiency are reflected in changes in stock prices and that stocks of cost efficient banks tend to outperform their inefficient counterparts. [ABSTRACT FROM AUTHOR]

The recent consultative papers by the Basel Committee on Banking Supervision has raised the possibility of an explicit role for external rating agencies in the assessment of the credit risk of banks’ assets, including interbank claims. Any judgement on the merits of this proposal calls for an assessment of the information contained in credit ratings and its relationship to other publicly available information on the financial health of banks and borrowers. We assess this issue via an event study of rating change announcements by leading international rating agencies, focusing on rating changes for European banks for which data on bond and equity prices are available. We find little evidence of announcement effects on bond prices, which may reflect the lack of liquidity in bond markets in Europe during much of our sample period. For equity prices, we find strong effects of ratings changes, although some of our results may suffer from contamination by contemporaneous news events. We also test for pre-announcement and post-announcement effects, but find little evidence of either. Overall, our results suggest that ratings agencies may perform a useful role in summarizing and obtaining non-public information on banks and that monitoring of banks’ risk through bond holders appears to be relatively limited in Europe. The relatively weak monitoring by bondholders casts some doubt on the effectiveness of a subordinated debt requirement as a supervisory tool in the European context, at least until bond markets are more developed. (J.E.L.: E53, G21, G33) [ABSTRACT FROM AUTHOR]

We create a tool for visual surveillance of the European banking system from a macroprudential perspective. The tool performs visual dynamic clustering with the self-organizing time map (SOTM) to visualize evolving multivariate data from two viewpoints: (i) multivariate cluster structures, and (ii) univariate drivers of changes in structures. In assessing the European banking system, the main tasks the SOTM can be used for are (i) identifying structural changes and breaking points in a large number of risk indicators, and their specific location in the cross-section, and (ii) identifying the build-up of, or generally changes in, individual risk indicators in the banking system as a whole. While the former view provides indications of changes in the banking system, the latter describes the sources of these changes. [ABSTRACT FROM AUTHOR]

The paper discusses the background to the European Central Bank's (the ECB's) choice of monetary strategy and goes on to consider in some detail the implications of an inflation targeting strategy in EMU. [ABSTRACT FROM AUTHOR]

Foreign currency (FX)-based loans and deposits became very popular in Central and Eastern European countries (CEECs) over the 2000-2011 period. In this paper, I simultaneously examine the demand-side (consumer-related) and supply-side (bank-related) determinants of the quick spread of FX banking. I use a newly constructed dataset on FX and domestic currency loans, deposits and interest rates, covering 16 CEECs overtime. Local-FX interest rate and market share spreads are: (1) lower in managed currency regimes; (2) strongly affected by the prevalence of FX funding, currency mismatch and FX banking restrictions, and (3) wider after economic crises. [ABSTRACT FROM AUTHOR]

This paper analyses income smoothing and cyclicality of loan-loss provisions (LLP) in Central European banks. I provide strong empirical evidence that banks in the region use loan-loss provisions to smooth their income streams, and that these provisions are procyclical with respect to national business cycles. In addition, I find that income smoothing may only partly be explained through the concept of 'saving for a rainy day'. Banks do use periods of high earnings to smooth income, but they also elect to build further reserves during periods of heavy losses-that is, on the 'rainy days' themselves. This behaviour deepens existing losses and may obscure the bank's underlying profitability. Introducing regulatory measures in line with the Bank of Spain's dynamic provisioning system would make income smoothing in Central European banks more transparent and could limit the scope for discretionary provisioning during periods of low profitability. [ABSTRACT FROM AUTHOR]

Since 2010, some European countries have been going through a difficult period of economic and financial fragility. The aim of this paper is to review the main causes of European financial instability. Since the analysis reflects an important interconnection between public debt and banking stability, we empirically investigate this interaction through a Granger causality analysis. Testing the possible existence of Granger causal relationships between sovereign debt and banking stability allows us to identify countries in which a sovereign crisis caused a banking crisis and vice versa. Finally, we describe possible solutions in order to exit from the crisis and the economic policy implications. [ABSTRACT FROM AUTHOR]

The aim of this paper is to review the theoretical and empirical literature on the impact of the affiliation of venture capital (VC) firms with a particular focus on the differences between Europe and the US. A main characteristic of VC firms is their high level of involvement in the management of funded firms. However, the VC industry is composed of heterogeneous actors. The literature has studied to a great degree the independent funds that dominate the US market. Yet, there also exist VC funds affiliated with banks or with industrial firm, which can benefit from synergies with their parent corporation. Several studies have highlighted significant differences between these types of VC firms. [ABSTRACT FROM AUTHOR]

Using a unique cross-sectional dataset of 381 cash and synthetic securitizations issued by 53 banks from the EU-15 plus Switzerland between 1997 and 2007, this paper provides empirical evidence for time-dependent negative wealth effects of credit risk securitization announcements in European banking. Baseline results hold when comparing estimated wealth effects with a control group of similar but non-securitizing banks for the relevant time period. Moreover, building several sub samples we find that the nexus between credit risk securitization, the issuing banks' overall risk exposure and wealth effects is associated with a variety of transaction- and bank-specific factors. [ABSTRACT FROM AUTHOR]

This paper examines the implications of mandatory IFRS adoption on the accounting quality of banks in twelve EU countries. Specifically, we analyse how the change in the recognition and measurement of banks' main operating accrual item, the loan loss provision, affects income smoothing behaviour and timely loss recognition. We find that the restriction to recognise only incurred losses under IAS 39 significantly reduces income smoothing. This effect is less pronounced in countries with stricter bank supervision, widely dispersed bank ownership and for EU banks cross-listed in the US. This provides additional evidence that institutions matter in shaping financial reporting outcomes. Further, the application of the incurred loss approach results in less timely loan loss recognition implying delayed recognition of future expected losses. In the light of the ongoing financial crisis it is questionable whether this is a desirable financial reporting outcome of mandatory IFRS adoption. [ABSTRACT FROM AUTHOR]

This paper analyzes the effects of ATM surcharges on deployment and welfare, in a model where banks compete for ATM and banking services. Foreign fees, surcharges and the interchange fee are endogenously determined. We find situations in which surcharges are welfare enhancing. Under strategic fee setting, the increase in deployment caused by surcharging might compensate the surplus loss caused by the increase in prices. [ABSTRACT FROM AUTHOR]

Competition between investment banks for lead underwriter mandates in IPOs is fierce, but having committed to a particular bank, the power of the issuer is greatly reduced. Although information revelation theories justify giving the underwriters influence over pricing and allocation, this creates the potential for conflicts of interest. In this clinical paper we analyse an interesting innovation that has been used in recent European IPOs whereby issuers separate the preparation and distribution roles of investment banks, and keep competitive pressure on the banks throughout the issue process. These ‘competitive IPOs’ allow the issuer greater control and facilitate more contingent fee structures that help to mitigate against ‘bait and switch.’ But unlike more radical departures from traditional bookbuilding – such as auctions – the competitive IPO is an incremental market-based response to potential conflicts of interest that retains many of the advantages of investment banks’ active involvement in issues. [ABSTRACT FROM AUTHOR]

In this paper we investigate whether banks that borrow from other banks have lower risk levels. We concentrate on a large sample of Central and Eastern European banks that allows us to explore the impact of interbank lending when exposures are long term and interbank borrowers are small banks. The results of the empirical analysis generally confirm the hypothesis that long-term interbank exposures result in lower risk of the borrowing banks. [ABSTRACT FROM AUTHOR]

During the last fifteen years, the European banking industry has experienced considerable consolidation through mergers and acquisitions against the background of the introduction of the single currency and reductions in cross-border barriers. This paper investigates whether these changes impacted on announcement period gains of the banks acquiring targets by examining the pre-euro, run-up to the euro and post euro eras. Evidence suggests bidders' gains have fallen with the development of economic and monetary union. It also reveals significant differences in the gains from acquisitions within and outside the eurozone. These results are consistent with increased competition among bidders and increased integration of the market in the eurozone area in the post-euro era. However, differing results relating to focused and diversifying bids suggest that the level of market integration is sector dependent. [ABSTRACT FROM AUTHOR]

In this paper the author argues that cross-border, intra-European bank mergers are likely to generate benefits similar to those enjoyed in the United States when interstate banking restrictions were removed. These benefits include greater banking efficiency, higher economic and employment growth, more entrepreneurial activity, and reduced economic volatility. [ABSTRACT FROM AUTHOR]

The article discusses various issues related to financial management. The theory of Harry DeAngelo and Linda DeAngelo focuses on making investment choices and payout policy. Information is presented regarding the market value of equity, present value of distributions and investment policies. Laurence Booth's comparison between Weighted Average Cost of Capital (WACC) valuation method and Adjusted Present Value (APV) method for valuation revealed that the WACC method is precise due to incorrect treatment of individual cash flows in the APV method. Yener Altunbas and others investigated the relationship between capital, risk and efficiency in European banks, which indicated a positive relationship between risk and the level of banking and liquidity.

This paper analyses the relationship between capital, risk and efficiency for a large sample of European banks between 1992 and 2000. In contrast to the established US evidence we do not find a positive relationship between inefficiency and bank risk-taking. Inefficient European banks appear to hold more capital and take on less risk. Empirical evidence is found showing the positive relationship between risk on the level of capital (and liquidity), possibly indicating regulators' preference for capital as a mean of restricting risk-taking activities. We also find evidence that the financial strength of the corporate sector has a positive influence in reducing bank risk-taking and capital levels. There are no major differences in the relationships between capital, risk and efficiency for commercial and savings banks although there are for co-operative banks. In the case of co-operative banks we do find that capital levels are inversely related to risks and we find that inefficient banks hold lower levels of capital. Some of these relationships also vary depending on whether banks are among the most or least efficient operators. [ABSTRACT FROM AUTHOR]

The deregulation of financial services in the European Union (EU), together with the establishment of the Economic and Monetary Union, aimed at the creation of a level playing-field in the provision of banking services across the EU. The plan was to remove entry barriers and to foster both competition and efficiency in national banking markets. However, one of the effects of the regulatory changes was to spur a trend towards consolidation, resulting in the recent wave of mergers and acquisitions. To investigate the impact of increased consolidation on the competitive conditions of the EU banking markets, we employ both structural (concentration ratios) and non-structural (Panzar-Rosse statistic) concentration measures. Using bank-level balance sheet data for the major EU banking markets, in a period following the introduction of the Single Banking Licence (1997-2003), this paper also investigates the factors that may influence the competitive conditions. Specifically, we control for differences in efficiency estimates, structural conditions and institutional characteristics. The results seem to suggest that the degree of concentration is not necessarily related to the degree of competition. We also find little evidence that more efficient banking systems are also more competitive. The relationship between competition and efficiency is not a straightforward one: increased competition has forced banks to become more efficient but increased efficiency does not seem to be fostering more competitive EU banking systems. [ABSTRACT FROM AUTHOR]

Financial stability in Europe has received renewed attention with the advent of EMU. This paper examines whether EU country banking systems are particularly vulnerable to systemic risk. Our approach is to explore episodes of banking sector distress for a large sample of countries, highlighting the experience of the EU. We estimate multivariate probit models linking the likelihood of banking problems to a set of macroeconomic variables and institutional characteristics such as aspects of bank supervision and regulation, restrictions on bank portfolios, and development of the banking system. Given these characteristics, the model predicts a low probability of banking sector distress in EMU countries. JEL classification: G21; E44; F41. [ABSTRACT FROM AUTHOR]

This paper analyzes the factors that influence entry and geographic diversification decisions, a topic of special strategic interest in a context of growing globalization. The empirical model we propose is tested in a framework— the Spanish savings-bank market—where recent deregulation has eliminated the legal barriers to entry. Our results show two important conclusions for the evolution of the effects of branching deregulation in Europe and the US. First, it seems that entry in new geographical markets has been impeded by the strategic interactions between entrants and incumbents. Second, savings banks exhibit a preference for closer locations at the time of expanding, which may have undermined the effects of deregulation and its potential benefits for consumers. [ABSTRACT FROM AUTHOR]

This paper aims at presenting some practical issues in modeling default risk of a single commercial credit counterparty from the perspective of a large retail bank. We define default risk as the probability that a counterparty's intrinsic credit quality deteriorates within a given time horizon such that contractual agreements cannot be honored. This work gives an insight into using scoring/rating models in a credit environment of a large European bank. Contrary to many banks, we did not define the segments in a first step with a view to developing the rating tools in a second step. Our approach has, to some extent, followed a different path. Iteratively, we both defined the borders for a particular segment and selected an appropriate rating tool. More particularly, customer segmentation has been carried out on the basis of various rating tools' goodness-of-fit criteria. The topics cover customer segmentation using goodness-of-fit measures, data measurement levels and optimization algorithms, rating tool calibration to the central default tendency and communication to the end user. [ABSTRACT FROM AUTHOR]

Ten years ago, the White Paper on the Completion of the Single Market announced the integration of European banking markets. The purpose of this essay is to identify four public issues that remain to be addressed. Home country control of international banks need to be complemented by host country control. The deposit guarantee schemes should be modified by rendering insured deposits first order claim'. A European authority is needed to ensure thanks do not exploit domestic rents to subsidize international activities. Finally, tax evasion is a fourth issue that remains to be addressed. The aim was to dismantle the technological, regulatory and fiscal barriers that prevented the free flow of goods, capital and persons in the European Union. As concerns banking and financial services, a major issue arises as to whether regulation and supervision must be handled by a unique European authority, or whether it can be delegated to independent national central banks and supervisory bodies. After trying in vain to harmonies national banking regulations over 20 years, the European Commission adopted the principle of the single banking licence, the home country control, and the opening of borders with minimal harmonization of regulations. The purpose of this paper is to develop a critical review of the approach adopted for the integration of banking markets in the European Union. The issues raised go far beyond the creation of a European market; they concern international trade in financial services. At a time when the North American Free Trade Agreement (NAFTA) integrates further the economies of Canada, Mexico and the United States, and when the new World Trade Organization has concluded successfully a trade agreement in financial services, a discussion of the policy issues raised by international banking integration is timely. The paper is structured as follows. The European banking industry and the early effects of financial integration are described in Section 2.... [ABSTRACT FROM AUTHOR]

This paper focuses on a specific aspect of prudential regulation: namely the impact on the stability of the financial system of a deterioration in public finances. This is a separate issue to the need for consumer protection that should be provided by rules for the conduct of business by financial institutions. [ABSTRACT FROM AUTHOR]

This paper presents the findings of an exploratory study of the content of and differences between managerial frames of references with regard to the structure and dynamics of competitive environments. These frames of references are examined and compared at both the industry level and the country level; and the paper shows the influences of both industry and institutional structures and national culture on managerial thinking. It therefore contributes to the field of comparative management, as well as the growing interest in cognitive analysis in the field of management. The study is particularly significant since (a) its context is the rapidly changing industry environment of Europe, and (b) the managers are all involved in the development of strategies for their firms. Thirty three top managers (16 English and 17 French) were interviewed in four industries (brewing, car manufacturing, retail banking and book publishing) on their understanding of their industry and the strategy of their company. Content analysis of the transcribed interviews surfaces cognitive constructs which facilitate the identification of similarities and differences between managers, (a) within industries, (b) across industries, (c) within countries, (d) between countries and (e) between countries within the different industries. The analysis also provides means whereby the constructs can be represented in the form of cognitive maps. [ABSTRACT FROM AUTHOR]

The development of European crowdfunding is directly connected to the prevalent structure of the banking system in the different member states. [ABSTRACT FROM AUTHOR]

This study examines the impact of the soundness of the banking sector on sovereign risk of EU member countries during the financial crisis using a selection of financial soundness indicators (FSIs) and the sovereign ratings of the three main rating agencies. Unlike previous literature that typically focuses on the ability of FSIs to foresee banking crises, we estimate ordered response models to assess the power of these indicators to explain sovereign risk. Our results show that evaluations made by the rating agencies are related to the lagged values of core FSIs such that an improvement in these indicators leads to improvements in upcoming sovereign ratings. Hence, reinforced banking soundness would reduce the sovereign risk. Accordingly, governments, supervisors and central banks should pay close attention to the evolution of certain FSIs related to the banking sector, in addition to other variables that have traditionally been taken into account in analysing sovereign risk. [ABSTRACT FROM AUTHOR]

Since the outbreak of the financial crisis in 2007, the level and volatility of the Euribor-OIS spreads have increased significantly. According to the literature, this variability is mainly explained by credit and liquidity risk premia. I provide evidence that part of the variability might also be explained by ambiguity in the phrasing of the Euribor survey. The participants in the survey are asked at what rate they believe interbank funds are exchanged between prime banks; given the lack of a clear definition of a prime bank, this question might leave room for subjective judgment. In particular, I find evidence that some of the variability of the Euribor rates might be explained by changes in the survey participants' perception of what a prime bank is. This evidence adds to the difficulties already encountered by previous studies in identifying and measuring exactly the determinants of the Euribor rates. I argue that these difficulties are at odds with the clarity, simplicity and replicability that should be required of a widely used financial benchmark. [ABSTRACT FROM AUTHOR]