THE PALGRAVE HANDBOOK OF EUROPEAN BANKING Edited by Thorsten Beck and Barbara Casu www.ebook3000.com The Palgrave Handbook of European Banking Thorsten Beck  •  Barbara Casu Editors The Palgrave Handbook of European Banking www.ebook3000.com Editors Thorsten Beck Cass Business School City, University of London London, UK Barbara Casu Cass Business School City, University of London London, UK ISBN 978-1-137-52143-9    ISBN 978-1-137-52144-6 (eBook) DOI 10.1057/978-1-137-52144-6 Library of Congress Control Number: 2016959995 © The Editor(s) (if applicable) and The Author(s) 2016 The author(s) has/have asserted their right(s) to be identified as the author(s) of this work in accordance with the Copyright, Designs and Patents Act 1988 This work is subject to copyright All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed The use of general descriptive names, registered names, trademarks, service marks, etc in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication Neither the publisher nor the authors or the editors give a warranty, express or implied, with respect to the material contained herein or for any errors or omissions that may have been made Cover image Deco Images II / Alamy Stock Photo Printed on acid-free paper This Palgrave Macmillan imprint is published by Springer Nature The registered company is Macmillan Publishers Ltd The registered company address is: The Campus, Crinan Street, London, N1 9XW, United Kingdom Preface The European banking landscape has profoundly changed as a result of the regulatory response to the 2007–8 global financial crisis and ensuing sovereign debt crisis in the Eurozone Moreover, the extensive changes in the economic and regulatory environment have highlighted a number of unresolved issues in European banking This Handbook offers a comprehensive overview of these key issues, taking stock after the recent crises and looking forward Although the new regulatory architecture is now mostly in place, its successful implementation depends crucially on how the Eurozone deals with the legacy of the financial crises Even after substantial regulatory reforms, debates on further reforms needed to strengthen the EU regulatory framework to limit future risks arising from the banking system are ongoing The persistent weakness of some Eurozone banking systems puts the implementation of the newly agreed rules to a test It is against this background that this Handbook aims to provide an understanding of the key issues facing European banks The Handbook is composed of five main parts Part 1, European Banking: Through the Crisis and Beyond, offers an overview of the European banking sector in terms of financial structure, ownership and business models and corporate governance, as well as the payment system Part 2, Performance and Innovation in European Banking, discusses the key themes of bank competition, efficiency and performance In addition, it looks at the impact of technological development on the banking sectors and how banks are embracing the opportunities it offers Finally, it explores the issues of bank diversification and the relevance of small business lending Part 3, Financial Stability and Regulation, addresses the key issues of financial reforms and the increasing complexity of financial regulation It also looks v www.ebook3000.com vi  Preface at the impact of state aid and the impact of monetary policy Finally, it considers the increasing interactions between banks and markets Part 4, Cross-­ border Banking, looks at recent trends in cross-border banking in Europe and evaluates the establishment of the Banking Union Finally, Part 5, European Banking Systems, offers a detailed analysis of the main issues facing national banking system in key European banking markets The chapters of this Handbook document major trends across European banking systems and the implications of a changed regulatory and monetary environment Building upon a close interaction between researchers, practitioners and policy makers, this Handbook aims to provide the necessary tools to understand the current practical and policy challenges London, July 2016  Thorsten Beck Barbara Casu Acknowledgements This text could have never been completed without the help and support of a number of individuals First and foremost, we wish to thank the contributors to this Handbook We are delighted to have brought together an outstanding group of experts, ranging from senior policy makers to academics, each with a wealth of expertise in their field Their expert contributions, together with their commitment to the project, have helped us deliver a text that offers an in-depth analysis of the key issues facing European banking We are indebted to Aimee Dibbens, Senior Commissioning Editor Economics & Finance, whose enthusiasm was crucial in convincing us to undertake the project We also wish to thank the editorial team at Palgrave Macmillan, in particular Alexandra Morton, Editorial Assistant Finance, who has worked closely with us during the entire project ensuring a timely delivery and high-quality content We would like to acknowledge the support of our home institution, Cass Business School, City, University of London Finally, we wish to thank our families and friends for encouragement and support Thorsten Beck thanks his wife and sons for their patience with his skewed work–life balance Barbara Casu thanks her husband and her children for their enthusiasm, their patience and support vii www.ebook3000.com Contents Part I  European Banking: Through the Crisis and Beyond   European Banking: An Overview3 T Beck, B Casu   Financial Structure25 Sam Langfield, Marco Pagano   Bank Diversification and Financial Conglomerates in Europe49 Panagiotis Dontis-Charitos, Sotiris Staikouras, Jonathan Williams   Banks’ Business Models in Europe81 Rym Ayadi, Willem Pieter de Groen   Ownership in European Banking103 John Goddard, Donal G McKillop, John O.S Wilson   Pay Structures in European Banks135 Jens Hagendorff, Abhishek Srivastav ix x  Contents Part II  Performance and Innovation in European Banking 157   European Retail Payments Systems: Cost, Pricing, Innovation and Regulation159 Wilko Bolt, Nicole Jonker, Mirjam Plooij   Competition in EU Banking187 Olivier De Jonghe, Maaike Diepstraten, Glenn Schepens   The Internet, Crowdfunding and the Banking Industry213 Armin Schwienbacher 10 Small Business Lending231 Santiago Carbo-Valverde, Francisco Rodríguez-Fernández 11 European Bank Efficiency and Performance: The Effects of Supranational Versus National Bank Supervision257 Rients Galema, Michael Koetter Part III  Financial Stability and Regulation 293 12 Regulatory Reforms in the European Banking Sector295 Elena Carletti, Agnese Leonello 13 Complexity in Regulation323 Andrew Haldane, Tobias Neumann 14 State Aid and Guarantees in Europe349 Reint Gropp, Lena Tonzer 15 The Bank Lending Channel of Monetary Policy: A Review of the Literature and an Agenda for Future Research383 Mintra Dwarkasing, Narly Dwarkasing, Steven Ongena www.ebook3000.com  Contents     xi 16 The Interplay Between Banks and Markets: Supervisory Stress Test Results and Investor Reactions409 Giovanni Petrella, Andrea Resti Part IV  Cross-Border Banking 449 17 The Banking Union: An Overview and Open Issues451 Dirk Schoenmaker 18 Recent Trends in Cross-Border Banking475 Ralph De Haas, Neeltje van Horen Part V  European Banking Systems 499 19 Banking in the UK501 Philip Molyneux 20 Banking in Italy521 Elena Beccalli, Claudia Girardone 21 The German Banking System541 Patrick Behr, Reinhard H Schmidt 22 Banking in Spain567 Joaquin Maudos, Xavier Vives 23 Banking in France603 Laetitia Lepetit, Céline Meslier, Amine Tarazi 24 Credit Institutions, Ownership and Bank Lending in Transition Economies623 Rainer Haselmann, Paul Wachtel, Jonas Sobott Index645 664  Index Japelli, T., 626 Jensen, M., 107n2 Jensen, M. C., 137, 143 Jiménez, G., 387, 398, 585, 595 Jin, G. Z., 220 John, K., 145 Joint Forum on Financial Conglomerates, 49n1 joint-stock companies, 538, 549, 588 Joint Supervisory Teams (JSTs), 415, 464 Jokivuolle, E., 148 Jondrow, J., 270, 278 Jones, D. C., 125 Jonker, N., 14 Jorda, O., 27, 39 JPMorgan Chase, 54, 329, 340 JSTs See Joint Supervisory Teams (JSTs) K Kahn, C. M., 301 Kakes, J., 393 Kalmi, P., 128 Kane, E. J., 54, 54n12, 65 Kashyap, A. K., 41, 386 Kaya, O., 242 Keeley, M. C., 199, 362 Keeton, W., 165 Kerola, E., 128 KfW Banking Group See Kreditanstalt für Wiederaufbau (KfW) Banking Group Khan, U., 371–3 Khwaja, A. I., 388 King, S., 170n10 Kiser, E. K., 204 Kishan, R. P., 387 Kleymenova, A., 150 Koerner, T., 368n18 Koetter, M., 15, 267, 365, 366, 368, 372 Konstantinos, T., 399 Koopmans, T. C., 262 Körner, T., 250 Kortelainen, M., 265 Kousmanen, T., 265 Koutsomanoli-Filippaki, A., 266 Kowalewski, O., 128 Kozłowski, Ł., 128 Kreditanstalt für Wiederaufbau (KfW) Banking Group, 109, 546, 553–4 Kremp, E., 615 Kumbhakar, S. C., 262, 264, 265, 267, 268 Kwan, S. H., 61, 64 Kysucky, V., 247 L La Banque Postale, 110 Laderman, E. S., 63, 64 Laeven, L., 62, 194, 272, 352, 614 Lagunoff, R., 306 Lallour, A., 340 Lambert, F. J., 34 Lamfalussy procedure, Länder, 109 Landesbanken, 114, 541–3, 545, 549–52, 557, 559, 562, 562n24, 564 Landwirtschaftliche Rentenbank, 110 Lane, P. R., 27, 39 Langfield, S., 10, 27, 38, 40 Lang, G., 61–2 La Porta, R., 109n4, 249, 250, 390, 563, 625 large complex financial institutions (LCFIs), 53 Larralde, B., 219 Larrick, R. P., 222 last-bank-standing effect, 310 latent-class SFA model, 267 Latin American debt, 337 www.ebook3000.com  Index     law and finance literature, 625, 635 lax monetary policy, 81 L-Bank, 110 LCFIs See large complex financial institutions (LCFIs) legal scholars, 224 Lehman Brothers, 53n11, 81, 112, 138, 353, 533, 612, 640 Leibenstein, H., 262 lender forbearance, 591 lending, 632 and bank networks relationship, 393–4 of banks and other bank-specific characteristics, 532 credit information and foreign bank ownership effect on, 639 institutional variables effect on, 640 lending-based crowdfunding, 219 lending technology, 243 Lenoci, F., 535 Lenz, R., 223 Leonello, A., 16, 57, 200 Lepetit, L., 21 Lerner index, 189–92, 193, 197, 207, 372, 585 Leroy, A., 392 Lev-Aretz, Y., 225 Levine, R., 37, 41, 62, 272 Levy, H., 60 liability balance sheet indicators, 82 “light-touch” supervision, 35 Liikanen, E., 50n3, 502, 509, 510 Liikanen report, 144, 311–12, 509, 510, 618 limited liability, 107, 110, 199, 302 Lindley, J. T., 270 Lin, M., 220 Lin, S., 615 liquidity coverage ratio, 324 international transmissions of, 395 requirements, 302, 304, 310–11 665 liquidity-focused laws, 324 Lisbon Treaty, Liu, H., 126, 194, 197 Liu, Q., 139, 143–4 Liu, W.-H., 373 Lloyds Banking Group, 86, 514, 559 loan-based crowdfunding, 215, 220, 223 loan-level data, local bank lending channel, 387–8 loan market, 603 loan-to-deposit ratios, 485, 486, 616, 617 Loan-to-Income (LTI), 517 Loan-to-Value (LTV), 517 local bank lending channel, of monetary policy, 384–6 bank and financial market characteristics, 390 bank balance sheet data, 386–7 institutions and potency of, 389–94 legal origin, 389 loan-level data, 387–9 local monetary policy, 395, 396 locked-in borrowers, 204 lock-in effects, 173–4 London Interbank Offered Rate (LIBOR), 20, 501, 502, 504, 516 long-run growth, effects of financial structure on, 37–40 long-term assets, 311 long-term deferred equity awards, 146–7 long-term instruments, 13, 145 Lopez-de-Silanes, F., 109n4 Louie, D., 634 Lovell, C. A K., 262, 263 Lower Tier capital, 333 Lown, C. S., 63 Lozano-Vivas, A., 125 LTI See Loan-to-Income (LTI) LTV See Loan-to-Value (LTV) 666  Index Luenberger productivity indicator, 267 Lynch, M., 53n11 Lyon, A., 222 M Maastricht Treaty, macro-prudential approach, 306–9 macro-prudential regulation, 18 Macroprudential Research Network (MaRS), 309 macro-prudential stress tests, 421 macro-prudential tools, 595 Maddaloni, A., 399 Madouros, V., 333 Mai, H., 560n20 maintenance obligation, 550n6 Ma, K., 200 Makinen, M., 125 Malherbe, F., 309, 310 Mannes, A. E., 222 Marchetti, M., 388 Marcus, A. J., 199 marginal costs, 190 marginal expected shortfall (MES) approach, 202, 203, 424 Mariathasan, M., 334 market-based Anglo-Saxon system, 13 market-based banking model, 11 market-based banking systems, 623 market-based financial structures, 32, 33, 37, 38, 40, 41 market-based institutions, 32 market capitalization commercial banks by, 113 of international banks, 613 market discipline hypothesis, 362 market power hypothesis, 251 Market Risk Amendment, 329, 330 market structure, 214, 216 mark-to-market accounting, 306 Marques-Ibanez, D., 394 MaRS See Macroprudential Research Network (MaRS) Martinez-Miera, D., 309, 310 Martins-Filho, C., 265 M&As See mergers and acquisitions (M&As) Matousek, R., 268 Matutes, C., 361n11 Maudos, J., 21, 195, 577, 585 maximum likelihood estimation (MLE), 265 Mayes, D. G., 339 McKillop, D. G., 12 McQuade, P., 39 Meckling, W. H., 107n2, 137, 143 median banks, 96 median investment, 96 median pre-liberalization investment rate, 38 Meeusen, W., 263 Mehran, H., 142, 146 Memorandum of Understanding (MoU), 462, 568, 587, 591, 592 Merck Martel, M., 52n9 mergers and acquisitions (M&As), 11, 58, 64–6, 71–2, 111, 534–6, 609–13 Merrouche, O., 333 MES approach See marginal expected shortfall (MES) approach Meslier, C., 21 Metro Bank, 517, 518 MFIs See monetary financial institutions (MFIs) Mian, A., 388 Michels, J., 220 micro-prudential tool, 311 Middendorf, T., 561 MIFs See multilateral interchange fees (MIFs) Milesi-Ferretti, G. M., 27 Milligan, G. W., 88n10 Minnick, K., 142 Mio, H., 340 Mishkin, F., 215 Mistrulli, P. E., 128, 533 www.ebook3000.com  Index     Mittelstand, 555 MLE See maximum likelihood estimation (MLE) mobile banking, 598, 620 mobile payments, 14 Model banks, 91 Model banks, 92, 93 Model banks, 92, 93 model transition matrix aided banks, 99 modern banking regulation, 323 modern banking theory, 232 modern-day commercial banking, 110 modern market oriented banking systems, 625 modern SFA literature, 263 Mody, A., 464, 464n3 Mollick, E., 221 Molyneux, P., 20, 58–9, 63, 64, 125–6 monetary financial institutions (MFIs), 569 monetary policy, 383–4 authorities, 163 bank risk-taking channel, 397–9 contraction, 129 international bank lending channels, 395–7 local bank lending channel of, 384–94 risk-taking channel of, 17, 18 Montoriol-Garriga, J., 248 Morais, B., 396 Mora, N., 397 Moro, A., 249 Morrison, A. D., 146 mortgage-backed securities, 40n8, 143, 486 mortgage banks, 545 Mortgage Society of Finland, 117 MoU See Memorandum of Understanding (MoU) ‘Mount of Mercy’, 115 667 multilateral interchange fees (MIFs), 177, 179 multinational banking adjustments in, 481, 482 cross-border banking vs., 476–9 East-West divide, 478 shifting sources of, 486–91 multinational financial supermarkets, 57 multi-output institutions, 61 multiple pricing models, 331 multi-polar regulation framework, 343 multi-product cost economies, 61 municipal credit institutions, 604, 605 Murphy, K. J., 150 mutual banks, 103, 105, 106, 111, 127, 604, 605 building societies, 116–18 cooperative banks, 118–22 credit unions, 122–4 savings banks, 114–16 N Nanda, R., 221, 251 Nankervis, J. C., 125 National Association of Securities Dealers Automated Quotations (NASDAQ), 223 national banking systems, national central banks (NCBs), 463 national competent authorities (NCAs), 258, 259, 287, 413, 414, 418, 419, 435, 443 national deposit guarantee scheme, 314 national deposit insurance schemes, 376, 466 national supervisory approaches, 72–3 National Supervisory Authorities, 86 nationwide public campaign, 170 natural/policy-induced elements, nature of debt contracts, 302 Nazi regime, 543 668  Index NCAs See national competent authorities (NCAs) NCBs See national central banks (NCBs) near-zero marginal costs, 217 negative feedback effects, 350 Nelson, B., 399 Neretina, E., 432 The Netherlands, 119, 170 net stable funding ratio (NSFR), 310, 340 network effects, 173–4, 214, 216, 225 network-enabled transactions, 218 Neumann, T., 16–17, 338 New Empirical Industrial Organization (NEIO) approach, 189 New York Stock Exchange (NYSE), 223 Ngo, P. T H., 373 Nier, E., 368 Nocera, G., 126–8 non-bank competition, 599 non-bank financial institutions, 22, 30–1, 35 non-bank financial intermediaries, non-banking activities, 11, 50, 63–4, 69 non-banking financial businesses, 27 non-banking union, 457, 459 non-bank payment service, 178 non-bank providers, 13 non-cash assets, 83 non-cash payment instruments, 162 non-core Tier capital, 332 non-EEA banking groups, 84 non-financial corporations, liabilities of, 29 non-financial markets, 216 non-financial organizations, 208, 544, 550 non-financial private sector, 571, 572, 577, 578, 585–9, 594 corporate debt of, 492 non-financial sectors, 146 non-financial support institutions, 551, 552 non-interest income, 66, 112, 202–3 non-interest income-to-net-interest income, 68 non-interoperable solutions, 174 non-linear programming methods, 262 non-parametric DEA, 266 non-performing assets, 597 non-performing loan rate, 597 non-performing loans (NPLs), 20, 268, 521, 522, 530–3 non-PIIGS banks, 420 non-SSM banks vs SSM, mean efficiency, 280–2 non-tradable sectors, 39 non-traditional activities, 52 Nordea, 478n4 Norden, L., 247 Nordmark, J., 42 Northern Rock, 81, 112 no-surcharge rules, 168 Noth, F., 372 NPLs See non-performing loans (NPLs) NSFR See net stable funding ratio (NSFR) O OECD countries See Organisation for Economic Co-operation and Development (OECD) countries Office of Fair Trading (UK), 206 OLS estimation See ordinary least squares (OLS) estimation Ongena, S., 17, 207, 395 online banking, 598 online service providers, 218 online social networks, 218 operational cost efficiency, 272, 280 www.ebook3000.com  Index     Opiela, T. P., 387 optimal executive compensation, 141 ordinary least squares (OLS) estimation, 270 Organisation for Economic Co-operation and Development (OECD) countries, 22, 127, 337, 370, 487, 612, 635 Oriani, M., 127 Oung, V., 609 ownership, 103–4 forms, 108–25 performance, risk and lending, 125–9 shareholder and stakeholder-­­ oriented financial institutions, 105–8 P Pacuit, E., 222 Pagano, M., 10, 27, 37–8, 40, 626 Paligorova, T., 399 panel data models, 265 pan-European deposit insurance scheme, 314 pan-European payment system, 179 panic-and fundamental-driven crises, distinction between, 301 panic runs, 300 Panzar, J. C., 189 Panzar–Rosse H-statistic, 189, 207 paper-based payments, 160, 166 Parliamentary Commission on Banking Standards (PCBS), 504–6 Parmeter, C. F., 262–3, 265, 266 Pausch, T., 439 Pauzner, A., 301, 302 Pay-As-You-Go pension system, 544 pay-based incentives, 142 pay guidance, 144 payment behaviour, 163–4 669 payment competition, 172 and cooperation, 171–3 payment cost, 165–6 payment initiation service providers (PISPs), 178 payment initiation services, 179n13 payment networks, 167–8 payment pricing, 168–70 payment protection insurance (PPI), 20, 501, 504 payment scale economies, 165–6 payment services directive, 178–9 payment steering, 170–1 Payment Systems Regulator, 506 payment use and composition, 160–3 PayPal, 224 pay-performance sensitivity, 142 pay structures, 135–8 compensation reforms in US to European approach, 149 costs, 150–1 impact of European policy developments on, 144–9 of managerial compensation, 138–44 PCBS See Parliamentary Commission on Banking Standards (PCBS) Peek, J., 386, 394, 396 peer-to-peer (P2P) crowdfunding, 245 lending, 215, 219, 220 platforms, 245 Peltzman, S., 188 Peng, L., 148 pension funds, 31 performance-based bonuses, 136 performance-based compensation, 13, 145 performance-based pay, 13, 150 performance European banks, 260, 261 performance-sensitive compensation, 141 Perotti, C. E., 370 670  Index pertinent public policy, 43 Petersen, M. A., 234, 251 Petrella, G., 18, 421, 422 Peydró, J.-L., 399 PISPs See payment initiation service providers (PISPs) Pistor, K., 625 Plooij, M., 14 Plosser, M., 336 Poghosyan, T., 267 point-of-sale payments, 160 policy interest, 232, 233, 398 Poli, F., 127 Polish credit unions, 124 political bureaucrats, 108n4 polyfunctional groups, 523–4 Popov, A., 633 Portugal, Ireland, Italy, Greece and Spain (PIIGS), 420 Postbank, 548–9 post-transition boom-and-bust cycle, 22 PPI See payment protection insurance (PPI) PRA See Prudential Regulatory Authority (PRA) Presbitero, A., 247 principle-based approach, 149 principle of identity, 118, 552 principle of self-help, 552 principles-based supervision, 35 private banks, 543 private commercial banks, 542, 543, 547–50 private debt crisis, 531 private debt securities, 30 private equity investments, 31, 110 private investments, 38 privately owned banks, 128 private-owned domestic banks, 128 private-sector companies, 112 private-sector debt, 585 productivity-enhancing investments, 39 productivity gains, 267 profit frontier, parameter estimates for, 278, 279 profit inefficiency distribution, 280 profit volatility, 198 promotional banks, 546 Prudential Regulatory Authority (PRA), 505, 506 PSD2, 179 Pseudo-F indices for clustering configurations, 88, 89 public bailout, 366 guarantees, 351 policies of, 364 public banking sector, 109 public banks, 93, 95, 104, 105, 108–10 public debt, 352, 353, 599 public equity market, 557 public guarantees, 303, 351, 352, 370, 371, 374 public guarantee scheme, 373 public infrastructure projects, 109 public interventions, 349, 350, 352 public law institutions, 551 public law regime, 550 public-owned banks, 107, 128 public ownership, 105, 106, 108n4 public ownership dominance, 523 public policy, 42, 72 in determining financial structure, role of, 33–6 public welfare projects, 550 Puri, M., 249, 562 Purnanandam, A., 396 Q Qualifying Financial Institutions (QFIs), 428 quasi-natural experiments, 366 R Raiffeisen, F. W., 118–19, 122 Rajan, R. G., 27 www.ebook3000.com  Index     Rajan, R., 301 Rajan, R. G., 234, 251 Ramakrishnan, R. T S., 231, 232 random error, 263 Ratnovski, L., 201 RBS, 514 R&D See research and development (R&D) real estate financing, 40 real estate market crisis, 531 ReBo See Restructuring Board (ReBo) recapitalization, 354–5 Recent Evolution of SME Finance in Europe, 233 Recovery and Resolution Directive, 512 reform pay in banking industry, 136 regional champions, 36 regional principle, 551, 554 regional savings banks, 36, 109, 545, 551 regression method, 87 “regular” currencies, 224 Regulation on Cross-border Payments in euros (2560/2011 EC), 177 Regulation on Interchange Fees for Card-based Payment Transactions, 180 regulatory framework, regulatory reforms, 4, 295–8, 302, 304 Banking Union, 312–17 Basel III and CRD IV, 307–12 regulatory regime, 557–8 regulatory tsunami, 597 Reichsbank, 323–4 Reinhart, C. M., 352 re-insurance scheme, 472 Reint Gropp, 17 relationship lending, 244 vs transaction-based lending, 533–4 rental price of funds, 272 reoriented intermediation, 246 Repullo, R., 309 repurchase agreements, 89 671 research and development (R&D), 38 residential mortgages, 39 residual loss, 107n2 resolution method, 462 Resti, A., 18, 421, 422 restructuring and resolution scheme, 373, 375 Restructuring Board (ReBo), 124 retail banking business, 502, 578 retail-banking model, 82 retail banks, 93, 98, 100 retail financial products, 502 retail financial services sector, 8, 110 retail-like business models, 98 retail market, 518 retail mutual fund sector, 111 retail-oriented banks, 92 retail-oriented groups, 93 retail payment innovations, 173 retail payment market, 14, 173, 176 retail payment system, 161, 170 return on assets (ROA), 259, 528, 529 return on equity (ROE), 259, 503, 515, 516, 579–80 revenue-based scope economies, 59 reward-based crowdfunding, 220 Rho, S., 264 Rifkin, J., 217 ring-fenced banks, 504 “ring-fencing” effects, risk asset ratio, 327 risk-management technologies, 491 risk-sharing terms, 470 risk shifting, 337 risk-taking behaviour, 136 risk-taking incentives, 143, 144, 146, 351 risk-weighted assets (RWAs), 329, 335–6, 338, 343, 417, 424, 429, 502, 590, 599 risk-weighted capital ratios, 324, 422 ROA See return on assets (ROA) Robles-Fernandez, M. D., 127 672  Index Rochdale Society of Equitable Pioneers, 118 Rochet, J.-C., 169, 169n8, 215, 361n11 ROE See return on equity (ROE) Roell, A., 148 Rogoff, K., 81n1 Rogoff, K. S., 352 Romano, R., 147 Roman, R., 372 Romer, P., 39 Roosevelt, F., 471 Rosenberg, J. V., 142 Rosengren, E. S., 386, 396 Rosen, R. J., 142 Roskilde Bank, 355 Rosse, J. N., 189 Royal Decree-Law 2/2011, 590 Royal Decree-Law 2/2012, 579, 591 Royal Decree-Law 18/2012, 579, 591 RWAs See risk-weighted assets (RWAs) S SAFE See Survey of Access to Finance of Enterprises (SAFE) safety net membership, 365 Sahin, C., 425 Sanpaolo IMI, 86 Santander, 575n5, 596, 596n21 Santomero, A. M., 57n13, 61, 231 Santos, J., 336 Santos, J. A C., 399 Sapienza, P., 128, 371n21 Sapra, H., 433, 439 SAREB, 592, 593 Sarnat, M., 60 Saunders, A., 64, 202n6 savings banks, 36, 103, 114–16, 116n6, 549–52, 555n13, 557, 567, 575, 586 Saxon, J., 328 SBA See Small Business Act (SBA) scale economies, 165–6 SCAP See Supervisory Capital Assessment Program (SCAP) Schaeck, K., 196, 248, 370 Schclarek, A., 128 Schiersch, A., 194n3 Schlegel, F., 221 Schmidt-Ehmcke, J., 194n3 Schmidt, P., 263, 264 Schmidt, R. H., 21, 544n1, 563n25 Schmiedel, H., 267 Schnabel, I., 140, 148, 150, 201, 250, 364, 368n18, 370 Schnabl, P., 395 Schoenmaker, D., 19, 457, 513 Schreft, S., 306 Schuermann, T., 432n22, 439, 440 Schüler, Y., 452 Schulze-Delitzsch, H., 118, 122 Schwienbacher, A., 14, 160n2, 174n11, 219 SCM See synthetic counterfactuals method (SCM) SCP See Structure-ConductPerformance (SCP) screening borrower, 302 SDIRB See Single Deposit Insurance and Resolution Board (SDIRB) SDM See Single Deposit Guarantee Mechanism (SDM) Sealey, C. W., 270 Second Banking Co-ordination Directive, 6, 524 Second Banking Directive of 1989, 52n7 Second German Empire, 543 Second World War, 109, 548 self-help, 118 senior bank managers, 135 Senior Loan Officer Survey, 389 Senior Managers Regime (SMR), 505 SEPA See Single Euro Payments Area (SEPA) www.ebook3000.com  Index     Separation and Regulation of Banking Activities, 618 service providers, 224 Sevestre, P., 615 SFA See stochastic frontier analysis (SFA) shadow banking system, 11, 31 Shapiro, J. D., 146 shareholder-based institution, 12 shareholder incentives, 137 shareholder-owned banks, 105–7 shareholder-owned commercial banks, 110–11, 124 shareholder-owned firms, 105 shareholder value (SHV), 84 Shehzad, C. T., 200 Sheldon, G., 337 Sheppard (1971), 27 Shin, H. S., 27, 53, 397 Shleifer, A., 106, 109n4 short-and medium-term funding, 603 short-term assets, 311 short-term debt, 603 short-term liabilities, 53 SHV See shareholder value (SHV) Shy, O., 168n7, 171 SIFIs See systemically important financial institutions (SIFIs) Significant Supervised Entities (SSEs), 281–3 Simar, L., 262, 265 simple linear regression, 191 simple single-technology SFA models, 264 single borrower–lender relationship, 247 Single Deposit Guarantee Mechanism (SDM), 258 Single Deposit Guarantee Scheme, 258 Single Deposit Insurance and Resolution Board (SDIRB), 463, 470, 471 Single Deposit Insurance Fund, 471 single deposit insurance scheme, 466 Single Euro Payments Area (SEPA), 166, 177–80 673 single European banking supervision, single-frontier SFA method, 268 single market for financial services, 5, 6, 15, 19, 453 Single Resolution Board (SRB), 314, 375, 463 Single Resolution Fund (SRF), 314, 375, 376, 463, 468, 469 Single Resolution Mechanism (SRM), 4, 36, 258, 312–14, 316, 351, 374, 375, 463, 466–69, 598 Single Resolution Regime, 558 Single Rulebook, 4, Single Supervisory Mechanism (SSM), 4, 35, 201, 204, 258, 259, 262, 269, 272, 275–6, 278, 280–2, 287, 312–13, 316, 351, 374, 375, 414, 415, 418, 424, 436, 451, 464–6, 511, 537, 558, 598 Sironi, A., 126–8, 369n19 Slovenia, 628, 628n3 Slovik, P., 420 small and medium-sized enterprises (SMEs), 15, 115, 206, 231–2, 236, 246, 249, 251, 388, 502, 503, 523, 533, 552, 561, 571, 594, 610, 626, 633 across European countries, 234, 235 external financing needs of, 238 finance, 233–43, 248 in Germany, 242 lending technologies, 246 Small Business Act (SBA), 232, 252 small business credit scoring, 245 small business lending technologies in Europe institutional features and market structure, 249–52 relationship lending and other technologies, 247–9 universe of lending technologies, 243–7 674  Index “Small Business Lending Technologies in Europe: A Diagnosis” surveys, 233 SMEs See small and medium-sized enterprises (SMEs) Smith, C. W., 139 Smith, D. C., 207 SMR See Senior Managers Regime (SMR) Sobott, J., 22 social and business digital innovations, 621 social media, 214, 224 socio-economic variables, 204 sociologists, 222 SOEs See state-owned enterprises (SOEs) Solanko, L., 392 Sosyura, D., 371 South-Eastern European banking markets, 267 sovereign bank loop, 19, 452–6, 472 sovereign debt crisis, 257, 350, 351 Soviet Union, 627 Spain, 36, 559 Spamann, H., 143, 147 Spanish banking crisis, 86 Spanish banking sector, 21, 416, 567–8, 599 bail-out and MoU, 592–3 challenges, 596–9 characteristics of, 577–85 crisis, 589–91, 594–6 developments in, 568 problems, 585–9 restructuring, 593–4 in Spanish economy, 569–77 Spanish cooperative banks, 119 Spanish economy, 568, 569, 575n6 Spanish financial system, 569, 590 Spanish savings banks, 115, 560, 560n20 Spanish SMEs, 242 Spargoli, F., 410, 440 Sparkassen, 109, 114 specialized credit institutions, 605 specialized financial institution, 604 special purpose banks, 545–6 split ratings, 409 SRB See Single Resolution Board (SRB) SREP See Supervisory Review and Evaluation Process (SREP) SRF See Single Resolution Fund (SRF) Srivastav, A., 13, 144 SRM See Single Resolution Mechanism (SRM) SSEs See Significant Supervised Entities (SSEs) SSM See Single Supervisory Mechanism (SSM) SSM Framework Regulation, 288n4 SSM-supervised banks, 262, 286 stable banking system, 564 stable funding, 343 Staikouras, S. K., 58 stakeholder-based institution, 12 stakeholder value (STV), 84 standard framework, 231 standardized approaches, 330 Stanley, M., 53n11, 138 state aid and guarantees, 376–7 bailout expectations, time consistency and competitive effects, 363–5, 369–71 deposit insurance and moral hazard, 360–1, 366–7 during recent financial crisis, 352–60 empirical evidence, 365–72 European Banking Union, 374–6 European case, 352–6 identification issues, 365–6 institutional design and policy implications, 373–4 market discipline and charter value, 362, 367–9 motivation, 349–52 www.ebook3000.com  Index     public interventions, 349 TARP effects in USA, 371–2 used in EU, 356, 359 US experience, 356–60 state aid instruments, 366 state bank of Baden-Württemberg, 110 state-of-the art lending, 491 state-owned enterprises (SOEs), 627, 628, 630 static balance sheet, 417 statistical provisions, 595n20 Steffen, S., 424 Stein, J. C., 384, 385 stochastic frontier analysis (SFA), 260, 266–9 stock markets, 33 stock options, 141 Stremmel, H., 339 stress test exercises, in Europe CEBS stress tests, 415–17 EBA stress tests, 417–19 institutional framework, 411–13 market reaction, 419–25 supervisory framework evolution, 413–15 vs USA, 434–41 stress test exercises, in USA CCAR program, 430–1 DFAST program, 429–31, 431 vs Europe, 434–41 institutional framework, 425, 426 market reaction, 432–4 SCAP, 427–9 stress tests, 344 Stress Tests and Capital Planning, 425n15 structural banking sector reforms, 509 structural deregulation, gradual relaxation of, 52 Structure-Conduct-Performance (SCP), 126, 188, 189 Stulz, R. M., 139, 143, 147, 304 Sturm, J.-E., 386, 393 675 STV See stakeholder value (STV) Suarez, J., 309, 310, 370 substantial expansion of research on relationship lending, 234 substantial regulatory reforms, subtracting liquid asset, 324 Suomen AsuntoHypoPankki, 117 Supervisory Capital Assessment Program (SCAP), 359, 425, 427–8, 438 qualitative assessment, 432 quantitative assessment, 432 Supervisory Review and Evaluation Process (SREP), 419, 443 supervisory stress tests, 429, 442–3 supporting institutions, 550 supra-national financial safety, 18, 19 supranational monetary policy, 258 supranational supervision, 280 supra-national supervisor, 373 Surico, P., 386, 387 Survey of Access to Finance of Enterprises (SAFE), 233, 236, 236n2, 253 Sy, A. N R., 421, 433n23 synthetic counterfactuals method (SCM), systemically important financial institutions (SIFIs), 50, 68, 69, 308, 509 systemic risk in banking sector, 223, 304–7, 317 T Taci, A., 125 tangible common equity, 91 Targeted Investment Program (TIP), 359 TARP See Troubled Asset Relief Program (TARP) taxpayers’ money, 349 TBTF See too-big-to-fail (TBTF) 676  Index technical efficiency (TE), 263, 277, 279, 282, 285 technological advancements, 260 technological change, 111 Temesvary, J., 396 TFEU See Treaty on the Functioning of the EU (TFEU) TFP See total factor productivity (TFP) Thakor, A. V., 231, 232 Thanassoulis, J., 138, 141, 148 theory of contestable markets, 54 three-pillar-banking-system, 542, 543, 545, 553, 555, 559 Thum, M., 127 Tier capital, 329, 341 Tier capital, 329, 333, 341 Tier capital, 330, 333 Tiner, J., 35 TIP See Targeted Investment Program (TIP) Tirole, J., 169, 169n8, 364 TLAC See Total Loss Absorbing Capacity (TLAC) TOC See total operating costs (TOC) too-big-to-fail (TBTF), 514 institutions, 61, 66 subsidies, 39 total derivative exposures, 84n3 total factor productivity (TFP), 38 Total Loss Absorbing Capacity (TLAC), 495, 618 total operating costs (TOC), 270 Tourist Test methodology, 172, 181 tradeable stocks, 30 trade credit, 240, 245 trading assets, 87, 91 trading book capital requirements, 335 traditional banking book activities, 98, 334, 335 traditional business model, 557 traditional economic and finance theory, 221 traditional intermediaries, 58 traditional lending activities, 11 traditional market power, 251 traditional retail banking business model, 620 traditional theoretical models, 200 transaction-based lending, 15, 128, 234 relationship lending vs., 533–4 transaction costs, 216, 224 transfers, 224 Transferwise, 175n12 transition banking, 623–7, 641 after 2000, 629–35 credit information systems, 635–8 empirical analysis, 638–40 first decade, 627–9 household and business lending and GDP, 630–2 institutional and bank data, 636, 637 transition probabilities, 96 Treaty on the Functioning of the EU (TFEU), 466 Trennbankengesetz, 558n17 Troubled Asset Relief Program (TARP), 356, 371–2 TSB, 518, 559 Tsionas, E. G., 264, 268 Tuna, I., 150 Tung, F., 144 two-sided market theory, 169, 169n8, 172 two-sidedness of payment markets, 159 two-sided payment competition, 172 Tymoczko, D., 630 U Uchida, H., 248, 252 Udell, G., 633 Udell, G. F., 232–4, 393 UK financial services sector, 117, 331 firms’ liabilities, 30 www.ebook3000.com  Index     monetary policy, 396 policy makers, 512–13 regulatory developments, 503–7 UK banking system, 20, 501–2, 518–19 assets data, 27 banks and building societies, 513 branches and ATMs, 514, 515 challenger banks, 517–18 debts, 507 and Europe, 509–10 and European Banking Union, 511–13 regulatory developments, 503–7 structural reforms, 503–7 structure and performance features of, 513–17 trends and challenges, 502–3 and USA, 508–9 UK Priscilla Wakefield, 114 UK Treasury, 506 uncompetitive markets, 197 unconstrained firms, 248 unemployment, 352 UniCredit, 549 universal banking model, 11, 54, 246, 523, 554 universe of lending technologies, 243–7 unsustainable business models, 81 Upper Tier capital, 333 USA, 222 bank assets data, 27 banking stress tests, 432 bank–market ratio, 26 banks, 140–1, 487, 489, 508–9 liquidity, 486 market-based financial structure, 29 monetary policy of, 396 regulatory landscape, 149 US Federal Reserve, 428 US Financial Services Modernization Act (FSMA), 58 US Financial Stability Oversight Council, 466 677 V Valderrama, M. T., 398 Valencia, F., 352, 614 Vallascas, F., 64, 140, 143 value-at-risk (VaR), 331 Van Bekkum, S., 144 van Damme, E., 301n3 van den Broeck, J., 263 Van der Cruijsen, C., 205 Vander Vennet, R., 49n1, 62 van Horen, N., 19, 477, 477n3, 479, 480n7, 484, 484n11, 487 Van Lelyveld, I., 486n13, 634 van Rixtel, A., 53 Van Rompuy plan, VaR See value-at-risk (VaR) variables, 38, 88, 126, 192, 204, 270–2, 366, 410, 420, 638, 640 Velentza, E. F., 125 venture capital, 222 firms, 31–3, 38 funds, 248 Verbund, 551n8, 558 Verdier, M., 169n8, 173 Véron, N., 34, 259 very long-term refinancing operations (VLTROs), 388 Vesala, J., 361, 367 Vichy regime, 326 Vickers Commission, 20 Vickers, J., 311–12, 503 Vienna Initiative, 19, 480, 480n8, 633, 633n9, 634, 638, 639, 641 Virgin Money, 517–18 Vishny, R. W., 106 Vives, X., 21, 361n11, 567n1, 585n13 VLTROs See very long-term refinancing operations (VLTROs) volatility of economic output, financial structure on, 40–2 voluntary compliance, 35 von Bissing, W. M., 325 voucher privatisation, 629 678  Index W Wachtel, P., 22, 626 Wagner, W., 201 Walter, I., 58n13, 64 Wang, X., 144 Ward clustering methods, 87 Ward, J. H., 87 Wardrop, R., 247 wealth management subsidiaries, 21 Web 2.0, 217 Webb, E., 140 Weill, L., 128, 190, 191, 266, 392 Weiß, G. N F., 64 well-functioning financial systems, 544 well-functioning markets, 14 Welzel, P., 61–2 Western European banks, 478 WGZ Bank, 119 WGZ-Bank AG, 552n9 Wheelock, D. C., 62, 272, 366n17 White Paper on Financial Services, wholesale banking business models, 93 wholesale banking group, 12, 91–3, 100 Wiesiolek, P., 630 Williams, J., 11 Wilson, J. O S., 12, 125–6 Wilson, P. W., 62, 262, 272 Wolff, G., 464, 464n3 “workhorse” stochastic production frontier model, 263 World Bank, 37, 477, 625, 627, 629, 637n11, 641 World Economic Outlook (IMF), 638 Worms, A., 393, 394 Wyman, O., 592 Y Yao, F., 265 Yermack, D., 143, 224 Yeyati, E. L., 362 Yorulmazer, T., 363, 364n15, 486n13 Z Zaheer, S., 394 Zakrajsek, E., 386 zero-inefficiency, 264 ‘zero lower bound’ problem, 163 zero-risk weight coefficient, 424 Zhou, C., 60 Zingales, L., 27 Ziraat Bank, 109 z-scores, 197–9, 259, 272, 278 www.ebook3000.com ... understanding of the key issues facing European banks The Handbook is composed of five main parts Part 1, European Banking: Through the Crisis and Beyond, offers an overview of the European banking. .. University, at the College of Business of the Bangor University and at the School of Business of the University of Glasgow He has worked as a consultant for the European Commission, the European Investment... Florence School of Banking and Finance at the European University Institute, a member of the Advisory Scientific Committee of the European Systemic Risk Board and of the Bank of Italy Scientific