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This paper analyzes the features of the boards of large listed European banks and their degree of “collective suitability” as formalized by the Capital Requirements Directives (CRD4) and evaluates whether closer proximity to the collective suitability regulatory paradigm affects banks’ performance, risk and risk-adjusted performance. We leverage Self-Organizing Maps (SOMs) to analyze board features and suitability (i.e. competence, diversity, independence and time commitment) jointly as a multifaceted, non-linear combination of all board variables, rather than evaluating the single variables individually as in the mainstream literature. Using a hand-collected dataset based on numerous features of boards of directors, we find that European banks’ boards can be classified in four different board archetypes characterized by different degrees of collective suitability. Our findings also suggest positive relationships between the degree of collective suitability and performance, risk-adjusted performance, and risk, confirming that the regulatory provisions on governance are going in the right direction, enhancing effective and prudent management.

This paper addresses the issue of systemic risk in insurance and investigates how financial markets evaluate the introduction of a new regulation addressed to global systemically important insurers (G-SIIs). We analysed the stock price reactions and the evolution of the distance-to-default of a sample of 44 of the world's largest insurers to the publication of the first list of 9 G-SIIs and the release of information regarding their new capital requirements and other policy measures. The results of our event study suggest that, overall, investors doubt the effectiveness of the new regulatory framework in reducing systemic risk in the insurance sector and curbing the moral hazard implications of a “too systemic to fail” policy.

This paper contributes to the existing literature on bank crisis and bank profitability by shedding light on “profitability shock” (i.e. a sudden and sizeable decline in profitability) and “profitability recovery” (i.e. returning to the previous level). Using a sample of 109 European bank holding companies over the years 2006-2016, we investigate the main drivers of these profitability shocks and the factors allowing banks to regain profitability and avoid a more severe crisis. Our findings show that (1) the profitability crisis has its roots in the lending activity and in the deterioration of the loan portfolio caused by a strong risk appetite that is not counterbalanced by adequate loan loss provisions and capitalization; (2) banks that recover after the profit shock adopt a more conservative lending policy, reduce their credit offer and tackle more effectively the NPL issue.

The current international financial crisis, which started in 2007 in the US and soon spread to the rest of the world, has revealed that the failure of an interconnected and complex financial institution, even though not necessarily large in terms of total assets, can threaten the stability of the entire financial system and have serious negative consequences for the real economy. In this study, we survey the analytical framework for identifying systemically important financial institutions (SIFIs) and discuss the various regulatory proposals that have been put forward at the national and global level to deal with SIFIs.

Il rapido e consistente deterioramento del portafoglio prestiti bancari, causato dal rallentamento dell’economia nel corso degli ultimi anni, e la conseguente elevata incidenza dei crediti deteriorati (NPL) nei bilanci delle banche europee costituisce una preoccupazione per le autorita di vigilanza, oltre che per le stesse banche. Un’elevata rischiosita del portafoglio prestiti riduce la redditivita delle banche e al limite ne compromette la stabilita e al contempo e una delle principali cause del rallentamento dell’offerta di credito, nonostante l’abbondante liquidita immessa nel sistema dalla BCE. L’articolo si propone di analizzare, con riferimento alle banche europee e in particolare a quelle italiane, il fenomeno dei NPL e le loro conseguenze, e di individuare le soluzioni adottabili dalle singole banche ovvero a livello di sistema. Se da un lato, l’implementazione da parte delle banche di pratiche gestionali piu efficaci ed efficienti puo contribuire a ridurre l’incidenza dei NPL nei bilanci bancari, restano peraltro ostacoli dovuti a fattori esogeni, quali inefficienze nelle procedure di gestione delle crisi aziendali e/o nel recupero dei crediti o ancora l’assenza di un ampio ed efficiente mercato secondario per i NPL. Questo giustifica la ricerca di soluzioni di sistema, che tuttavia - a differenza di quanto accaduto in passato in altri paesi europei - non puo contare su un consistente aiuto pubblico. Si tratta quindi di trovare un difficile bilanciamento tra costi individuali e benefici che invece quantomeno in parte sono di natura pubblica

We investigate whether financial markets reacted to the regulatory changes implied by the publication of the list of systemically important financial institutions (SIFI) and the new rules designed to address the too-big-to-fail problem of systemic banks. By applying event study methodology to a sample of 70 of the world’s largest banks, we assess whether the stock prices of SIFIs reacted significantly and differently from those of other large banks not deemed to be systemically important following the release of information regarding the methodology used to identify SIFIs and their new capital requirements; the disclosure of the first list of 29 SIFIs; and the publication of the updated list of 28 SIFIs. Overall, we determine that financial markets did not univocally react to the new regulation regarding SIFIs. However markets discriminated between high and low capitalized banks and they correctly estimated the probable effects of the additional capital requirements.

We address the issue of systemic risk in insurance and investigate whether financial markets reacted to the regulatory changes implied by the publication of the list of global systemically important insurers (G-SIIs) and the new rules designed to address the systemic risk posed by large and interconnected insurers. By applying event study methodology to a sample of 44 of the world’s largest insurers, we assess whether the stock prices of G-SIIs reacted significantly and differently from those of other large insurers not deemed to be systemically important, following the publication of the first list of 9 G-SIIs and the release of information regarding their new capital requirements and other policy measure. Overall, we determine that financial markets did not react to the new regulation regarding G-SIIs, confirming the results obtained in the banking sector. Financial markets question the capability of the new rules to effectively curb the moral hazard implications of a too-big-to-fail policy.

This survey on Relationship Lending (RL) reviews thirty years of literature in a new analysis framework that considers the alleged benefits of RL in all possible scenarios under which banks and firms could operate from a good time scenario to a scenario of generalized crisis affecting both firms and banks. The number of studies currently conducted on RL in a scenario of prolonged crisis is growing rapidly, confirming that RL remains a viable solution and that it helps both banks and their customers to weather the storm. We also add suggestions on additional dimensions of RL that could be investigated in empirical studies to capture the presence of RL in the credit policy of each bank more effectively and thus better measure its effects on both sides – firm and bank – of the relationship.