Ornella Ricci

The efficiency of cooperative banks: the impact of environmental economic conditions

This article analyses the cost and profit efficiencies of cooperative banks. Cooperative banks are small financial institutions providing financial services in several local geographical areas, and they play a fundamental role in various European banking systems. Even though these small financial institutions present a homogeneous business model, their performance is strongly influenced by the economic conditions of their local markets. The efficiency measurement has to account for the heterogeneity of the environmental conditions. By using a large sample of Italian cooperative banks (2683 year observations) collected between 2000 and 2005, we estimated the cost and profit efficiency using Stochastic Frontier Analysis (SFA) and including various environmental variables accounting for disparities among Italian regions. We show that environmental conditions substantially influence efficiency estimates: banks in the Northeast of Italy are shown to be the more cost efficient, benefiting from a favourable environment, while banks in the South of Italy display a higher profit efficiency, probably due to lower competitive pressures. We show that the coefficients for branches and the concentration of cooperative banks with respect to other banks are important both on the cost side and the profit side.

Bancassurance efficiency gains: evidence from the Italian banking and insurance industries

Bancassurance has rapidly grown in Europe over the past 20 years catching the attention of managers and academia. Most dedicated studies have only been descriptive in nature, while the number of empirical studies is very limited. Potential efficiency gains are a poorly investigated issue, even though cost and revenue synergies are commonly recognised among the main economic rationales for conglomeration. Our paper aims to assess bancassurance performance gains (from both the banking and the insurance standpoints) in the Italian banking and insurance sectors over the period 2005–2006 by estimating cost and profit efficiency using stochastic frontier analysis. With regard to the banking industry, we do not show any strong evidence in favour of entering the life insurance business. The investigation into the insurance industry highlights the competitive viability of bancassurance as a distribution channel, especially in terms of cost efficiency. In terms of profitability, our findings suggest that the mix of products should be continuously revised to adapt to customer needs and the evolution of financial markets. As a consequence, ownership links are not necessarily the best bancassurance strategy, and the parties involved should also consider more flexible forms of cooperation, such as cross-selling agreements and non-equity strategic alliances.

The Unintended Consequences of the Launch of the Single Supervisory Mechanism in Europe

The launch of the Single Supervisory Mechanism (SSM) was an historic event. Beginning in Nov. 2014, the most significant banks came under the direct supervision of the European Central Bank (ECB), while national supervisory authorities (NSAs) maintained direct supervision of the remaining banks. Thus, supervision is conducted on two levels, which could cause inconsistency problems. Did the behavior of the significant banks differ from that of the less significant banks during the SSM launch? We find that the significant banks reduced their lending activity more than the less significant banks did in order to shrink their balance sheets and increase their capitalization.

Bancassurance in Europe : past, present and future

Introduction F.Fiordelisi & O.Ricci The Development of Bancassurance in Europe O.Ricci Bancassurance Products M.G.Starita Bancassurance: The Market Reality in Europe M.Caratelli The Regulatory Framework M.G.Starita Insurance Financial Statements S.Pucci Studying the Bancassurance Phenomenon: A Literature Review O.Ricci Studying the Bancassurance Phenomenon: An Empirical Exploratory Analysis on a European Sample F.Fiordelisi & O.Ricci Studying the Bancassurance Phenomenon: A Two Side Analysis on the Relevant Case of Italy F.Fiordelisi & O.Ricci Conclusions F.Fiordelisi & O.Ricci

The Effect of Monetary Policy Interventions on Stock Markets and G-SIFIs during the Crisis

Central banks have run during the crisis a wide set of monetary policy interventions using new instruments and techniques to restore the monetary stability and thus re-establish the stability of financial (and banking) systems. We analyze the effect of monetary policy interventions on stock markets in the most advanced monetary areas (Euro area, Japan, U.S., U.K., and Switzerland). We estimate cumulated abnormal returns (CARs) around the announcement of each monetary policy intervention focusing on: 1) interbank credit market; 2) stock markets; and 3) Global Systematically Important Financial Institutions (G-SIFIs). We show that different monetary policy interventions from single central banks have produced a diverse market reaction. Non-conventional measures have been more effective than traditional ones in restoring the stability of financial and banking sectors. Dividing the sample period into three different time intervals, we also show that the impact of expansionary interventions was particularly significant during the subprime crisis, while the effect of restrictive interventions was more relevant during the sovereign debt crisis.

Efficiency in the Life Insurance Industry: What are the Efficiency Gains from Bancassurance?

The aim of this paper is to assess whether bancassurance firms outperform other life insurance companies. Cost and profit efficiency are estimated using a stochastic frontier analysis and including several firm‐specific factors to overcome possible sample heterogeneity. On the cost side, we find strong evidence in favour of bancassurance as a distribution channel. Results on the profit side suggest the need to continuously revise the product mix. Bank ownership is not found to provide any direct advantages. As a consequence, the subjects involved should carefully consider looser forms of cooperation, such as cross‐selling agreements and non‐equity strategic alliances.

Efficient or Fortunate? The Impact of Environmental Economic Conditions on Co-Operative Banks

This paper analyses the cost and profit efficiency of Italian co-operative banks. These small financial institutions have homogeneous business model and their performance is strongly influenced by the economic conditions of their local markets. As recognised by various recent studies (Bos et al., 2008), the efficiency measurement has to account for the heterogeneity of environmental conditions. By using a sample of 2683 year observations collected between 2000 and 2005, we estimated cost and profit efficiency using the Stochastic Frontier Analysis and including various environmental variables accounting for disparities among Italian regions. Our results provide evidence that banks in the North-East of Italy are more cost efficient, taking advantage of a favourable environment, while banks in the South of Italy display a higher profit efficiency, probably due to lower competitive pressures.

Enterprise risk management and bank performance: Evidence from Eastern Europe during the financial crisis

Abstract Does the adoption of the Enterprise Risk Management (ERM) improve bank profitability? Does ERM also reduce bank risk? By analyzing a sample of banks located in European emerging markets between 2005 and 2013, the aim of this chapter is to empirically investigate the determinants of firm performance, both in terms of bank profitability and risk, with respect to the adoption of Enterprise Risk Management (ERM). In order to capture the effect of the ERM program adoption on banks’ performance, we both use market-based measures as well as accounting-based indexes. Following the seminal literature on the topic (Aebi, Sabato, & Schmid, 2012; Eckles et al., 2014; Ellul & Yerramilly, 2013; Hoyt & Liebenberg, 2003, 2011; Lin, Wen, & Yu, 2012; Pagach & Warr, 2010), we adopt a binary proxy variable, that is, the appointment of a Chief Risk Officer (CRO), to define whether the firm is currently undertaking an ERM program. Our results show that a post-ERM firm experiences an increase in the risk-adjusted profits and a reduction of the overall risk.

Studying the Bancassurance Phenomenon: A Two-Sided Analysis on the Relevant Case of Italy

Most studies dealing with bancassurance provide readers with descriptive analysis by discussing economic rationales, advantages and drawbacks for all the institutions involved. In contrast, there are few studies providing an empirical assessment of the bancassurance business. More specifically, as outlined at the end of the previous chapter, there are no empirical analyses measuring bancassurance cost and profit efficiency gains from both the banking and the insurance perspectives. This chapter aims to fill this gap by answering the following three research questions: (1) Are banks engaged in the insurance business more cost and profit efficient than competitors who have specialised in traditional and investment banking? (2) Are bancassurance companies more cost and profit efficient than independent companies operating in the life business? (3) Which model of bancassurance performs best?

Studying the Bancassurance Phenomenon: An Empirical Exploratory Analysis on a European Sample

As outlined in Chapter 6, cost and revenue synergies are commonly recognized as one of the main economic rationales for bank diversification into the insurance industry. Nevertheless, there are only a very few studies dealing with efficiency issues and specifically focussing on bancassurance. This chapter aims to present the empirical analysis conducted on a European sample in order to answer the following research question: are banks engaged in the insurance business more cost and profit efficient than their competitors specialised in traditional and investment banking?