Too-Small-To-Survive banks: An Overview

Article for general public (2013)

Finanzmarkstabilitat in Zeiten der Krise

Article for general public (2012)

Market structure, screening activity and bank lending behaviour

E-print/Working paper (2010)

In this paper we construct a theoretical model of spatial banking competition that considers the differential information among banks and potential borrowers in order to investigate how market structure ... [more ▼]

In this paper we construct a theoretical model of spatial banking competition that considers the differential information among banks and potential borrowers in order to investigate how market structure affects the lending behavior of banks and their incentives to invest in screening technology. Consistent with the prevailing view in the relevant literature, our results reveal that competition reduces lending cost, which, in turn, encourages the entry of new customers in the loan market. Also, that the transportation cost that potential borrowers have to pay in order to reach the bank of their interest is decreased with the degree of competitiveness. Importantly, we demonstrate that market structure exerts a considerable positive effect on banks’ incentives to screen their loan applicants since banks are found to invest more in screening as competition in the market becomes higher. This is to say, banks resort to screening that serves as a buffer mechanism against bad credit which entails higher risk and which is more likely under competitive conditions. Overall, our findings provide support to a rather close link between the degree of competition, bank lending activity, and the investment of banks in screening technology. [less ▲]

Determinants of bank efficiency: Evidence from a semi-parametric mathodology

in Managerial Finance (2009), 35(3), 260-275

Purpose – This paper aims to analyze bank efficiency into a number of bank-specific, industryspecific and macroeconomic determinants. Design/methodology/approach – The authors follow a semi-parametric two ... [more ▼]

Purpose – This paper aims to analyze bank efficiency into a number of bank-specific, industryspecific and macroeconomic determinants. Design/methodology/approach – The authors follow a semi-parametric two-stage methodology, where productive efficiency is derived via a non-parametric technique in the first stage and then the scores obtained are linked to a series of determinants of bank efficiency, using a double bootstrapping procedure. Findings – Overall, it is found that the banking sectors of almost all the sample countries show a gradual improvement in their efficiency levels. The model used shows that a number of determinants like bank size, industry concentration and the investment environment have a positive impact on bank efficiency, which is not the case when standard Tobit models are employed. Research limitations/implications – The findings have important implications for the relevance of well-known hypotheses that refer to the performance of the banking sectors, like the structure conduct-performance and the efficient structure hypotheses. These implications are not necessarily verified when past conventional econometric methodologies are used. Practical implications – The paper offers new insights to policy makers, bank managers and practitioners on the relevance of a number of driving factors of bank efficiency that might help them to improve the performance of the banking system and enhance the quality of services provided. Originality/value – This is the first paper in the bank efficiency literature that employs a semiparametric two-stage model, which relaxes several deficiencies of previous two-stage empirical approaches thus, offering a solution to the many problematic features of standard censored regressions. [less ▲]

Exploring the nexus between banking sector reform and performance: Evidence from newly acceded EU countries

in Journal of Banking and Finance (2008), 32(12), 2674-2683

The aim of this study is to examine the relationship between banking sector reform and bank performance –measured in terms of efficiency, total factor productivity growth and net interest margin– ... [more ▼]

The aim of this study is to examine the relationship between banking sector reform and bank performance –measured in terms of efficiency, total factor productivity growth and net interest margin– accounting for the effects through competition and bank risk-taking. To this end, we develop an empirical model of bank performance, which is consistently estimated using recent econometric techniques. The model is applied to bank panel data from ten newly acceded EU countries. The results indicate that both banking sector reform and competition exert a positive impact on bank efficiency, while the effect of reform on total factor productivity growth is significant only toward the end of the reform process. Finally, the effect of capital and credit risk on bank performance is in most cases negative, while it seems that higher liquid assets reduce the efficiency and productivity of banks. [less ▲]