Bank Performance, Risk and Securitization

320 Pages·2013·2.338 MB·English

by  Joseph Falzon (eds.)

Palgrave Macmillan Studies in Banking and Financial Institutions
Series Editor: P rofessor Philip Molyneux
The Palgrave Macmillan Studies in Banking and Financial Institutions are international
in orientation and include studies of banking within particular countries or regions,
and studies of particular themes such as Corporate Banking, Risk Management,
Mergers and Acquisitions, etc. The books’ focus is on research and practice, and they
include up-to-date and innovative studies on contemporary topics in banking that will
have global impact and influence.
Titles include:
Mario Anolli, Elena Beccalli and Tommaso Giordani ( editor)
RETAIL CREDIT RISK MANAGEMENT
Seth Apati
THE NIGERIAN BANKING SECTOR REFORMS
Power and Politics
Caner Bakir
BANK BEHAVIOUR AND RESILIENCE
The Effect of Structures, Institutions and Agents
Alessandro Carretta and Gianluca Mattarocci (editors)
ASSET PRICING, REAL ESTATE AND PUBLIC FINANCE OVER THE CRISIS
Dimitris N. Chorafas
BASEL III, THE DEVIL AND GLOBAL BANKING
Dimitris N. Chorafas
HOUSEHOLD FINANCE
Adrift in a Sea of Red Ink
Stefano Cosma and Elisabetta Gualandri (editors)
THE ITALIAN BANKING SYSTEM
Impact of the Crisis and Future Perspectives
Joseph Falzon (editor)
BANK PERFORMANCE, RISK AND SECURITIZATION
Joseph Falzon (editor)
BANK STABILITY, SOVEREIGN DEBT AND DERIVATIVES
Juan Fernández de Guevara Radoselovics and José Pastor Monsálvez (editors)
CRISIS, RISK AND STABILITY IN FINANCIAL MARKETS
Juan Fernández de Guevara Radoselovics and José Pastor Monsálvez (editors)
MODERN BANK BEHAVIOUR
Franco Fiordelisi and Ornella Ricci (editors)
BANCASSURANCE IN EUROPE
Past, Present and Future
Josanco Floreani and Maurizio Polato
THE ECONOMICS OF THE GLOBAL STOCK EXCHANGE INDUSTRY
Jill M. Hendrickson
FINANCIAL CRISIS
The United States in the Early Twenty-First Century
Otto Hieronymi and Constantine Stephanou (editors)
INTERNATIONAL DEBT
Economic, Financial, Monetary, Political and Regulatory Aspects
Paola Leone and Gianfranco A. Vento (editors)
CREDIT GUARANTEE INSTITUTIONS AND SME FINANCE
Philip Molyneux (editor)
BANK PERFORMANCE, RISK AND FIRM FINANCING
Philip Molyneux (editor)
BANK STRATEGY, GOVERNANCE AND RATINGS
Victor Murinde (editor)
BANK REGULATORY REFORMS IN AFRICA
Bernardo Nicoletti
CLOUD COMPUTING IN FINANCIAL SERVICES
Özlem Olgu
EUROPEAN BANKING
Enlargement, Structural Changes and Recent Developments
Fotios Pasiouras
GREEK BANKING
From the Pre-Euro Reforms to the Financial Crisis and Beyond
Daniela Pîrvu
CORPORATE INCOME TAX HARMONIZATION IN THE EUROPEAN UNION
Ramkishen S. Rajan
EMERGING ASIA
Essays on Crises, Capital Flows, FDI and Exchange Rate
Allesandro Roselli
FINANCIAL STRUCTURES AND REGULATION: A COMPARISON OF CRISES IN THE
UK, USA AND ITALY
Yasushi Suzuki
JAPAN’S FINANCIAL SLUMP
Collapse of the Monitoring System under Institutional and Transition Failures
Gabriel Tortella and José Luis García Ruiz
SPANISH MONEY AND BANKING
A History
The full list of titles available is on the website:
www.palgrave.com/finance/sbfi.asp
Palgrave Macmillan Studies in Banking and Financial Institutions
Series Standing Order ISBN 978–1–4039–4872–4
You can receive future titles in this series as they are published by placing a standing
order. Please contact your bookseller or, in case of difficulty, write to us at the address
below with your name and address, the title of the series and the ISBN quoted above.
Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke,
Hampshire RG21 6XS, England
Bank Performance,
Risk and Securitization
Edited by
Joseph Falzon
Faculty of Economics, Management and Accountancy, University of Malta
Editorial matter, introduction and selection © Joseph Falzon 2013
Remaining chapters © Respective authors 2013
Softcover reprint of the hardcover 1st edition 2013 978-1-137-33208-0
All rights reserved. No reproduction, copy or transmission of this
publication may be made without written permission.
No portion of this publication may be reproduced, copied or transmitted
save with written permission or in accordance with the provisions of the
Copyright, Designs and Patents Act 1988, or under the terms of any licence
permitting limited copying issued by the Copyright Licensing Agency,
Saffron House, 6–10 Kirby Street, London EC1N 8TS.
Any person who does any unauthorized act in relation to this publication
may be liable to criminal prosecution and civil claims for damages.
The authors have asserted their rights to be identified as the authors of this work
in accordance with the Copyright, Designs and Patents Act 1988.
First published 2013 by
PALGRAVE MACMILLAN
Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills, Basingstoke,
Hampshire RG21 6XS.
Palgrave Macmillan in the US is a division of St Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN 978-1-349-46156-1 ISBN 978-1-137-33209-7 (eBook)
DOI 10.1057/9781137332097
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources. Logging, pulping and manufacturing
processes are expected to conform to the environmental regulations of the
country of origin.
A catalogue record for this book is available from the British Library.
A catalog record for this book is available from the Library of Congress.
Contents
List of Figures v ii
List of Tables i x
Notes on Contributors x i
Introduction 1
Joseph Falzon
1 The Impact of the New Structural Liquidity
Rules on the Profitability of EU Banks 7
Laura Chiaramonte, Barbara Casu and Roberto Bottiglia
2 Basel III and Banking Efficiency 20
Ted Lindblom and Magnus Willesson
3 Estimating the Probability of Financial Distress in
European Markets: Prediction Models and Empirical
Applications 3 7
Andrea Cerri and Gimede Gigante
4 Performance Management Systems in Swedish Savings Banks:
A Longitudinal Study through the First Quarter-Century
of Deregulation 5 3
Viktor Lundberg
5 Does Asset-Backed Securitization Affect the Credit Risk of the
Originator Banks? The Italian Case 80
Francesca Battaglia and Maria Mazzuca
6 Microcredit Securitization 1 14
Mario La Torre and Fabiomassimo Mango
7 Country Risk: Measurement Approaches and ECAIs Rating 147
Pasqualina Porretta, Gianfranco A.Vento and Fabrizio Santoboni
8 Top Players in Central and Eastern Europe: Does
their Widespread Presence Enhance Bank Efficiency? 187
Katarzyna Mikołajczyk
9 Asset Management Issues in Sovereign Wealth Funds:
An Empirical Analysis 2 12
Andrea Paltrinieri and Flavio Pichler
v
vi Contents
10 A VAR Approach to the Analysis of the Relationship between
Oil Prices and Industry Equity Returns 235
Joseph Falzon and Daniel Castillo
11 China’s Controlled Potential Property Bubble and
Its Economic Slowdown: Overview of Causes and
Policy Options 266
René W.H. van der Linden
Index 301
List of Figures
1.1 The NSFR construction 1 0
1.2 The average NSFR value of the largest European
sample banks in each year (2003–2010) 1 1
1.3 NSFR by specialization for the largest European
sample banks in each year (2003–2010) 12
1.4 ROA and ROE of the largest European sample banks
in each year (2003–2010) 1 3
1.5 The trend of explanatory variables (2003–2010) 1 4
4.1 Framework to examine change in the PMSs of banks 5 8
6.1 Number of active borrowers, southern hemisphere (2011) 118
6.2 Gross microcredit portfolios, southern hemisphere (2011) 1 19
6.3 Average value of microcredit, southern hemisphere (2011) 120
6.4 Gross microcredit portfolios in European countries
(sample 2009) 1 20
6.5 Number of active borrowers, in European countries
(sample 2009) 1 21
6.6 The standard microcredit structure in developing countries 123
6.7 The standard microcredit structure in Europe 123
6.8 The structure of an ABS transaction 1 26
6.9 The flow of funds of an ABS transaction 127
6.10 H ybrid Microcredit Securitization 1 28
6.11 D irect Microcredit Securitization structure 129
6.12 A verage gross loans for MFIs in the southern hemisphere
(2011 – US dollars) 1 30
6.13 A verage active borrowers for MFIs in
the “south of the world” (2011) 1 31
6.14 I ndirect Microcredit Securitization 1 32
6.15 S econd–Level indirect Microcredit Securitization 133
6.16 S econd–Level IMBS with Investment Fund acting as SPV 135
6.17 H ybrid Indirect Microcredit Securitization 1 36
7.1 Country risk: the different dimensions 1 49
7.2 The three steps of Moody’s sovereign rating methodology 1 65
7.3 Spreads government bond (Italy, France, Greece,
Spain) – German Government bond (2y) 1 70
7.4 Spreads government bond (Italy, France, Greece,
Spain) – German Government bond (5y) 1 71
7.5 Spreads government bond (Italy, France, Greece,
Spain) – German Government bond (10y) 171
vii
viii List of Figures
7.6 Cumulative default probability: Italy, France, Italy, Greece 173
7.7 Gross and net outstanding notional in sovereign CDS 175
7.8 Sovereign CDS, US$ 5y (German, Italy, France,
Greece, Spain) 1 76
7.9 Sovereign CDS, US$ 10y (German, Italy) 1 77
8.1 Gross domestic product at purchasing power parity,
per capita, Index (EU27=100) 1 91
8.2 Technical efficiency and scale efficiency; CEE top player
subsidiaries in relation to: (a) CEE7 average,
(b) host country average 1 99
8.3 Technical efficiency of individual CEE top player subsidiaries
in relation to: (a) CEE7 average, (b) host country average 201
8.4 Z-score for CEE top player subsidiaries in relation to:
(a) CEE7 average, (b) host country average 202
10.1 O il price transmission channels to stock prices 237
10.2 R eal oil price 2 44
10.3 U K equity returns 2 45
10.4 U S equity returns 2 46
10.5 I mpulse response functions for UK equity returns 256
10.6 I mpulse response functions for US equity returns 257
11.1 C hina’s mortgage-to-loan ratio for all financial institutions
between 2005 and 2011 270
11.2 C hina’s real estate investment as percentage of total GDP; as
percentage of fixed capital formation; and as percentage
of fixed-asset investments (2002–2011) 273
11.3 C hina’s money supply (M2) and national average selling
price of commodity properties (ASP) 2 83
1 1.4 C hina’s CPI inflation rate and one-year deposit interest rate 284
11.5 C hina CSI 300 stock index performance (2002–2012)
year-to-date 2 85
11.6 C hina property sector fund by sources (RMB billion) 291
List of Tables
1.1 S ample distribution by specialization in each
European country (2003–2010) 1 0
1.2 E xplanatory variables definition and predicted sign 13
1.3 C orrelations between banks’ performance and
explanatory variables (2003–2010) 1 5
1.4 P anel regressions 16
2.1 T he balance sheets of the fictitious bank with different
levels of regulations 2 7
2.2 R isk and return of four scenario-type banks under different
regulatory terms 2 9
2.3 C omparison of banks with compensating lower ROE
by increasing premium 3 2
5.1 S ample 85
5.2 S ummary statistics for the dependent variable, the key
independent variables and the control variables 9 0
5.3 O rdered probit models focusing on changes in
credit risk of 2% over the whole period (2000–2009) 9 1
5.4 O rdered probit models focusing on credit risk changes
of 2% for banks, split by sub-periods 9 3
5.5(a) R obustness test: ordered probit model focusing on credit risk
changes of 1% over the whole period (2000–2009) 95
5.5(b) Robustness test: ordered probit model focusing on
credit risk changes of 3% over the whole period
(2000–2009) 96
5 .6 R obustness test: ordered probit models focusing on
alternative cut-offs (1% and 3%) for banks,
split by sub-periods 9 8
5.7 R obustness test: ordered logit models focusing on different
cut-offs (1%, 2% and 3%) over the whole period
(2000–2009) 1 00
5.8 R obustness test: binary probit model over the whole
period (2000–2009) 101
5.9 R obustness test: binary probit models for banks, split
by sub-periods 1 02
6.1 M FIs surveyed in the world 1 17
6.2 T he main features of BRAC I, MOSEC I and BlueOrchard I 1 34
6.3 T he main features of the different MBS structures 1 37
7.1 B anks and sovereign downgrades 1 53
ix