PhD Brown Bag Seminar (Essex Finance Centre)

Event abstract

'Market reaction to bail-in announcements' - Federica Minnucci

Abstract: After the recent global financial crisis, the European Union (EU) has introduced a common regulation for both banking supervision and crisis management, in order to preserve financial stability. More precisely, the Single Resolution Mechanism (SRM) provides common resolution procedures to resolve banking crises in an orderly manner and restore the viability of banking institutions. The new resolution mechanism includes, as its main feature, a bail-in tool based on the burden sharing of the losses between debtholders, depositors and shareholders for the resolution of banking crises. This paper aims at empirically assessing market reactions to policy announcements implementing the new bail-in regime. Using an event study approach, it is investigated whether investors perceive the new bail-in regime as credible, i.e., whether they believe in the reduction of State aids to banks. Differences across several types of bank are also analysed in order to assess market discipline effectiveness. Results provide important indications to policy makers and contribute to the understanding of how future banking crises should be managed.

'Financial Inclusion and Bank Performance: High Vs Low income countries' - Mais Sha’ban

Abstract: The paper explores the relationship between financial inclusion and performance for banks operating in 125 countries over 2005-2014. We distinguish between high and low income countries to exploit cross-economies variations. We obtain data on financial inclusion from the IMF’s Financial Access Survey, measured by deposits to GDP, loans to GDP, number of borrowers from commercial banks per 1000 adults, and number of deposit accounts with commercial banks per 1000 adults. We then construct an aggregate bank performance index using principal component analysis and focus on a set of key bank performance indicators based on CAMEL ratios including solvency, asset quality, liquidity, efficiency, and profitability. Our main findings suggest that a higher level of financial inclusion is negatively associated with the bank performance index particularly in high and upper middle income countries. In contrast, higher financial inclusion levels in low and lower middle income countries do not seem to adversely affect bank performance. In fact, we find that banks in these countries could achieve gains from further financial access. We also show that higher stringency in capital regulation can improve the relationship between increased financial inclusion and bank performance.

Speaker biographies

Miss Federica Minnucci is a full time PhD student in Management (Banking and Finance Track) at the University of Rome Tor Vergata and she is currently a visiting research student at Essex Business School. She received her MSc degree in Finance and her BSc in Economics at University of Rome Tre (Italy). Her research interests are on banking regulation and resolution, banking and sovereign crises and financial stability.

Miss Mais Sha’ban is a full time PhD student in Finance at Essex Business School (University of Essex), under the supervision of Professor Claudia Girardone and Dr Anna Sarkisyan. She holds an MSc in Finance from Swansea University and a BA in Banking and Finance from Yarmouk University (Jordan). Her research interests are on bank capital structure, bank performance, and financial inclusion.