Paola Bongini

The political economy of distress in East Asian financial institutions

Paola Bongini et al. — Tue, 17 Jan 2012 05:48:33 PST

The 1997±1999 East Asian crisis is an interesting case for studying the determinants of distress and closure of ®nancial institutions. Of a sample of 283 ®nancial institutions from Indonesia, Korea, Malaysia, the Philippines, and Thailand, 120 experienced distress, and by July 1999, 38 were closed. We ®nd that traditional, CAMEL-type ®nancial data for 1996 help predict distress and closure. ``Connections''Ðwith industrial groups or in¯uential familiesÐincreased the likelihood of distress, however, suggesting that supervisors had granted selective prior forbearance from prudential regulations. Since closure was more, not less, likely with connections, the closure processes themselves appear transparent. We also ®nd evidence of ``too big to fail'' policies.

How good is the market at assessing bank fragility? A horse race between different indicators

Paola Bongini et al. — Tue, 17 Jan 2012 05:42:15 PST

For a sample of individual banks, active in the East Asian countries during the years 1995-1998, we explore the performance of three sets of indicators of bank fragility computed on the basis of publicly available information. We compare the behavior of traditional “early warning” indicators, based on balance sheet information, with that of implicit deposit insurance premia, based on the stock prices dynamics, and with the behavior of credit rating agencies’ assessments. We find significantly different patterns among the three groups of indicators in their ability of forecasting financial distress at both a specific point in time and through time. More specifically in the South East Asia crisis episode the information based on stock prices or on judgmental assessments of credit rating agencies did not outpace backward looking information contained in balance sheet data. Stock market based information, though, has responded more quickly to changing financial conditions than ratings of credit risk agencies. Overall, the evidence supports the policy conclusion that, where the information processing is quite costly, as in most developing countries, it is important to simultaneously use a plurality of indicators of banks’ fragility.

Is financial innovation a still relevant issue?

Paola Bongini et al. — Tue, 17 Jan 2012 05:36:21 PST

In this study we investigate the effects of financial innovation on performance and asset growth for a sample of EU large banks. The novel contribution of this study is the use of a unique dataset that identifies banks’ attitude towards innovation across time and the level of information conveyed to market participants in order to understand: a) to what extent, in recent years, banks have focused their attention on financial innovation; b) to what extent an innovating attitude translates into greater asset growth and higher profitability;

Ownership, bank organization and retail lending in a low income area

Paola Bongini et al. — Tue, 17 Jan 2012 05:06:12 PST

The focus of this study is on the organizational features of banks operating in the South of Italy, namely major Italian banking groups and local independent banks. In our opinion, in order to evaluate the allocative and operational efficiency of the Southern Italian banking system, the issue to be addressed relates to the potential heterogeneous behavior between banks which are “truly local” – i.e. those banks whose real decisional centres are located in the Southern regions – with respect to those banks operating in the South but which have their decisional centres located in the Centre-North of the country (“outer banks”). The fact that bank strategies are defined in decisional centres located outside the Southern area could indeed explain the reduced credit support perceived by Southern SMEs. Two are the main research questions of the study. First, have the benefits of localism and relationship lending been deeply and negatively affected by the transfer of control rights outside the area (Mezzogiorno)? Second, is the organizational model adopted by local and independent banks (i.e. truly local banks) more effective in dealing with the needs of the local customer base?. Such questions are relevant not only with specific reference to southern Italy, but also to any region which experienced a reduction of locally based banks in favour of foreign banks (i.e. Central Eastern European Countries).

The role of pension funds in a global economy (in Italian)

Paola Bongini et al. — Tue, 17 Jan 2012 04:56:29 PST

Was there a “small-bank” anomaly in the Great Crisis of 2007-09?

Paola Bongini et al. — Thu, 07 Jul 2011 07:56:50 PDT

Drawing on a large set of listed banks from Europe, the US and Japan we start noticing that smaller-sized banks suffered less than larger banks in conjunction with the unfolding of the Great Crisis of 2007-09. Was this a small-bank anomaly analogous to the classic small firm effect? We conjecture that what seems to be a small bank anomaly might, in fact, signal a generalized market reassessment of the banking business model and tested whether stock markets penalized less the banks that kept more rooted to the traditional “originate-to-hold” (OTH) model while forgoing the opportunities disclosed by the “originate-to-distribute” (OTD) model. By an event study methodology, we focus on September 29, 2008, the day in which the initial rejection by Congress of the Paulson Plan provoked a true panic on the instability of banking worldwide and led the VIX (the main index measuring equity market volatility) to shoot to the highest level in 6 years. Our results detect that, indeed, banks that had kept closer to the OTH model – as proxied by a higher net interest income/operating income – experienced less negative abnormal returns. In spite of this, we still keep finding that larger-sized banks’ share prices were penalized more than the share prices of their smaller-sized homologues. Presumably, the “Too Big (or Interconnected) To Fail” credence, at least for a while, had been overruled. We also find that European and Japanese banks experiences less negative abnormal returns.

The EU Experience in Financial Services Liberalization: A Model for GATS Negotiations?

Paola Agnese Bongini — Sun, 06 Jan 2008 14:27:22 PST

The investigation of the sequencing of liberalization in the EU financial services industry is the primary object of this study. The relevance of the EU model for financial liberalization is threefold. First, the EU route towards liberalization in financial services could be regarded as a blueprint for opening up markets worldwide, especially in the context of multilateral liberalization within the WTO framework. Second, the EU model calls for an investigation of the degree of compatibility between regional agreements and multilateral commitments. Third, the EU regional experience raises the question of the extent to which it can be transferred in different settings and used elsewhere without the supranational legislative, judicial and administrative structure of the European Community. I argue that the intra-EU approach – minimum harmonization, mutual recognition and home country control – has a potential for widespread validity

Deposit Insurance in the Italian Banking System (in Italian)

Paola Agnese Bongini — Sun, 06 Jan 2008 13:52:34 PST

The Italian Southern Banking System. Crisis, Restructuring and Policies (in Italian)

Paola Agnese Bongini et al. — Sun, 06 Jan 2008 13:48:46 PST

Governance, Diversification and Performance: The Case of Italy’s Banche Popolari

Paola Agnese Bongini et al. — Sun, 06 Jan 2008 13:44:59 PST

The value of relationship banking: small banks in an era of consolidation

Paola Agnese Bongini et al. — Sun, 06 Jan 2008 13:41:13 PST

Reverse mortgages: a new product for the Italian banking market (in Italian)

Paola Agnese Bongini — Sun, 06 Jan 2008 13:29:27 PST

What happened to the Italian Southern Banking System? (in Italian)

Paola Agnese Bongini et al. — Sun, 06 Jan 2008 13:14:19 PST

Organization and Performance of Italian Banking Groups

Paola Agnese Bongini et al. — Sun, 09 Dec 2007 14:16:46 PST

Emerging Banking Systems

Paola Agnese Bongini et al. — Sun, 09 Dec 2007 13:51:01 PST

This book is an in-depth analysis of the key players (China, India, Brazil, Russia, Turkey, Indonesia, North Africa) of the unprecedented international economic integration of the last 25 years. Despite their success, the fragilities of their banking systems pose constraints to domestic growth and risks to global financial stability.

The financial system (in Italian)

Paola Agnese Bongini et al. — Sun, 09 Dec 2007 13:42:21 PST

David and Goliath: small banks in an era of consolidation

Paola Bongini et al. — Tue, 24 Jul 2007 08:29:49 PDT