Di Giorgio

Should Banking Supervision and Monetary Policy Tasks Be Given to Different Agencies

This paper adds some new arguments to the thesis that the responsibility for banking supervision should be assigned to an agency formally separated by the Central bank. We also provide some additional evidence on the macro and microeconomic performance of OECD countries whose banking systems are classified according to the regulatory regime in place. We find that the inflation rate is considerably higher and more volatile in countries where the Central bank acts as a monopolist in banking supervision. Besides, although banks seem to be more profitable when Central banks supervise them, they incur into higher costs and rely more on deposits with respect to more sophisticated liabilities as a funding source. The data are not definitively in favor of functional separation. However, we argue that the evolution of financial intermediaries, moral hazard problems and especially cost accountability seem to suggest that separation would be a better solution for industrialized countries. We also critically discuss the current arrangement of financial regulation and supervision in the EMU: our proposal is to establish an independent European System of Financial Supervisors (ESFS) structured similarly to the ESCB.

Financial development and reserve requirements

Abstract Many countries have either eliminated or considerably reduced reserve requirements during the last decade. This paper derives the optimal reserve requirements of a simple economy with production and financial intermediation subject to costly state verification, and shows that one motivation for the widely observed reduction in the level of mandatory reserves is linked to the process of financial markets development.

Monetary policy shocks and transmission in Italy: A VAR analysis

This paper provides updated empirical evidence about the real and nominal effects of monetary policy in Italy, by using structural VAR analysis. We discuss different empirical approaches that have been used in order to identify monetary policy exogenous shocks. We argue that the data support the view that the Bank of Italy, at least in the recent past, has been targeting the rate on overnight interbank loans. Therefore, we interpret shocks to the overnight rate as purely exogenous monetary policy shocks and study how different macroeconomic variables react to such shocks.

Financial intermediation and equity investment with costly monitoring

This paper studies the efficiency of equilibria in a productive OLG economy where the process of financial intermediation is characterized by costly state verification. Both competitive equilibria and Constrained Pareto Optimal allocations are characterized. It is shown that market outcomes can be socially inefficient, even when a weaker notion than Pareto optimality is considered.This paper studies the efficiency of equilibria in a productive OLG economy where the process of financial intermediation is characterized by costly state verification. Both competitive equilibria and Constrained Pareto Optimal allocations are characterized. It is shown that market outcomes can be socially inefficient, even when a weaker notion than Pareto optimality is considered.

Designing a Regulatory and Supervisory Framework for Integrated Financial Markets

The financial crisis that started in 2007 casts doubt on the ability of national laws and competent authorities to manage the stability of the financial system and to protect investors. This is due to the relevant evolving features of financial intermediation – like the cross-border strategies in banking – with many M&As undertaken, especially in Europe, and more in general the globalization of finance, also through the many recent operations among exchanges. The associated regulatory and supervisory challenges have proved to be difficult to tackle. An international perspective is needed on single banking regulatory instruments, even if it is impossible at this stage to imagine unique rules and single international authorities managing capital ratios, deposit insurance, reserve requirements and lending of last resort, as well as other tools for ensuring financial markets stability. However, some common principles on regulation and the structure of supervision may be stated both in US and in Europe: we suggest a “four peak” approach to the matter.

Systemic Risk in the European Banking Sector

Systemic risk is the risk of a collapse of the entire financial system, typically triggered by the default of one, or more, large and interconnected financial institutions. In this paper we estimate the systemic risk contribution of each financial institution in a large sample of European banks. We follow a recent methodology first proposed by Adrian and Brunnermeier (2011) based on the CoVaR and find that size is a predictor of a bank contribution to systemic risk, but it is not the only one. Leverage is important as well. Also, banks that have their headquarters in countries with a more concentrated banking system tend to contribute more to European wide systemic risk, even after controlling for their size. Therefore, any financial regulation designed only to curb banks’ size would not completely eliminate systemic risk. On average, balance sheet variables are very weak predictors of banks’ contribution to systemic risk, if compared to market based variables. Accounting rules provide enough degrees of freedom to make balance sheet less informative than market prices. As a result, measures of risk based on higher frequency market prices are more likely to anticipate systemic risk.

Uncertainty and Transparency of Monetary Policy

What is the proper degree of central bank transparency? This chapter investigates the issue in a framework characterized by (a) common uncertainty on potential output and (b) imperfect knowledge of the central bank target by the private sector. We show that full transparency is socially beneficial under a variety of parametrizations. Our results confirm, in a different setup, those of Faust and Svensson (2001, 2002), and Svensson (2006).

Systemic Risk in the Italian Banking Sector

Systemic risk is the risk of a collapse of the entire financial system, typically triggered by the default of one, or more, interconnected financial institutions. In this paper we estimate the systemic risk contribution of Italian listed banks for the period 2000-2011. We follow a methodology first proposed by Adrian and Brunnermeier (2011) and measure banks’ contribution to systemic risk by ΔCoVaR, that measures the contribution of bank i to the financial system VaR when bank i is in a state of distress. We define “the system” as the set of Italian listed banks in the sample. First, we find that the information contained in ΔCoVaR is different from that contained in the VaR. Therefore, regulators should take it into account in order to monitor the systemic risk posed by banks. Second, recent policy debate has focused on the danger posed by large banks and on the need to curb their size. We find that size is indeed the main predictor of a bank contribution to systemic risk. However, in the post-Lehman period leverage is also an important predictor of systemic risk. Consequently, any financial regulation designed only to curb banks’ size could not completely eliminate systemic risk because exactly in crisis times leverage becomes relevant. Hence, we conclude that ΔCoVaR is a very useful policy tool for regulators that can estimate which factors are more relevant in terms of contribution to systemic risk.

Venture Capital E Private Equity in Italia

Questo studio analizza le determinanti e le prospettive del venture capital in Italia, nell’ambito dello studio delle relazioni esistenti tra struttura e funzionamento del sistema finanziario e crescita dell’economia e dell’occupazione. Particolare attenzione è dedicata al ruolo svolto dalla politica economica e regolamentare attraverso la disamina dei provvedimenti recenti che hanno contribuito a modificare il contesto entro il quale si muove in Italia questo segmento del mercato finanziario.