0000000000006777
AUTHOR
Juan Fernández De Guevara
Factors explaining the interest margin in the banking sectors of the European Union
Abstract This study analyses the interest margin in the principal European banking sectors (Germany, France, the United Kingdom, Italy and Spain) in the period 1993–2000 using a panel of 15,888 observations, identifying the fundamental elements affecting this margin. Our starting point is the methodology developed in the original study by Ho and Saunders [Journal of Financial and Quantitative Analysis XVI (1981) 581–600] and later extensions, but widened to take banks' operating costs explicitly into account. Also, unlike the usual practice in the literature, a direct measure of the degree of competition (Lerner index) in the different markets is used. The results show that the fall of marg…
La economía intangible en España: Evolución y distribución por territorios y sectores (1995-2014)
La presente investigación tiene como objetivo estimar la inversión en activos intangibles más allá del PIB —es decir, aquellos que todavía no han sido incluidos por los sistemas de cuentas nacionales— para las comunidades autónomas españolas. De esta forma, España se convierte en el primer país de la Unión Europea para el que existe esta información a nivel regional. Las estimaciones presentan también un elevado grado de desagregación sectorial con la finalidad de completar las informaciones que ya están disponibles sobre las fuentes de crecimiento de las regiones españolas durante el periodo 1995-2014. Con el fin de proporcionar una visión lo más completa posible, tanto la base de datos co…
Effects of the degree of financial constraint and excessive indebtedness on firms’ investment decisions
Abstract The aim of this paper is to provide empirical evidence of the importance of financial variables in explaining differences in investment rates among firms. The main contributions of the study are twofold: the use of a variable that approximates the degree of financial constraint, and the effect of indebtedness on investment is allowed to be non-linear. The empirical application to the case of Spain is of interest because of the large proportion of SMEs among Spanish firms (SMEs being highly dependent on bank financing) and the drastic tightening of credit conditions in Spain during the banking crisis. The results provide evidence of the impact of financial constraints on firms’ inve…
The impact of the financial crisis on financial integration, growth and investment
Financial crises, and in particular those of the past few years, have severe consequences for the affected economies. In this paper we analyse the impact of financial development and European financial integration on growth and we find no reversal of the growth benefits of financial development and integration in recent years. This highlights the economic cost of regulatory changes that would reverse European financial integration. We also find that, following a financial crisis, investment declines more in countries with a greater degree of uncertainty aversion, which can be informative for evaluating post-crisis economic performance.
Bank competition and multimarket contact intensity
Abstract This paper analyzes the effect of multimarket contact on bank competition. We propose a completely new multimarket contact indicator that not only considers the existence of contacts between banks, but also their intensity, by analyzing the strength–weakness position of banks in terms of branch numbers in comparison to their rivals in the markets where they coincide. We test the new indicator empirically in the context of the Spanish banking sector. The main results suggest a negative relationship between market power and the number of multimarket contacts, rejecting the hypothesis of tacit collusion in the Spanish banking sector. However, the result changes completely when we cons…
Regional financial development and bank competition: effects on firms' growth
Fernandez de Guevara J. and Maudos J. Regional financial development and bank competition: effects on firms' growth, Regional Studies. This paper analyses the effect of regional financial development and bank competition on firms' growth using the Spanish provinces as a testing ground. The results show that firms in industries with a greater dependence on external finance grow faster in more financially developed provinces. The results also show that bank monopoly power has an inverted-‘U’ effect on firms' growth, suggesting that market power has its highest effect at intermediate values. The effect is heterogeneous among firms according to the financial dependence of the industry to which …
Crecimiento y competitividad. Motores y frenos de la economía española
El tejido productivo de la economía española está realizando cambios positivos en varias direcciones, pero sus progresos se ven obstaculizados por la desfavorable coyuntura macroeconómica, el fuerte ritmo de ajustes fiscales impuesto por la Unión Europea (UE) y la prolongación de las dificultades financieras. Los datos del Informe muestran que el contexto macroeconómico no es favorable para aumentar la velocidad de los cambios que están produciéndose y hace que predominen los balances negativos en términos de actividad, empleo o endeudamiento. La falta de margen de maniobra financiero y de estímulos externos en el entorno europeo está manteniendo una fuerte presión sobre las empresas y el s…
The economic impact of European financial integration: The importance of the banking union
Abstract The aim of the paper is to analyze the effect of European financial integration on economic growth. We focus on how the international financial crisis that started in 2007 has affected integration and growth. By combining information at country, sector and firm level, we quantify the effect of financial integration on financial development and therefore on economic growth. Our results illustrate that until the outbreak of the crisis, a significant part of financial development is attributable to progress in integration, with a positive contribution of around 0.04 pp to the EU-15 countries’ GDP growth over the period 1999–2007 of advance in integration. However, during the crisis, t…
The 2017 PREDICT Key Facts Report: An Analysis of ICT R&D in the EU
The 2017 PREDICT Key Facts Report provides a detailed analysis of the state of ICT R&D activities in the European Union. This is the tenth edition of a series that is published annually. Like the previous editions, an online version is available at: https://ec.europa.eu/jrc/en/predict. The PREDICT dataset 2017 is based on the latest data available from official sources (such as the Eurostat and OECD, National Accounts and R&D statistics). It also includes the novelty of backwards reconstruction of the series from 1995, which allows it to cover the period from 1995 to 2014. Therefore, it provides a long-term analysis of the EU ICT sector and its R&D, covering a whole cycle since the initial …
EXPLANATORY FACTORS OF MARKET POWER IN THE BANKING SYSTEM
The aim of the study is to analyse the explanatory factors of market power in the banking system. Using as laboratory the Spanish banking system in the period 1986–2002, results show an increase of market power from the mid-1990s. Of the set of variables that the model posits as explaining market power, those with the greatest explanatory power are size, efficiency and specialization; concentration is not significant. This last result shows the limitations of the approaches, studies and decision-making rules of economic policy that uses market concentration as a proxy for the degree of competition.
Measuring welfare loss of market power: an application to European banks
From a model of imperfect competition among banking firms, this study derives an analytical expression that allows empirical quantification of the welfare loss associated with imperfect competition. Its application to the specific case of the European banking system shows that in spite of the process of deregulation, market power increased during the 1990s in 10 out of the 15 countries of the EU. The welfare loss associated with market power represents close to 2.5% of EU GDP.
Integration and competition in the European financial markets
Financial integration in Europe should affect the competition between markets and intermediaries and generate a convergence of both interest rates and margins among the different countries. This paper analyses the evolution of the convergence in interest rates and the level of competition and its inequalities among the European banking systems for the period 1993 to 2001. The inequality index used ?the Theil index- allows us to break down the inequalities so that the importance of either a country effect or a specialization effect is quantified. If the former effect dominates it would mean that the national banking markets are segmented as a consequence of the existence of obstacles or barr…
Firms’ investment, indebtedness and financial constraints: Size does matter
Abstract This paper provides evidence of the importance of size in explaining the impact of financing conditions on firms´ investment rate. The study makes two main contributions: a) it allows the relationship between indebtedness and firms´ investment to be non-linear; and b) it contrasts whether the impact of indebtedness and the degree of financial restriction differ depending on the size of the company (SME vs large). Results show that while in SMEs indebtedness has a negative impact on investment, there is a threshold beyond which this effect is even larger (based on a debt/assets ratio of 59%). However, in large companies the impact of indebtedness is positive although there is also a…
Determinants of net interest margin: the effect of capital requirements and deposit insurance scheme
This paper analyzes the determinants of net interest margin with a focus on the impact of capital regulation and deposit insurance. We extend the Ho and Saunders (1981) family of models to explicit...
Impact of the subprime crisis on bank ratings: The effect of the hardening of rating policies and worsening of solvency
Abstract This paper studies the impact of the subprime crisis on the ratings issued by the rating agencies in evaluating the solvency of banks. After ascertaining a significant worsening of ratings after the crisis, the paper hypothesises the possibility that this worsening is due not exclusively to a deterioration in the banks’ credit quality, but also to a change in the behaviour of the rating agencies. The study designs a methodology to separate the observed change in ratings into two multiplicative components: one associated with the deterioration of the banks’ solvency itself and another associated with the change in the agencies’ valuation criteria. The methodology is applied to the S…
Interest Rates and Net Interest Margins: The Impact of Monetary Policy
In this chapter, we examine the determinants of bank net interest margin, focusing on the effect of interest rates, and thus monetary policy decisions. The analysis is carried with a panel of banks from 32 OECD countries over the period 2003–2014. The results show a quadratic relationship between net interest margins and interest rates, implying that the variation of the latter has a greater effect when interest rates are low. An important policy implication of the results is that there is a trade-off between economic growth and financial stability associated with the impact of expansionary monetary policy when the level of interest rates is very low. As a result, if the current scenario of…
The evolution of market power in European banking
This paper analyses the effect that European financial market integration has had on the evolution of the banks' market power disparities. The results show that market power disparity has narrowed among eurozone banks. The reduction is attributable to the convergence in the average levels of market power of the European banking sectors. In contrast, the disparities observed within each country have remained stable. As a result, the measures adopted to advance towards a single banking market should be complemented by measures at the national level designed to intensify competition among the banks within a given country.
Crecimiento económico y productividad en Latinoamérica. El proyecto LA-KLEMS
Antecedentes: El objetivo de este artículo es analizar el crecimiento económico, la productividad y sus determinantes en cinco países de América Latina (Argentina, Brasil, Chile, Colombia y México) durante el periodo 1990-2010. Este análisis se aplica tanto a la economía agregada como a nueve sectores de actividad económica. Metodología: Se utiliza una nueva base de datos, LA-KLEMS, que servirá como herramienta fundamental para la investigación empírica y teórica en el área de crecimiento económico y productividad para América Latina. Las variables se organizan en torno a la metodología de contabilidad del crecimiento, que proporciona un marco conceptual claro para el análisis coherente de …
The cost of market power in banking: Social welfare loss vs. cost inefficiency
Abstract This paper analyses the relationship between market power in the loan and deposit markets and efficiency in the EU-15 countries over 1993–2002. Results show the existence of a positive relationship between market power and cost X-efficiency, allowing rejection of the so-called quiet life hypothesis [Berger, A.N., Hannan, T.H., 1998. The efficiency cost of market power in the banking industry: A test of the ‘quiet life’ and related hypotheses. Review of Economics and Statistics 8 (3), 454–465]. The social welfare loss attributable to market power in 2002 represented 0.54% of the GDP of the EU-15. Results show that the welfare gains associated with a reduction of market power are gre…
Inequalities in the efficiency of the banking sectors of the European Union
The aim of this study was to analyse the inequalities of cost and profit efficiency existing in the banking sectors of the European Union, and the origins of the inequalities observed. The decomposition of the Theil index shows that on the cost side the greatest differences within groups occur when the total sample is divided into institutional groups (commercial banks, saving banks, co-operative banks and other banks), the country effect and the type of productive specialization being more important in explaining the differences between groups. In profit efficiency, there are great differences between countries, but none between specialization clusters.
The adjustment of bank ratings in the financial crisis: International evidence
Abstract This paper analyses the adjustment of bank ratings which occurred in the United States, some European countries and Japan as a result of the financial crisis. We use a methodology which allows us to decompose the observed change in the rating into an effect associated with the change in agency rating policies (understood in a broad sense) and into another effect associated with the situation of bank assets. The results obtained show that with the crisis there was a generalised fall in the ratings, caused by both a worsening of the bank asset situation and the hardening of rating policies. Specifically, we find that 39.95% and 19.25% of the fall in ratings in the United States and E…