Crisis, Risk and Stability in Financial Markets

249 Pages·2013·1.128 MB·English

by  Juan Fernández de Guevara Radoselovics, José Manuel Pastor Monsálvez (eds.)

PalgraveMacmillanStudiesinBankingandFinancialInstitutions
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Crisis, Risk and Stability
in Financial Markets
Editedby
Juan Fernández de Guevara Radoselovics and
José Manuel Pastor Monsálvez
UniversityofValencia,Spain
Introduction,selectionandeditorialmatter©JuanFernándezdeGuevara
RadoselovicsandJoséManuelPastorMonsálvez2013
Individualchapters©contributors2013
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Contents
ListofIllustrations vi
NotesonContributors ix
Introduction 1
JuanFernándezdeGuevaraRadoselovics
andJoséManuelPastorMonsálvez
1 FinancialStabilityandEconomicGrowth 8
SantiagoCarbó-ValverdeandLuisPedaugaSánchez
2 FinancialCrisisandEUBanks’Performance 24
TedLindblomandMagnusWillesson
3 Diversification,DiversityandSystemicRiskin
EuropeanBanking 49
PierluigiMorelli,GiovanniB.PittalugaandElenaSeghezza
4 BaselIII,Pillar2:TheRoleofBanks’InternalControl
Systems 71
ElisabettaGualandri
5 ShadowBankingandSystemicRisk:InSearchof
RegulatorySolutions 96
GianfrancoA.VentoandPasqualeLaGanga
6 SocialLendinginEurope:Structures,Regulationand
PricingModels 116
MarioLaTorreandFabiomassimoMango
7 Banks’Ratings,theFinancialCrisisandSizeofEntities 156
CarlosSalvadorMuñoz,JoséManuelPastorMonsálvezand
JuanFernándezdeGuevaraRadoselovics
8 StockExchangeMergersintheAftermathoftheCrisis:
NewInsights 183
MaurizioPolatoandJosancoFloreani
9 SustainabilityandFinancialInclusioninMicroinsurance 203
MartadelaCuestaGonzález,CristinaRuzayPaz-Curbera
andFranciscoJavierGarayoaArruti
Index 231
v
Illustrations
Figures
1.1 Selectedtransitionvariablesplottedagainsttime 19
1.2 Effectofpositivefinancialdevelopmentshocksbyinitial
stateofeconomy 19
2.1 Thedevelopmentofshort-termmarketrates(3months)
inthefiveregions 41
3.1 Returndistributionatthesystemlevel 58
3.2 Correlationsbetweenbanks’stockprices 63
3.3 Correlationsbetweenstockpricesofbankswithassets
d
exceeding 300billion 63
3.4 Cross-sectionvariabilityoftheROEforlargeEuropean
banks 64
3.5 Cross-sectionvariabilityoftheROEforlarge
internationalbanks 65
5.1 Shadowbankliabilitiesversustraditionalbankliabilities 97
5.2 Prudentialstandardsandsupervisoryoversight:degree
ofapplication 98
5.3 Theshadowcreditintermediationprocess 102
5.4 Thetwoliquidityspirals:lossspiralandmarginspiral 103
5.5 Phase-intimeline:graph 107
5.6 Phase-intimeline:table 108
6.1 DistributionofSLplatformsactiveintheUE 119
6.2 StronglyPureSL(directmodel) 124
6.3 PureorPass-ThroughSL(directmodel) 124
6.4 HybridSL(brokeredmodel) 125
6.5 DistributionofpureplatforminEU 132
6.6 Distributionofprofit-basedplatformsinEU 132
6.7 DistributionofbrokeredplatformsinEU 133
6.8 Anoperationalmodelforsociallending 142
7.1 Distributionofratingsbysize:beforeversusafterthe
outbreakoffinancialcrisis 165
7.2 Changeintheratingestimatedbeforeversusafter
financialcrisis 175
9.1 Themicroinsurancemarket 210
9.2 Theinclusivefinancialproductscircle 211
9.3 Microinsuranceperformancebalance 214
vi
ListofIllustrations vii
9.4 Microinsurancedeliverychannels 218
9.5 Netincomeratio 224
9.6 Incurredexpenseratio 225
9.7 Incurredclaimsratio 226
Tables
1.1 Selectedstudiesonthegrowthresponsivenessfinance
hypothesis 12
1.2 Lagrangemultipliertestforlinearity 17
2.1 Numberofbanks(N),totalassets(TA)andmeantotal
assets(MillionEUR)byyearandbyassociationform 30
2.2 Numberofbanksandcountriesincludedinthesample
byregion 31
2.3 TheoverallprofitabilityofEUbanksindifferentregions 33
2.4 TheaverageprofitabilityofEUbanksintermsofROIF
andROFL 36
2.5 Leveragespreadbefore(LS )andafter(LS )loanloss
bLL aLL
provisions 38
2.6 Interestmargins(IM)andaverageinterestexpenses(k )
D
oftheaverageEUbank 40
2.7 Capitalriskexposure(D/E)forbanksingeneral,
commercialbanks(CB)andsavingsbanks(SB) 44
3.1 Numberofcreditinstitutions 52
3.2 ConcentrationmeasuresofEuropeanbanking 52
3.3 Thebiggest15banksintheworld 53
3.4 Non-interestincomeshare 54
3.5 Twobankingsystems 57
3.6 Risk–returnatthesystemlevel 59
3.7 Thebanksample 62
4.1 Coreprinciplesforeffectivebankingsupervision 86
4.2 TheEuropeanSupervisoryAuthorities(ESA) 88
5.1 Thesteps,entitiesandfundingtechniquesinvolvedin
shadowcreditintermediation 101
6.1 Ataxonomyofsociallendingplatforms 123
6.2 SociallendingplatformsinEurope 130
6.3 DistributionofpricingformulasadoptedbySLplatform
inEurope 147
6.4 Averageinterestrateappliedbytheplatformsofthesample 148
6.5 AverageinterestratesandusuriousratesinItaly 150
7.1 Descriptivestatisticsofratingsandthemarketshareof
CRAs 163
viii ListofIllustrations
7.2 DescriptivestatisticsofratingsissuedbyFitchdepending
ofthesizeofbanks 164
7.3 Descriptivestatisticsofthedeterminantsofthebanks
evaluatedbyFitch 170
7.4 Eqn(1)–(2):orderedprobitmodelwithrandomeffects 172
7.5 CRIanditscomponents 177
8.1 EV/EBITDAmultipleinmajorexchanges 190
8.2 Theeconomicsofmergeragreements 192
8.3 Estimatedlossesinvaluefor5percentdecreasein
revenuesCAGRor5percentincreaseincostCAGR 197
Boxes
4.1 Internalgovernanceinbanking 76
4.2 Internalcontrolreview(Pillar2) 78
Annex
9.1 Formaloperatorsandinstitutionsvisited 229
9.2 ResearchprogrammesinColombia,PeruandBrazil 229
Contributors
Santiago Carbó-Valverde is Director of Financial Studies and Analysis
atBancoMareNostrumandFullProfessorofEconomicsattheUniver-
sityofGranada,andDirectorofFinancialStudiesattheSpanishSavings
BanksFoundation(FUNCAS).HeisalsoaresearchprofessorattheInsti-
tutoValencianodeInvestigacionesEconomicas(IVIE).Hehasalsobeen
aresearcherandconsultantattheFederalReserveBankofChicagosince
2008. He has been a consultant for both public and private financial
institutions. HeobtainedhisPhDinEconomicsfromtheUniversityof
Wales, Bangor, UK. He has published more than 200 papers on finan-
cial systems in European Economic Review, Review of Finance, Journal of
Money,CreditandBanking,JournalofInternationalMoneyandFinanceand
Journal of Banking and Finance. He has participated in conferences and
internationalforums,includingtheG-20.
Marta de la Cuesta González is a senior lecturer at the Department
of Applied Economics, Universidad Nacional de Educación a Distancia
(UNED), Spain. She was Vice-chancellor of Economic Affairs at UNED
between2005and2009.ShehasheldtheTelefónicaChairinCorporate
ResponsibilityandSustainability,isamemberoftheSpanishCorporate
SocialResponsibilityBoard(MinisteriodeTrabajo),andhasbeenaninde-
pendentmemberoftheBancaCívicaBoardsinceJune2011. Shehasa
PhD in Economics and Business Management. A teacher at undergrad-
uate and postgraduate levels, she is responsible for delivering modules
in the areas of banking, financial systems and sustainable finance. She
isafoundingmemberoftheEconomicswithoutFrontiersNGOandhas
promotedthefoundationoftheSpanishCSRWatch.Hermainresearch
interestsincludebankingandfinance,corporatesocialresponsibilityand
socially responsible investing. Her work has been published in books,
conference proceedings and academic journals such as Journal of Busi-
nessEthics,BusinessEthics:AEuropeanReview,TheServiceIndustryJournal,
CorporateSocialResponsibilityandEnvironmentalManagement.
Juan Fernández de Guevara RadoselovicsisAssistantProfessoratthe
University of Valencia and Associate Researcher at the Instituto Valen-
cianodeInvestigacionesEconómicas(IVIE).Between1997and2008he
was a member of the technical staff at IVIE. He has also been a asso-
ciateresearcherofseveralprojectsoftheSpanishNationalR+D+IPlan.
ix