EUROPEAN BANKING 3.0 - Bank Industry and Supervision in the Behavioural Finance Revolution


20th Report on the Italian Financial System

 

di: Fondazione Rosselli
a cura di: Giampio Bracchi, Umberto Filotto, Donato Masciandaro

EditoreEdibank
Anno2015
Pagine368
ISBN 978-88-449-1058-7
DisponibilitàDisponibile
Prezzo copertina€35,00
Prezzo Promozione €28,00
IVA assolta dall'editore

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Presentazione

The scenario of the Euro Area is characterized by three features: weak and uneven growth, high liquidity supported by unconventional monetary measures, and a new supervisory architecture in the financial sector. In this context, which are the perspectives for the Italian Banks in the European arena? The 20th Report on the Financial System investigates key issues using three different perspectives: micro, macro and regulatory views.
 
Part One “Behavioural money and banking” analyses the approach of Behavioural Economics (Be) to explore the banking and financial choices and to evaluate the appropriateness of different supervisory styles. Be (and also Neuroeconomics)allows us to observe phenomena from a different perspective and give us unusual and original instruments to make diagnoses. Also, thanks to their typical and experimental approach, studies that adopt these perspectives often can suggest solutions that have specific but substantial policy implications. The papers in this section are a typical example of both the potential and the limits of this approach. They refer to specific and diversified issues but, leveraging on the objective observation of behaviours, they contain immediate and realistic policy proposals.
  
In the Part Two “Bank industry” the Report illustrates updated aggregate evaluations of the health state of the Italian banks. The long financial crisis has widely impacted the European banking system, opening the debate on the efficiency and sustainability of different bank business models. In the early stages of the crisis, the banking system of countries, like Italy, in which the retail commercial bank model prevails, appeared to demonstrate greater resilience. However, in these same countries, with the severe downturn of their economic conditions, banks have subsequently revealed more critical areas: an important indicator is the sharp decline in profitability, that has been amplified by the new and more rigorous framework concerning banks regulatory capital, making it essential to rebalance costs and revenues and reconsider growth strategies.
 
Finally, the crucial and evolving effects of the new single supervisory architecture on the banking setting are analysed in the Part Three “Bank supervision”. The architecture of the Banking Union has been constructed on the two pillars entrusted to different authorities: the Single Supervisory Mechanism (Ssm), and the Single Resolution Mechanism (Srm) with the Single Bank Resolution Fund. The Banking Union has been strengthened with a considerable complexity of actors and procedures; however, the central role is played by the strong direction of supervision by the Ecb.

INTRODUCTION: BANK INDUSTRY AND SUPERVISION IN THE BEHAVIOURAL FINANCE REVOLUTION
1. Micro view: behavioural money and banking 
2. Macro view: bank industry performances 
3. Regulatory view: bank supervision
Part 1 - BEHAVIOURAL MONEY AND BANKING
 
BANK NUDGING. OPPORTUNITIES AND CHALLENGES FOR NUDGE STRATEGIES APPLIED TO THE CREDIT SYSTEM
1. Introduction 
2. The most expensive cup of coffee 
3. Nudging by default 
4. Nudging vs. marketing 
5. Nudging the nudge 
6. Nudging and substative law 
7. Actual and potential nudging 
8. Conclusions 
References
SLOW TRADING AND FINANCIAL MARKETS EFFICIENCY. SOME EXPERIMENTAL EVIDENCE
1. Introduction 
2. Surveying the literature 
3. Experimental design 
4. Participants and procedures 
5. Results 
6. Conclusions 
References
EMPOWERING BORROWERS: IS THE APR THE MOST APPROPRIATE CHOICE INDICATOR? A BEHAVIOURAL AND EMPIRICAL ANALYSIS
1. Introduction 
2. Literature review 56
3. Why do we prefer raw figures to percentages? 
4. Empirical analysis 
4.1 Sample 
4.2 Methodology 
4.3 Results 
5. Conclusions 
Appendix – Survey on financial choices 
References
THE ROLE OF BEHAVIOURAL ECONOMICS IN FINANCIAL SYSTEM REGULATION: THE CASE OF ITALIAN OCCUPATIONAL PENSION SCHEMES
1. Introduction 
2. Behavioural based policy-making 
3. Behavioural Economics regulation vs. nudges 
4. Using behavioural findings for pension fund participation in Italy 
4.1 The Italian pension system 
4.2 The use of experiments 
4.3 The experiments 
5. Conclusions 
Appendix – Mefop experiments 
References
BEHAVIOURAL ECONOMICS AND MONETARY POLICY
1. Introduction 
2. Behavioural Economics: principles 
3. Aggregate supply and Behavioural Economics 
4. Aggregate demand and Behavioural Economics 
4.1 Behavioural Economics and savings 
4.2 Behavioural Economics and credit 
5. Macroeconomic equilibrium and Behavioural Economics 
6. Behavioural Economics and monetary policy 
7. Conclusions 
References
CROWDFUNDERS APPRAISAL: ECONOMIC AND BEHAVIOURAL PROFILES
1. Introduction 
2. Crowdfunding on funders’ side 
3. An introduction to Behavioural Economics 
4. A brief description of the sample 
5. Empirical results 
5.1 Crowdfunding and traditional asset classes 
5.2 Crowdfunding and non traditional asset classes 
5.3 Crowdfunding and Smes 
5.4 Wealth level, gender and overconfidence 
6. Conclusions and future research perspectives 
References
CAN HIGH QUALITY INDEPENDENT DIRECTORS REDUCE CEO OVERCONFIDENCE?
1. Introduction 
2. Literature review and hypotheses 
3. Sample and methodology 
4. Results 
5. Conclusions 
References
Part 2 - BANK INDUSTRY
 
MIND THE GAP: THE PROFITABILITY OF THE ITALIAN BANKING SYSTEM IN A CHANGING WORLD
1. Introduction 
2. Methodology, data and results 
2.1 Panel regression (Euro Area) 
2.2 Cluster and principal components analysis (Euro Area) 
2.3 Cluster and principal components analysis (Italy) 
3. Conclusions 
References
LOAN LOSS PROVISIONING BEHAVIOUR OF ITALIAN BANKS: AN EMPIRICAL ANALYSIS
1. Introduction 
2. Literature review 
3. Data and descriptive analysis 
3.1 Data sources and definitions 
3.2 Descriptive statistics 
4. Econometric analysis 
4.1 The baseline regression 
4.2 Testing for other effects 
4.3 Local banking 
5. Conclusions 
References
DE-LEVERAGING, DE-RISKING AND MORAL SUASION IN THE BANKING SECTOR
1. Introduction 
2. Empirical specification 
3. Data and descriptive statistics 
4. Main empirical findings 
5. The crisis period and Eu banks 
6. Conclusions 
Appendix - Variable definition and sources 
References
NETWORK AGREEMENTS AND THE ITALIAN BANKING SYSTEM: PRELIMINARY EVIDENCE FROM FIRM PERFORMANCE
1. Introduction 
2. Italian legislation on network agreements 
3. Networks and competitiveness in literature 
4. The strategic profile of networked firms: a descriptive approach 
5. Is there a link between network agreements and performance? An econometric approach 
6. Conclusions and implications for the banking system 
References
Part 3 - BANK SUPERVISION
 
THE SINGLE SUPERVISORY MECHANISM. FROM THE BUILDING STAGE TO THE RACE TRACK
1. Introduction 
2. The building of the Ssm 
2.1 Theory and project 
2.2 Rationale and targets
2.3 The tasks of the Ssm
3. The principle of separation in the Ssm regulation 
3.1 An overview 
3.2 The Ecb objectives 
3.3 The relationship between the different tasks of the Ecb 
3.4 The decision-making procedure 
3.5 The organisational arrangements and the treatment of information 
3.6 The accountability requirements 
4. The principle of integration in the Ssm regulation 
4.1 A new form of integrated administration 
4.2 Operational aspects 
5. Legal regime: an overview of main issues 
5.1 The separation between regulation and supervision 
5.2 Legal regime and integration of the different legislations 
5.3 Framework, organization and procedures 
5.4 The Administrative Board of Review 
6. Supervision and banking resolution: complementarity or conflict 
7. Conclusions and prospects 
References
STRESSING THE EUROPEAN BANKS: AN EVALUATION OF THE COMPREHENSIVE ASSESSMENT
1. Introduction 
2. The sample 
2.1 Descriptive statistics 
3. Methodology 
3.1 Model specifications
3.2 Bank specific variables 
3.3 Country specific variables 
4. Main results 
5. Conclusions 
References
RISK CULTURE AND BANKING SUPERVISION
1. Introduction 
2. Literature 
3. Methods 
4. Results 
5. Conclusions 
References
CAPITAL BUFFERS, BUSINESS MODELS AND OWNERSHIP STRUCTURE: NEW CHALLENGES FROM THE EUROPEAN BANKING UNION
1. Introduction 
2. Literature review 
3. Sample and data 
3.1 Sample characteristics 
3.2 Capital buffer and explanatory variables 
4. Regression model 
5. Empirical results 
6. Conclusions 
References
MONETARY POLICY AND CAPITAL ADEQUACY: THE IMPACT ON CREDIT SUPPLY
1. Introduction 
2. Literature review and presentation of the hypotheses 
2.1 Literature review 
2.2 Presentation of the hypotheses 
3. Dataset and methodology 
3.1 Dataset 
3.2 Methodology 
4. Findings 
5. Conclusions 
References
ABOUT THE AUTHORS