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on Banking |
| By: | McCann, Fergal (Central Bank of Ireland); Ryan, Ellen (Central Bank of Ireland) |
| Abstract: | It is widely acknowledged that mortgage lending with lower Loan to Value (LTV) ratios is expected to have a lower probability of default, which will increase the resilience of a bank's mortgage portfolio to adverse events. This Letter focuses on another channel through which lower-LTV lending can lead to improvements in bank balance sheet resilience: the lowering of losses in the event of a default (Loss Given Liquidation, LGL). Using data from three major mortgage lenders in Ireland on loans for property purchase, we focus on originating LTVs on mortgages issued between 2003 and 2016 to make a number of observations on the evolution of mortgage portfolio resilience. Firstly, aggregate hypothetical losses experienced in the event of a common shock are at the lowest level since 2003 among the cohorts of loans issued since the introduction of recent Central Bank of Ireland mortgage market regulations. Secondly, the correlation between originating LTV and loan size has been falling steadily since 2006, reflecting a decreased tendency for banks to make their largest loans also their most highly leveraged, which leads directly to improvements in portfolio-level resilience. Finally, we show that improvements in the resilience of mortgages to adverse house price shocks are most pronounced at the right tail of the LTV distribution, where the highest-risk lending has reduced significantly over the 2008-2016 period. |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:ecolet:10/el/16&r=ban |
| By: | Koetter, Michael; Noth, Felix; Rehbein, Oliver |
| Abstract: | We test if and how banks adjust their lending in response to disaster risk in the form of a natural catastrophe striking its customers: the 2013 Elbe flooding. The flood affected firms in East and South Germany, and we identify shocked banks based on bank-firm relationships gathered for more than a million firms. Banks with relationships to flooded firms lend 13-23% more than banks without such customers compared to the preflooding period. This lending hike is associated with higher protability and reduced risk. Our results suggest that local banks are an effective mechanism to mitigate rare disaster shocks faced especially by small and medium firms. |
| Keywords: | disaster risk,credit demand,natural disaster,relationship lenders |
| JEL: | G21 G29 O16 Q54 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:iwhdps:312016&r=ban |
| By: | Barattieri, Alessandro (Collegio Carlo Alberto and ESG UQAM); Moretti, Laura (Central Bank of Ireland); Quadrini, Vincenzo (University of Southern California) |
| Abstract: | In the period that preceded the 2008 crisis, US financial intermediaries have become more leveraged (measured as the ratio of assets over equity) and interconnected (measured as the share of liabilities held by other financial intermediaries). This upward trend in leverage and interconnectivity sharply reversed after the crisis. To understand the factors that could have caused this dynamic, we develop a model where banks make risky investments in the non-financial sector and sell part of their investments to other banks (diversification). The model predicts a positive correlation between leverage and interconnectivity which we explore empirically using balance sheet data for over 14,000 financial intermediaries in 32 OECD countries. We enrich the theoretical model by allowing for Bayesian learning about the likelihood of a bank crisis (aggregate risk) and show that the model can capture the dynamics of leverage and interconnectivity observed in the data. |
| Keywords: | Interconnectivity, Leverage |
| JEL: | G11 G21 E21 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:07/rt/16&r=ban |
| By: | Jieshuang He (Indiana University) |
| Abstract: | I develop a model to study two related questions: how bank decisions to form connections depend on fundamentals; and how financial stability depends on bank network structure. In my model, banks are connected through two layers of networks: interbank debts and banks' common investments in non-financial firms. These layers of interconnections are incentivized by diversified investments when banks maximize their expected equity values according to mean-variance rules. Comparative statics of a small number of banks indicates that, in equilibrium, as banks become less risk averse, they tend to issue more debts and form more links within the banking sector. Furthermore, I conduct numerical computations for bank default probabilities in a circle network and a more connected network. The results demonstrate that increased bank interconnectedness and common asset holdings significantly reduce systemic stability. |
| Keywords: | Endogenous Network, Financial Contagion, Interbank Debt, Portfolio Selection |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:inu:caeprp:2016005&r=ban |
| By: | Holton, Sarah (BSI Bank and CEPR); McCann, Fergal (Central Bank of Ireland) |
| Abstract: | Conditions in the banking sector have been shown to have a meaningful impact on lending flows and real economic activity, with evidence that these effects are more pronounced for smaller and more bank-dependent borrowers. Using monthly panel data on banks across twelve euro area countries from 2007 to 2015, we investigate the role played by banks' market power, the stability of their funding base, their holdings of sovereign debt and measures of their balance sheet health on the relative interest rate they charge on small versus large large loans (the Small Firm Financing Premium, SFFP), as a proxy for the cost of credit to small versus large firms. We find strong evidence that bank market power, sovereign bond holdings and balance sheet weaknesses lead to disproportionate borrowing cost increases for small firms, and that these features act to exacerbate the impact of a weak macroeconomy. This paper provides evidence that smaller firms, who are more dependent on the banking sector, are affected more by bank balance sheet weakness than larger firms. |
| Keywords: | SMEs, Cost of Credit, Bank Balance Sheets, Bank Market Power |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:wpaper:09/rt/16&r=ban |
| By: | Mark Mink |
| Abstract: | As compared to non-banks, banks adopt relatively fragile balance sheet structures characterized by leverage, maturity mismatch, and asset diversification. This paper offers a new potential explanation for this observation, within a model where banks face lower aggregate (funding) liquidity risk than non-banks. This single difference between both provides banks with an incentive to adopt fragile balance sheets, even in the absence of tax distortions, moral hazard, or a special role for banks as liquidity providers. The model implies that banks engage in pro-cyclical risk-taking, are vulnerable to contagion, and will resist regulatory equity and liquidity requirements, while non-banks do not. |
| Keywords: | banks; balance sheet fragility; aggregate liquidity; bank equity and liquidity requirements; financial stability |
| JEL: | E50 G01 G21 G28 |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:534&r=ban |
| By: | Kinghan, Christina (Central Bank of Ireland); McCarthy, Yvonne (Central Bank of Ireland); O'Toole, Conor (Central Bank of Ireland) |
| Abstract: | This Economic Letter explores the effects of the recent macroprudential measures in the mortgage market on the leverage of Irish borrowers. Using loan-by-loan data from before and after the measures, we test how loan-to-income (LTI) and loan-to-value (LTV) ratios have changed for First Time Buyers (FTBs) and Second and Subsequent Buyers (SSBs). A number of findings emerge. The average (mean) LTV and LTI ratios increased slightly after the introduction of the regulations for both FTBs and SSBs. However, the opposite pattern is observed for high leverage borrowers. For FTBs with an LTV of 80 per cent or above, the average borrower registered a small reduction in their LTV after the regulations. This result was only present for higher income borrowers, i.e. FTBs at the lower end of the income distribution had the same average. LTV pre- and post-regulations. SSBs with an LTV of 80 per cent and above also had a lower LTV after the regulations, but the effect was more pronounced than for FTBs. Few borrowers experienced a tightening of LTIs following the measures; we find only a limited effect among high leverage SSB borrowers. |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:ecolet:08/el/16&r=ban |
| By: | Pierre-Richard Agénor; L. Pereira da Silva |
| Abstract: | The effects of capital requirements on risk taking and welfare are studied in a stochastic overlapping generations model of endogenous growth with banking, limited liability, and government guarantees. Capital producers face a choice between a safe technology and a risky (but socially inefficient) technology, and bank risk taking is endogenous. Setting the capital adequacy ratio above a structural threshold can eliminate the equilibrium with risky loans (and thus inefficient risk taking), but numerical simulations show that this may entail a welfare loss. In addition, the optimal ratio may be too high in practice and may require concomitantly a broadening of the perimeter of regulation and a strengthening of financial supervision to prevent disintermediation and distortions in financial markets. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:226&r=ban |
| By: | Boateng, Agyenim; Asongu, Simplice; Akamavi, Raphael; Tchamyou, Vanessa |
| Abstract: | This study investigates the role of information sharing offices and its association with market power in the African banking industry. The empirical evidence is based on a panel of 162 banks from 42 countries for the period 2001-2011. Five simultaneity-robust estimation techniques are employed, namely: (i) Two Stage Least Squares; (ii) Instrumental Fixed effects to control for the unobserved heterogeneity; (iii) Instrumental Tobit regressions to control for the limited range in the dependent variable; (iv) Generalised Method of Moments (GMM) to control for persistence in market power and (v) Instrumental Quantile Regressions (QR) to account for initial levels of market power. The following findings have been established from non-interactive regressions. First, the effects of information sharing offices are significant in Two Stage Least Squares, with a positive effect from private credit bureaus. Second, in GMM, public credit registries increase market power. Third, from Quintile Regressions, private credit bureaus consistently increase market power throughout the conditional distributions of market power. Given that the above findings are contrary to theoretical postulations, we extended the analytical framework with interactive regressions in order to assess whether the anticipated effects can be established if information sharing offices are increased. The extended findings show a: (i) negative net effect from public credit registries on market power in GMM regressions and; (ii) negative net impacts from public credit registries on market power in the 0.25th and 0.50th quintiles of market power. |
| Keywords: | Financial access; Market power; Information asymmetry |
| JEL: | G20 G29 L96 O40 O55 |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:75414&r=ban |
| By: | George J. Bratsiotis |
| Abstract: | In the aftermath of the Great Recession, when various policies for regulating credit liquidity were introduced, the US Fed and other central banks placed more emphasis on the interest on reserves than the more traditional required reserve ratio. This paper employs a model with endogenous credit risk, a balance sheet channel, a cost channel and bank equity requirements, to examine the macroprudential role of the interest on reserves and the required reserve ratio and compare their welfare implications. Two transmission channels are identified, the deposit rate and the balance sheet channels. The required reserve ratio is shown to have conflicting effects through these two channels mitigating its policy effectiveness as a credit regulation tool. Conversely, with the interest on reserves both these channels complement each other in reducing the output gap, the cost channel and inflation. The results show that as a credit regulation tool the interest on reserves requires lower policy rate intervention and yields superior welfare outcomes to both the required reserve ratio and credit-augmented Taylor rules. |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:man:cgbcrp:228&r=ban |
| By: | Kinghan, Christina (Central Bank of Ireland); Lyons, Paul (Central Bank of Ireland); McCarthy, Yvonne (Central Bank of Ireland); O'Toole, Conor (Central Bank of Ireland) |
| Abstract: | This Economic Letter provides an overview of residential mortgage lending that took place in Ireland from the 1st of January to the 30th of June 2016. A total of €2.3bn of mortgage loans was covered by the data for the five main mortgage providers in the Irish market in the first half of 2016, with 93 per cent in-scope of the measures. With the exception of loan and property sizes, which were both higher in H1 2016, the characteristics of in-scope lending were broadly similar to those observed in 2015 for both FTBs and SSBs. The average LTV for in-scope FTBs in H1 2016 was 78.6 per cent while the average LTI was 2.9. Among SSBs, the average LTV and LTI were 66.2 per cent and 2.4 respectively. Regarding lending in excess of the limits of the Regulations, at end-June 2016, 11 per cent of the value of new PDH lending exceeded the LTV cap, while 12 per cent exceeded the LTI Cap. SSBs accounted for a larger share of the value of lending above the LTV limit (63 per cent against the remaining 37 per cent accounted for by FTBs) while FTBs accounted for a larger share of the value of lending that exceeded the LTI limits (72 per cent against 28 per cent for SSBs). Among both FTBs and SSBs with an allowance to exceed the LTV cap, we find a higher share of couples, a larger share of Dublin-based borrowers, a higher average income and a larger average loan size relative to the group without an LTV allowance. Regarding the LTI allowance, we find a larger share of Dublin-based and single borrowers among the group with an allowance. The average borrower with an LTI allowance has had lower income, was younger took a larger loan and bought a more expensive property than those without an allowance. |
| Date: | 2016–11 |
| URL: | http://d.repec.org/n?u=RePEc:cbi:ecolet:06/el/16&r=ban |
| By: | Coricelli, Fabrizio; Frigerio, Marco |
| Abstract: | Analyzing a large firm-level database for European countries, the paper shows that during the Great Recession trade credit amplified the liquidity squeeze on SMEs induced by the contraction of bank credit. Because of their generally weaker bargaining power in the inter-enterprise credit market, SMEs sharply increased their net trade credit and thus transferred financial resources to larger firms. The paper finds that the liquidity squeeze induced by trade credit had large negative effects on real activity by SMEs, contributing to the fall in employment, wages and investments. |
| Keywords: | Financial crises; SMEs; trade credit |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11680&r=ban |
| By: | Ozili, Peterson K |
| Abstract: | This paper analyses the effects associated with using the magnitude of realised loan losses as a basis for performance measurement and compensation to credit risk team in banks. Paying and rewarding credit risk professionals on the basis of reporting fewer provisions or lower loan losses motivate credit risk teams to game the system that work to determine loan loss provisions estimate of banks. While bank credit risk teams are sometimes mesmerised by the short-term benefits of provisions games, they do not care if their behaviour destroys bank value and the informativeness of loan loss provisioning estimates. While it is not difficult for bank managers and analysts to understand that the provisioning process is subject to gaming, few of them understand the costs it pose on banks and how to lower this costs. This paper explains how this happens and how provisions games can be stopped or reduced. Using the magnitude of loan losses as a basis to determine the compensation to risk professionals or credit risk teams encourages provisions games. The solution is not to reduce or eliminate provisioning discretion of credit risk teams but rather to de-link credit risk teams’ bonuses from the magnitude of loan loss. |
| Keywords: | Provisions Games; Loan Loss Provisions; Bank Professionals, Credit Risk; Banks. |
| JEL: | A2 A20 E3 M4 |
| Date: | 2017–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:75354&r=ban |
| By: | Curatola, Giuliano; Faia, Ester |
| Abstract: | Consensus exists that financial crises are triggered by excessive leverage and low risk-sensitivity at the tails, together leading to endogenous risk-formation. A large body of literature explored the first determinant. None combined the two. We build a model with heterogenous agents, occasionally binding collateral constraints and loss-averse borrowers with kinked preferences (diminishing risk-sensitivity on the tails). The shadow price of debt (the tightness of the constraint), hence the risk of a crisis, derives endogenously by the distance in borrowers/lenders pricing kernels. Analytically we prove that: the tightness of the borrowing limit increases in the pricing kernels' distance and decreases in borrowers' risk-tolerance; the borrowers' Sharpe ratio raises with respect to his pricing kernel and to the shadow price of debt. We quantify the transmission channels by simulating the model with Markov-switching regimes, which account for anticipatory effects of the occasionally binding borrowing limit and of the preference status around the kink. Among other things we find that our model matches well several facts about asset prices, returns and consumption. |
| Keywords: | endogenous price of risk; excessive leverage; loss averse borrowers; occasionally binding constraints; risk-tolerance |
| JEL: | E0 E5 G01 |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11678&r=ban |
| By: | Raphael Auer; Steven Ongena |
| Abstract: | Do macroprudential regulations on residential lending influence commercial lending behavior too? To answer this question, we identify the compositional changes in banks' supply of credit using the variation in their holdings of residential mortgages on which extra capital requirements were uniformly imposed by the countercyclical capital buffer (CCB) introduced in Switzerland in 2012. We find that the CCB's introduction led to higher growth in commercial lending, in particular to small firms, although this was unrelated to conditions in regional housing markets. The interest rates and fees charged to these firms concurrently increased. We rationalize these findings in a model featuring both private and firm-specific collateral. The corresponding imperfect substitutability between private and commercial credit for the entrepreneur's relationship bank is then shown to give rise to the compositional patterns we empirically document. |
| Keywords: | macroprudential policy, spillovers, credit, bank capital, systemic risk |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:bis:biswps:593&r=ban |
| By: | Boeing-Reicher, Claire; Pinto, David |
| Abstract: | We identify the effects of the supply of mortgage credit on house prices, using the politicallydirected credit-targeting regime of Venezuela as quasi-natural experiment. We find a large effect of the supply of housing credit on time path of house prices (or housing Markups), with an elasticity of housing markups with respect to credit of about 0.23 under our baseline specification, and similar results under a set of alternative specifications. These estimates are close to previous panel estimates for the United States, which suggests that these estimates capture similar phenomena. |
| Keywords: | house prices,credit supply,Venezuela,credit targeting |
| JEL: | E51 E65 R31 |
| Date: | 2016 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwkwp:2066&r=ban |
| By: | Dirk Schoenmaker |
| Abstract: | This material was originally published in a paper provided at the request of the Committee on Economic and Monetary Affairs of the European Parliament and commissioned by the Directorate-General for Internal Policies of the Union and supervised by its Economic Governance Support Unit (EGOV). The opinions expressed in this document are the sole responsibility of the authors and do not necessarily represent the official position of the European Parliament. The original paper is available on the European Parliament’s webpage. © European Union, 2016. In the aftermath of the financial crisis, the question of how to handle a big bank’s collapse has arisen. Large banks perform functions that if disrupted could seriously damage the financial sector and the real economy. The European Union’s new resolution regime introduced by the Bank Recovery and Resolution Directive (BRRD) aims at orderly resolution of banks, with creditors – and to greatest the extent possible, not the taxpayer – bearing the cost of bankruptcy, while the banking functions crucial to the financial system and the economy continue to be performed. The Single Resolution Board (SRB) has been set up exactly to carry out this task in the banking union. This Policy Contribution evaluates the obstacles to resolvability that the legal and operational structures of the large euro-area banks could present, assuming that it is possible to liquidate smaller and medium-sized banks through transfer of their relevant activities to other banks. Dirk Schoenmaker classifies the large euro-area banks according to their number of legal entities, foreign assets and their governance. From this, he identifies three groups of banks - domestic banks with a limited number of entities; domestic cooperative banks with more complicated legal and decision-making structures; cross-border banks with complex structures operating in multiple jurisdictions. The paper focuses on specific aspects of the SRB’s resolvability assessment process. The legal and operational structures of banks should facilitate the separation of critical and non-critical bank operations. Non-critical operations should be liquidated when a bank is in resolution. The SRB should take a strict line on critical functions and, if necessary, overrule national resolution authorities (NRAs). The SRB should not only simplify complex legal structures but also streamline protracted decision-making procedures within banks. Only when effective cooperation arrangements with foreign resolution authorities are in place, should the SRB rely on the efficient single-point-of-entry (SPE) approach. Otherwise, a multiple-point-of-entry (MPE) approach is more realistic. Within the banking union, the SRB should promote the more efficient SPE approach in cooperation with NRAs. There is currently no clarity on the provision of liquidity to a resolved bank. Liquidity is important if the resolved bank is to re-open for business. Dirk Schoenmaker recommends that the European Central Bank should clarify that it is prepared to provide emergency liquidity assistance (ELA) to properly resolved banks. |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:bre:polcon:17984&r=ban |
| By: | Sreejata Banerjee and Malathi Velamuri (Madras School of Economics); Malathi Velamuri (Madras School of Economics); Malathi Velamuri (Visiting Faculty, Chennai Mathematical Institute) |
| Abstract: | Banks pursue profit like any business, but in their role as custodians of domestic savings, they are required to be cautious. Riskier but profitable advances may cause asset quality deterioration, thus affecting the longterm viability of the entity. Financial sector reforms in India from the early 1990s, have raised the level of competition for banks of different ownerships - public sector (PSB), old private banks, new private banks and foreign banks. We use panel data on 75 banks across the ownership spectrum, for the period 2000-13, to examine their performance vis-à-vis these two measures – profitability and soundness. We find evidence of significant heterogeneity in performance across ownership type. Overall, we find that there is a negative association between the profitability and soundness measures, though these effects vary by ownership type. PSBs’ business constrained by social outreach commitments perform comparatively worse. The smaller old private banks appear to be the strongest with dedicated client base despite the pressure of nonperforming assets have consistent profits reflected in the return on equity and return on assets. Foreign banks maintain high capital adequacy ratio and relatively higher return on assets. The results provide evidence that good human resource policy is vital for bank performance. |
| Keywords: | Profitability, Soundness, Ownership effectClassification-JEL: G21 ,G28, C 33 |
| Date: | 2015–07 |
| URL: | http://d.repec.org/n?u=RePEc:mad:wpaper:2015-111&r=ban |
| By: | Santos, Tano; Veronesi, Pietro |
| Abstract: | Many stylized facts of leverage, trading, and asset prices follow from a frictionless general equilibrium model that features agents' heterogeneity in endowments and habit preferences. Our model predicts that aggregate debt increases in good times when stock prices are high, return volatility is low, and levered agents enjoy a "consumption boom". Our model is consistent with poorer agents borrowing more and with recent evidence on intermediaries' leverage being a priced factor of asset returns. In crisis times, levered agents strongly deleverage by "fire selling" their risky assets as asset prices drop. Yet, consistently with the data, their debt-to-wealth ratios increase because their wealth decline faster due to higher discount rates. |
| Date: | 2016–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:11681&r=ban |
| By: | Piabuo, Serge Mandiefe |
| Abstract: | The main objective of this study is to assess the effect of working capital management on the profitability of Afriland First Bank Cameroon. Time series data from 2002 to 2013 was extracted from the financial statement of the bank. Correlation analysis and ordinary least Square regression were used to determine how working capital affects profitability. The findings of this study show that working capital management effectively influences the performance of Afriland First Bank. The analysis revealed that customer deposits, the size of the bank, outstanding expenditure and return on assets all have a positive impact on bank profitability and are statistically significant while loan portfolio has a positive impact on bank performance but is statistically insignificant. On the other hand, reserves have a negative impact on bank profitability. Thus efficient management of working capital is prerequisite for growth and profitability of commercial banks in general and Afriland first Bank in particular. |
| Keywords: | Profitability , Working capital management, Return on assets |
| JEL: | G2 G21 G22 G24 G3 G31 G32 |
| Date: | 2016–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:75356&r=ban |
| By: | Chavaz, Matthieu (Bank of England); Rose, Andrew (Haas School of Business Administration, University of California, Berkeley.) |
| Abstract: | We use spatial discontinuities associated with congressional district borders to identify the effect of political influences on American banks’ lending. We show that recipients of the 2008 public capital injection program (TARP) increased mortgage and small business lending by 23% to 60% more in areas located inside their home-representative’s district than elsewhere. The impact is stronger if the representative supported the TARP in Congress, was subsequently re-elected, and received more political contributions from the financial industry. Together, these results suggest that political considerations influence credit allocation in a politically mature system like the United States without the formal possibility of political interference in lending decisions, and that this influence is larger if the flows between banks and politicians are reciprocal. |
| Keywords: | Empirical; data; panel; fixed; effect; county; district; congress; policy; mortgage. |
| JEL: | F36 G28 |
| Date: | 2016–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:boe:boeewp:0629&r=ban |
| By: | Argys, Laura (University of Colorado Denver); Friedson, Andrew (University of Colorado Denver); Pitts, M. Melinda (Federal Reserve Bank of Atlanta) |
| Abstract: | This study analyzes the effect of individual finances (specifically creditworthiness and severely delinquent debt) on mortality risk. A large (approximately 170,000 individuals) subsample of a quarterly panel data set of individual credit reports is utilized in an instrumental variables design. The possibility of the reverse causality of bad health causing debt and death is removed by instrumenting for individual finances post 2011 using the exposure to the housing crisis based on their 2005 residence. Worsening creditworthiness and increases in severely delinquent debt are found to lead to increases in individual mortality risk. This result has implications for the benefit of policies such as the social safety net, which aims to protect individual finances, by adding reduced mortality to the benefit of any intervention. |
| Keywords: | debt; mortality; creditworthiness |
| JEL: | D14 I1 |
| Date: | 2016–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedawp:2016-14&r=ban |
| By: | Michele Cincera (The International Centre for Innovation, Technology and Education Studies (iCite), Solvay Brussels School of Economics and Management, University of Brussels, Belgium); Anabela Santos (The International Centre for Innovation, Technology and Education Studies (iCite), Solvay Brussels School of Economics and Management, University of Brussels, Belgium) |
| Abstract: | Promoting Research and Development (R&D) activities is the main goal of the EU 2020 Strategy in order to achieve an R&D spending at least 3% of GDP. The Innovation Union is one of the seven flagship initiatives of the EU 2020 Strategy, which has the aims: to improve access to finance for R&D; to get innovative ideas to market; to ensure growth and jobs (European Commission, 2014b). The aim of the present paper is to identify and explain the main mechanisms related to four commitments of Innovation Union: i) Commitment 10 (Put in place EU level financial instruments to attract private finance); ii) Commitment 11 (Ensure cross-border operation of venture capital funds); iii) Commitment 12 (Strengthen cross-border matching of innovative firms with Investors); iv) Commitment 13 (Review State Aid Framework for Research, Development and Innovation). To this purpose, a review of both theoretical and empirical literatures about ’Innovation, Access to Finance and SMEs’ based on more than 80 scientific and other articles and analyses is presented. The paper provides an analysis of the main alternative financial instruments to bank loans, namely Risk-Sharing Facility Financing, Venture Capital, Business Angels and public subsidies. We found some evidence in the literature that Venture Capital could have a limited impact in enhancing innovation in the long-term and that some public support schemes could be more effective than other, depending on the firm’s maturity state. |
| Keywords: | EU 2020 strategy, innovation, finance, Innovation Union |
| URL: | http://d.repec.org/n?u=RePEc:crv:opaper:6&r=ban |