Narrow Results

This paper studies to what extent bank-specific characteristics relate to stock return skewness. The main finding is that stock return skewness decreases significantly in bank size, measured in terms of total assets, i.e stocks of large banks are less skewed than those of small banks. This result holds for backward-looking skewness computed using the past stock returns, as well as for forward-looking skewness extracted from stock options. We interpret the empirical evidence by arguing that bank size increases the likelihood to have severe losses, to the point that investors expect to be compensated by receiving higher expected returns.

This article explores some recent macroeconomic and microeconomic approaches to financial digitalization and the relationship between banks, FinTech and BigTech. It also deals with new approaches to identify the adoption and implications of financial digitalization by consumers. We show competition between traditional banks and tech companies is mostly driven by their relative ability to manage information sharing. Regulation is still considering ways of providing a level playing field while industry participants are reacting with a mixture of strategies, many of them based on cooperation. The paper also shows there are different ways in which customers access financial digital channels and new approaches from matching learning and brain studies to identify behavioral patterns in financial digitalization decisions.

Banks have been revising their business models since the financial crisis, diversifying income sources to pursue profitability and stability in a rapidly evolving environment. The effectiveness of this strategy is still debated. We investigate if revenue diversification of 1250 EU and US banks improved performance or its stability between 2008 and 2016. We adopt a broad econometric approach and define diversification as the share of non-interest revenue and the HH index of the net operating income. We find that diversification is not clearly associated with performance or its volatility, that benefits change remarkably over time and, where present, show significant variability. Our results support recent evidence on the limitations of diversification in banking, raising potential concerns on converging supervisory practices and general calls for revenue diversity. The variability of business models and the impacts of different economic and institutional environments matter.

Based on daily data from Thomson Reuter’s Refinitiv, we investigate the effect of information and communication technology (ICT) on the profitability and risk of the European banking industry during the COVID-19 pandemic. Specifically, we empirically examine whether and how ICT diffusion affects banks’ stock return, credit default swaps (CDS) spreads and market volatility over the period spanning from January 1, 2020, to March 31, 2020. Our evidence demonstrates that ICT improves banks’ performance measures and reduces risks. These effects are more significant in the post-COVID-19 period.

Advertising has a major effect on individual investors’ decisions. Financial instruments tend to be advertised more when market sentiment is high, as investors are more willing to buy. Mechanisms affecting the relationship between market sentiment and advertising activity remain unexplored in the finance literature. Using a novel dataset of advertisements for mutual and exchange-traded funds from the main Italian financial newspaper, we show that the effect of market sentiment on financial advertisements depends upon the distribution channel. Sentiment matters only for products directly traded by the investors, such as exchange-traded funds. Conversely, for financial products — like mutual funds — distributed through a captive distribution network (bank branches and tied agents), financial advisers’ actions mitigate the effect of market sentiment on advertising activity. Overall, our findings provide some evidence of the persuasive power of financial advisers in investors’ decisions, which arguably requires increased attention from financial market regulators.

The world around us has become increasingly digital in recent years, from the quick adoption of mobile phones to the emergence of the Internet and, more recently, social media and big data. With profound effects on all productive sectors, the “digital revolution,” considered as the widespread use of digital technology, has fundamentally changed the financial sector. This is presently in the midst of a profound and unheard-of change known as FinTech, which is the direct outcome of the application of technology to finance. Among other things, blockchain has recently gained popularity in the financial services industry. Therefore, a greater comprehension of how this novel technology could affect the financial industry is necessary. In this paper, we explore how blockchain may impact on financial intermediaries and banks.

All companies pollute, financial firms included. How much does the financial sector pollute? How much does it impact climate change?

This paper contributes to the debate on the relationships between the European financial sector and environmental sustainability. By examining the ESG score — in particular, the environmental indicators — of a sample of Italian banks and insurance companies over the period 2015–2020, the research intends to verify (i) whether financial intermediaries adopt policies and make efforts to reduce the environmental impact of their operations; (ii) the observable trend in the environmental performance of the examined companies and (iii) the existence of a relationship between the environmental performance and the characteristics of the examined companies.

The results show an increasing trend in the environmental performance of the examined intermediaries and a wide dissemination of policies aimed at reducing their impact on the environment. According to our analysis, environmental performance is significantly related to company size. The study can be useful for managers and decision-makers in providing an in-depth analysis of the measures adopted to reduce environmental impact. In addition, it can have important repercussions on the financial markets and also for investors in increasing awareness about environmental scores.

This study investigates how the COVID-19 pandemic affected the European banking system, focusing on lending activities and risk-taking behavior. We use a difference-in-differences (DID) approach to compare the performance of banks highly impacted by the pandemic with those operating in less affected countries. Our results indicate a negative impact on lending activities, as banks reduced their exposure to both individuals and businesses. Nonetheless, the impact on bank risk-taking was heterogeneous, as certain banks increased their risk-taking by relaxing their lending standards to support their borrowers while others tightened lending criteria. The reduction in total lending for the banking system was primarily driven by less capitalized banks — with a sharp decline in corporate loans combined with stability in mortgages and consumer loans — and those with limited access to public guarantee schemes. Different characteristics, such as size, profitability, and listing status, led to varied lending behaviors during the COVID-19 pandemic, with smaller and more profitable banks exhibiting greater resilience.

This study uses a combination of archival and documentary research, as well as quantitative analysis, to uncover the evolution and impact of banking regulations on the economy of Brunei Darussalam. Available evidence suggests that throughout most of the 20th century, regulators adopted a laissez-faire approach with minimal regulations in the banking industry. However, financial crises tend to trigger regulatory reforms. Growing household indebtedness and bankruptcies were precursors to the introduction of major institutional changes, including the establishment of a centralized monetary and financial regulatory authority, Autoriti Monetari Brunei Darussalam in 2011 (later renamed the Brunei Darussalam Central Bank (BDCB) in 2021), the Brunei Darussalam Protection Corporation in 2011, as well the Credit Bureau in 2012. Various financial regulations covering personal credit/financing, interest rates, credit card usage, and the Total Debt Service Ratio (TDSR) requirements have been introduced to promote financial stability and consumer financial protection. This has coincided with an evident decline in private and household indebtedness as well as non-performing loans/financing among banks. However, promoting financial stability and supporting economic growth can be a tricky balancing act for regulators to navigate. This study finds that the lack of local investment opportunities limits the possibility for surplus funds to circulate in the economy. In terms of policy recommendations, the role of financial regulations is discussed in the context of addressing global challenges such as inequality and climate change.