Upcoming Talks and Conferences
17.10. Fordham (New York, USA)
19.10. IMF (Washington, USA)
20.10. Georgetown University (Washington, USA)
25.10. St. Gallen (St. Gallen, Switzerland)
22.11. CEMFI (Madrid, Spain)
30.11. Frankfurt School of Finance and Management (Frankfurt, Germany)
11.12. Univ of Cape Town (Cape Town, South Africa)
5.1.-8.1.2017 AFA (Chicago, USA)
Current Employment
Professor of Finance (W3), Chair of Financial Markets, University of Mannheim - Business School, Since January 2016
Head of the Research Group "International Finance and Financial Management" at the Center of European Economic Research (ZEW), Since January 2016
Research Fellow Center for Financial Studies (CFS), Since 2013
Forschungsprofessor ("Professor of Research"), IWH - Halle Institute of Economic Research, 2014 - 2017
Member of the Schmalenbach-Arbeitskreis „Strategieentwicklung und Controlling in Banken“, Since 2015
Curriculum Vitae (August 2016)
Stress Testing Update (July / August 2016)
"Turning Off the Dividend Spigot", with Viral V. Acharya and Diane Pierret, Project Syndicate, 22 Sept 2016
"High time to tell European banks: No dividends", with Viral V. Acharya and Diane Pierret, 7 August 2016
A first step to preventing bank capital erosion can be that simple: ask banks to stop paying dividends! And it wouldn’t even require a discussion about capital issuance or bail-in or bail-out. Some banks have already taken steps and suspended dividend payments. It is now the task of the European Central Bank to enforce this across the Eurozone.
"Introducing the “Leverage Ratio” in Assessing the Capital Adequacy of European Banks", with Viral V. Acharya and Diane Pierret,
1 August 2016
The European Banking Authority (EBA) disclosed the effect of losses in a stress test on bank capital ratios on 29 July 2016. We assess the capital adequacy of these banks based on these disclosures and using two supervisory approaches (the approach used by the EBA in the Asset Quality Review in 2014 and the methodology used by U.S. supervisors in the Comprehensive Capital Analysis and Review (CCAR) in 2016) and a market based approach. The two supervisory approaches yield an ordering of banks with respect to their capital shortfall (or surplus) that is negatively correlated. The CCAR 2016 approach, however, ranks banks similarly as the market based approach. The capital shortfall differences between the approaches can be attributed to (i) different prudential thresholds applied to capital ratios, (ii) different loss projections under the stress scenario, and (iii) the difference between market and book values of bank equity. The differences are particularly large for banks in France, Germany, Italy, Spain and the United Kingdom.
"Capital Shortfalls of European Banks since the Start of the Banking Union", with Viral V. Acharya and Diane Pierret, 28 July 2016
Since the start of the Banking Union in November 2014, European banks lost nearly half their market capitalization. Important risks in bank balance sheets are still unaccounted for requiring an even larger recapitalization compared to the capital shortfall estimates of November 2014. The market’s assessment of banks’ risky assets is still decoupled from their book valuation and associated Basel risk-weights, causing a divergence between market and regulatory assessments of bank capital. Not only Italian but also German and French banks show large capital shortfalls, some of which may require public backstops if losses are not to be passed onto non-subordinated debtholders of banks.
News - Academic Research
"Why do Corporate Depositors Risk Everything for Nothing? The Importance of Deposit Relationships, Interest Rates and Bank Risk", with Daniel Friedmann, Bjoern Imbierowicz and Anthony Saunders. *** COMING SOON ***
"Mind the Gap: The Difference between US and European Loan Rates", with Tobias Berg, Anthony Saunders and Daniel Streitz, 2016, Review of Financial Studies, forthcoming.
We analyze pricing differences between U.S. and European syndicated loans over the 1992-2014 period. We explicitly distinguish credit lines from term loans. For credit lines, U.S. borrowers pay significantly higher spreads, but lower fees, resulting in similar total costs of borrowing in both markets. Credit line usage is more cyclical in the U.S., which provides a rationale for the pricing structure difference. For term loans, we analyze the channels of the cross-country loan price differential and document the importance of: the composition of term loan borrowers and the loan supply by institutional investors and foreign banks.
"The Wolves of Wall Street: Managerial Attributes and Bank Business Models" with J. Hagendorff, A. Saunders, and F. Vallascas,
This Version: April 2016
PDF File Slides (coming soon)
Financial Times Coverage Financial Times Podcast
Abstract
We investigate the role of executive-specific attributes (or ‘styles’) in affecting bank business models beyond pay-per-performance incentives. We decompose the variation in business models and document that the ‘style’ of members of a bank’s top management team is reflected in key bank policy choices. Observable manager characteristics such as education or experience can only explain style to a small degree. Bank manager style is also important in understanding bank risk and performance during the 2007-2009 financial crisis. Finally, we derive manager specific profiles that combine various bank policies.
"Capital Markets Union in Europe: Why other Unions must lead the way", with Viral V. Acharya, January 2016
Capital Markets Union in Europe with fully integrated capital markets across member countries can only work when the status of member country sovereign bonds as risk-free assets is restored. Banking Union and fiscal union are both required for this outcome. However, the Banking Union remains an unfinished project without a European deposit insurance framework and there is little consensus at the moment for a fiscal union in the Euro Area. It appears thus that the fate of the Capital Markets Union solely rests with the European Central Bank in the near to medium term.
"Does Lack of Financial Stability Impair the Transmission of Monetary Policy?" with V. Acharya, B. Imbierowicz, and D. Teichmann, November 2015 * being revised for resubmission to the Journal of Financial Economics.
PDF Version Slides Online Appendix
We investigate the transmission of central bank liquidity to bank deposit and loan spreads in Europe over the January 2006 to June 2010 period. We find evidence consistent with an impaired transmission channel due to bank risk. Central bank liquidity does not translate into lower loan spreads for high-risk banks, even as it lowers deposit rates for both high-risk and low-risk banks. This adversely affects the balance sheets of borrowers of high-risk banks, leading to lower payouts, lower capital expenditures, and lower asset growth. These firms replace term loans drawing down existing credit lines. Our results suggest that during a banking crisis, the transmission of central bank liquidity to the real sector may be more effective if accompanied by a strengthening of banking sector health.
17.10. Fordham (New York, USA)
19.10. IMF (Washington, USA)
20.10. Georgetown University (Washington, USA)
25.10. St. Gallen (St. Gallen, Switzerland)
22.11. CEMFI (Madrid, Spain)
30.11. Frankfurt School of Finance and Management (Frankfurt, Germany)
11.12. Univ of Cape Town (Cape Town, South Africa)
5.1.-8.1.2017 AFA (Chicago, USA)
Current Employment
Professor of Finance (W3), Chair of Financial Markets, University of Mannheim - Business School, Since January 2016
Head of the Research Group "International Finance and Financial Management" at the Center of European Economic Research (ZEW), Since January 2016
Research Fellow Center for Financial Studies (CFS), Since 2013
Forschungsprofessor ("Professor of Research"), IWH - Halle Institute of Economic Research, 2014 - 2017
Member of the Schmalenbach-Arbeitskreis „Strategieentwicklung und Controlling in Banken“, Since 2015
Curriculum Vitae (August 2016)
Stress Testing Update (July / August 2016)
"Turning Off the Dividend Spigot", with Viral V. Acharya and Diane Pierret, Project Syndicate, 22 Sept 2016
"High time to tell European banks: No dividends", with Viral V. Acharya and Diane Pierret, 7 August 2016
A first step to preventing bank capital erosion can be that simple: ask banks to stop paying dividends! And it wouldn’t even require a discussion about capital issuance or bail-in or bail-out. Some banks have already taken steps and suspended dividend payments. It is now the task of the European Central Bank to enforce this across the Eurozone.
"Introducing the “Leverage Ratio” in Assessing the Capital Adequacy of European Banks", with Viral V. Acharya and Diane Pierret,
1 August 2016
The European Banking Authority (EBA) disclosed the effect of losses in a stress test on bank capital ratios on 29 July 2016. We assess the capital adequacy of these banks based on these disclosures and using two supervisory approaches (the approach used by the EBA in the Asset Quality Review in 2014 and the methodology used by U.S. supervisors in the Comprehensive Capital Analysis and Review (CCAR) in 2016) and a market based approach. The two supervisory approaches yield an ordering of banks with respect to their capital shortfall (or surplus) that is negatively correlated. The CCAR 2016 approach, however, ranks banks similarly as the market based approach. The capital shortfall differences between the approaches can be attributed to (i) different prudential thresholds applied to capital ratios, (ii) different loss projections under the stress scenario, and (iii) the difference between market and book values of bank equity. The differences are particularly large for banks in France, Germany, Italy, Spain and the United Kingdom.
"Capital Shortfalls of European Banks since the Start of the Banking Union", with Viral V. Acharya and Diane Pierret, 28 July 2016
Since the start of the Banking Union in November 2014, European banks lost nearly half their market capitalization. Important risks in bank balance sheets are still unaccounted for requiring an even larger recapitalization compared to the capital shortfall estimates of November 2014. The market’s assessment of banks’ risky assets is still decoupled from their book valuation and associated Basel risk-weights, causing a divergence between market and regulatory assessments of bank capital. Not only Italian but also German and French banks show large capital shortfalls, some of which may require public backstops if losses are not to be passed onto non-subordinated debtholders of banks.
News - Academic Research
"Why do Corporate Depositors Risk Everything for Nothing? The Importance of Deposit Relationships, Interest Rates and Bank Risk", with Daniel Friedmann, Bjoern Imbierowicz and Anthony Saunders. *** COMING SOON ***
"Mind the Gap: The Difference between US and European Loan Rates", with Tobias Berg, Anthony Saunders and Daniel Streitz, 2016, Review of Financial Studies, forthcoming.
We analyze pricing differences between U.S. and European syndicated loans over the 1992-2014 period. We explicitly distinguish credit lines from term loans. For credit lines, U.S. borrowers pay significantly higher spreads, but lower fees, resulting in similar total costs of borrowing in both markets. Credit line usage is more cyclical in the U.S., which provides a rationale for the pricing structure difference. For term loans, we analyze the channels of the cross-country loan price differential and document the importance of: the composition of term loan borrowers and the loan supply by institutional investors and foreign banks.
"The Wolves of Wall Street: Managerial Attributes and Bank Business Models" with J. Hagendorff, A. Saunders, and F. Vallascas,
This Version: April 2016
PDF File Slides (coming soon)
Financial Times Coverage Financial Times Podcast
Abstract
We investigate the role of executive-specific attributes (or ‘styles’) in affecting bank business models beyond pay-per-performance incentives. We decompose the variation in business models and document that the ‘style’ of members of a bank’s top management team is reflected in key bank policy choices. Observable manager characteristics such as education or experience can only explain style to a small degree. Bank manager style is also important in understanding bank risk and performance during the 2007-2009 financial crisis. Finally, we derive manager specific profiles that combine various bank policies.
"Capital Markets Union in Europe: Why other Unions must lead the way", with Viral V. Acharya, January 2016
Capital Markets Union in Europe with fully integrated capital markets across member countries can only work when the status of member country sovereign bonds as risk-free assets is restored. Banking Union and fiscal union are both required for this outcome. However, the Banking Union remains an unfinished project without a European deposit insurance framework and there is little consensus at the moment for a fiscal union in the Euro Area. It appears thus that the fate of the Capital Markets Union solely rests with the European Central Bank in the near to medium term.
"Does Lack of Financial Stability Impair the Transmission of Monetary Policy?" with V. Acharya, B. Imbierowicz, and D. Teichmann, November 2015 * being revised for resubmission to the Journal of Financial Economics.
PDF Version Slides Online Appendix
We investigate the transmission of central bank liquidity to bank deposit and loan spreads in Europe over the January 2006 to June 2010 period. We find evidence consistent with an impaired transmission channel due to bank risk. Central bank liquidity does not translate into lower loan spreads for high-risk banks, even as it lowers deposit rates for both high-risk and low-risk banks. This adversely affects the balance sheets of borrowers of high-risk banks, leading to lower payouts, lower capital expenditures, and lower asset growth. These firms replace term loans drawing down existing credit lines. Our results suggest that during a banking crisis, the transmission of central bank liquidity to the real sector may be more effective if accompanied by a strengthening of banking sector health.
