Paola Musile Tanzi

Customer needs and front‐office technology adoption

Based on a wide survey of over 1,500 Italian customers, analyses both payment services and sales and private banking areas. In the former, human contact attributes of service prove to be overemphasized when customer satisfaction is observed. In the latter, technology seems extremely important in helping bank branch officers decide which new services to offer to which customers. In both sections customers’ clusters are identified according to the importance of different service attributes; subsequently, they are described in terms of demographic, behavioural and psychographic characteristics. Technology‐oriented unsatisfied customers seem to belong to most segments. This calls for a major shift in the approach to delivery channels the majority of Italian banks are still adopting.

Firm size and compliance costs asymmetries in the investment services

Purpose - The purpose of this paper is to find out how effectively implemented are measuring approaches to compliance and whether there is a correlation between the measures implementation, financial specialisation and international activity. The authors evaluate if the regulatory framework implies a measure cost asymmetry, depending both on the proportionality principle and on the existence of different supervisors with an heterogeneous set of enforcement rules. Design/methodology/approach - The analysis is based on a survey involving 84 financial firms (banks, investment companies and insurance companies). Two criteria have been used to interpret the results: the prevailing workability within international and domestic intermediaries; the intermediary typology, creating a distinction between banks other financial intermediaries (FIs) and insurance companies. Findings - Italian financial firms are sensitive to minimise sanctions, but the reputational impact is becoming more important. International firms are more sophisticated than domestic ones for their ability to measure both the probability of non-compliance events and their severity. Banks show the highest attitude to adopt insurance or financial contracts to minimise the negative impact of non-compliant behaviours. Small FIs are late in measuring the exposure and losses due to non-compliance actions. Originality/value - Four years after the Basel Document on compliance, a large percentage of firms is still managing the process within a function with different purposes; nevertheless, reputational impact has become more important. Small intermediaries show a lower attitude to implement a risk management approach, with a capital management sensitivity. This finding addresses the question about the existence of size effect which could reduce the compliance attitude.

Managing compliance risk after MiFID

The research focuses on changes in the compliance function within major European banks and other financial intermediaries and on the effects of MiFID implementation. The research: a) focuses on multinational groups based in Europe and operating in investment services, such as banks, asset management companies and investment companies; b) highlights the critical areas in terms of compliance after MiFID implementation within international groups, with growing operational complexity in a framework of principle-based regulation. The four areas of research seek to answer the following questions: 1) Is the positioning of the compliance function “at the top�? of the organizational structure, as suggested by the Basel Committee? 2) Are the roles attributed to the compliance function, their knowledge and their instruments consistent with their responsibilities? 3) Do the methodologies applied in investment services for measuring and mitigating compliance risk follow a qualitative and/or a quantitative approach? 4) Is the interaction between the compliance function inside and outside the structure appropriate to the goals of compliance? Thirty-one top international groups based in Europe were invited to take part in the research. Sixteen of them accepted. The research was carried out using a structured questionnaire and the qualitative analysis of public reports. Due to the sample size, this analysis can only be considered indicative, but ‘knowing what is actually happening’ is essentially to avoid subjectivity and support action, providing ideas for organizing systems, designing paradigms and thus facilitating efficient, effective and consistent approaches to self-regulation and to implementing external regulations.

An Analysis of the Number of Medical Malpractice Claims and Their Amounts

Starting from an extensive database, pooling 9 years of data from the top three insurance brokers in Italy, and containing 38125 reported claims due to alleged cases of medical malpractice, we use an inhomogeneous Poisson process to model the number of medical malpractice claims in Italy. The intensity of the process is allowed to vary over time, and it depends on a set of covariates, like the size of the hospital, the medical department and the complexity of the medical operations performed. We choose the combination medical department by hospital as the unit of analysis. Together with the number of claims, we also model the associated amounts paid by insurance companies, using a two-stage regression model. In particular, we use logistic regression for the probability that a claim is closed with a zero payment, whereas, conditionally on the fact that an amount is strictly positive, we make use of lognormal regression to model it as a function of several covariates. The model produces estimates and forecasts that are relevant to both insurance companies and hospitals, for quality assurance, service improvement and cost reduction.

Supporting an Effective Risk Culture in Private Banking/Wealth Management

Each customer is unique. Starting from this perspective, the most recurring promise of the private banking/wealth management players becomes: “Each of our solutions is unique”. As argued in this chapter, the ‘Know your client’ principle and the standard requirements requested by the MiFID framework are not conflicting, but complementary and the second ones are a guarantee from the client point of view. While much less exciting, the most serious promise to the client should be: ‘We are able to keep your risks under control’, and this promise becomes reliable, if the private bank/wealth management unit’s risks are also under control. The private banking/wealth management business models sustainability highly depends on it.

A European banking business models analysis: the investment services case

Purpose Business Model Analysis is acquiring increasing visibility in the European banking regulatory framework, following the European Banking Authority guidelines on common procedures and methodologies for the supervisory review and evaluation process (SREP), developed to assess business and strategic risks (EBA, 2014, 2015a,2015b, 2015c). Starting from a selected literature review, in the paper, the authors analyse business models set up by financial intermediaries, bank and non-banks, for the distribution of investment services, first by comparing European niche players with European banking global players, and second, comparing European niche players among themselves to understand the evolution of business models for the distribution of investment services at European level. The research is supported by the Baffi–Carefin Research Centre at the Bocconi University (Italy), in collaboration with ANASF, the Italian Association of Financial Advisors (Italy). Design/methodology/approach The authors consider a sample of European financial players from 2009 to 2014. The authors’ focus is on France, Germany, Italy, The Netherlands, Spain and the UK; overall the authors’ handmade data set is based on 162 annual reports. The authors follow two main questions: Do the niche players, as they are focused on the distribution of investment services, have an upper limit to profitability, compared to the global players, as risk-takers in many financial areas? How is the business model of niche players changing, facing increasing competition and regulatory pressures? Findings Answering the first research question, the highest net profitability is found in the niche players group; the global players, as risk-takers, achieve lower remuneration, in contrast with the risk premium theory. The results were assessed over a limited period, however, deemed in line with the company’s strategic planning horizon. Answering the second research question, the authors focus on the case of niche players, using a cluster analysis. The authors identify three different business models: most dynamic niche players, which combine investment services, insurance and welfare services, achieving the highest margins and stability; players mainly focused on asset management, whose key vulnerability is the degree of open architecture, especially in light of future MiFID 2 implementation; and players mainly focused on the creation of well-structured on-line platforms, which offer also brokerage services, thereby reducing their marginality and potentially increasing their business risk. Research limitations/implications Despite the limited time series, the authors’ research gives some inputs for those interested in deepening the business model analysis focus on the distribution of investment services and the business and strategic risk assessment, both for the global banks and the niche players (banks and non-banks). Practical implications The authors’ results could be of some interest during the strategic assessment of global banks and niche players, both adopting an internal perspective or an external one, as regulator. Social implications By giving some specific insights into the assessment and comparison of business and strategic risks among global and niche players, the authors’ research provides the basis for further research in the field of the distribution of investment services. Originality/value The originality mainly regards the business model risk perspective and the focus of the authors’ analysis: the distribution of investment services. This sector, unlike the asset management, does not have an easily recognisable group of comparables at European level, all the European countries analysed have very different business models. This research avails of an original database, that is unique to Europe.

Insurance Companies and E-Marketing Activities: An Empirical Analysis in the Italian Market

The relationship between insurance companies and digital technologies has been studied less than the one of the banking industry. The first step in this process was to review some relevant literature about e-marketing and e-service quality (e-SQ) in service industries—with particular focus on the insurance and banking industries. On this basis, we develop a framework for assessing e-SQ and e-marketing activities for insurance companies, both traditional and native digital, and we tested our research hypotheses in an empirical setting for the Italian market.

Multiple Regulators and Compliance Costs Asymmetries in the Investment Services: Does Firm Size Matter?

This research focuses on the advancement of the Compliance function within financial intermediaries. Eighty four financial firms (banks, investment companies and insurance companies) took part in this research. Two criteria have been used to interpret the results: 1) the prevailing workability within international and domestic intermediaries; 2) the intermediary typology, creating a distinction between banks, and of these cooperative banks, other financial intermediaries (investment companies) and insurance companies. We found that players are sensitive to minimize sanctions; the sample is almost perfectly balanced between intermediaries who implemented some methodologies to measure the risk and those who do not, but banks appear to be more measuring oriented, especially in terms of event probability and loss given event. This finding and the different regulatory perimeter among financial firms addresses the question about the existence of size effect which could reduce the compliance attitude when either the enforcement is not big enough to deter rational misconduct.