Andrea Lippi

Determinants of Bank Profitability in the Euro Area: What Has Changed During the Recent Financial Crisis?

During the recent financial crisis, bank profitability has become an element of strong concern for regulators and policymakers; in fact both self-financing strategies and capital increases – necessary to provide higher level of capitalization – rely on the ability of a bank to generate profits. However, the determinants of bank profitability, that seemed to be unequivocally identified by previous literature, appear to have changed under the effect of regulatory and competitive dynamics. We test this hypothesis on commercial, cooperative and saving banks, employing a random effect panel regression on a dataset comprising bank-level data and macroeconomic information (covering the period 2006-2013) for 9 countries of the Euro area. Our findings suggest that, after a period of “irrational exuberance” in which credit growth and high leverage were seen as proper and fast ways to boost profitability, a sound financial structure and a wiser and objective credit portfolio management have become the main drivers to ensure higher returns.

Default Bias or No Default Bias? Evidence From Decisions Regarding Occupational Pension Fund Enrollment in Italy

If forced to choose a supplementary pension fund, people will decide not to decide, accepting decisions made for them by others (default bias), reaching a status quo position. This study analyses whether the status quo position achieved via the default option in Italian occupational pension funds is later changed over the period studied (2007-2011), and the factors influencing any change.

Current Identifiable Biases in Italian Occupational Pension Fund Enrolment Decisions: Default Bias and Extremeness Aversion

Previous researches have demonstrated that consumer decisions could be affected by some biases in the supplementary pension field. Decision-making is very often not guided by reason, and in many cases, if forced to choose, people will decide not to decide, passively accepting the decisions made for them by others. Such behaviour deserves to be analyzed and studied in order to better understand its consequences, and determine whether the latter can be turned to the advantage of the decision-makers themselves. Using a database of 24 occupational pension funds representing 1,732,530 employees, this paper examines the presence of default bias and extremeness aversion in Italian workers’ choices regarding the supplementary pension system, as a result of the new rules enacted by the regulator in 2007. The results provide insights which are important for public policy as regards the possibility of taking account of these biases when formulating the regulations, with the aim of benefiting employees.