Effect of European Sovereign debt crisis on banks’ stock market performances: application to Portuguese data

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Finance from the NOVA – School of Business and Economics

The impact of the European sovereign debt crisis on the recovering from the financial crisis: Equity returns of the banking sector

This paper analyses, through a dynamic panel data model, the impact of the Financial and the European Debt crisis on the equity returns of the banking system. The model is also extended to specifically investigate the impact on countries who received rescue packages. The sample under analysis considers eleven countries from January 2006 to June 2013. The main conclusion is that there was in fact a structural change in banks’ excess returns due to the outbreak of the European Debt Crisis, when stock markets were still recovering from the Financial Crisis of 2008.

Banks and sovereigns: An econometric analysis of an entangled relationship

In this discussion OLS regressions are used to study the factors that influence sovereign yield spreads and domestic bank indeces for a set of euro area countries. The results show that common factors explain changes in bank indeces better than in the yields. Moreover, although there is some country differentiation, a common pattern among all is visible. A contemporary spillover effect between banks and sovereigns emerged after bank bailouts and became stronger with the burst of the sovereign debt crisis. The vicious cycle between the two has contributed to the escalation of spreads and to painful austerity measures.

The determinants of net interest margins & net interest spreads in the Russian & Japanese Commercial Banking sectors

This study presents an empirical investigation of the determinants of net interest margins and spreads in the Russian and Japanese banking sectors with a particular focus on commercial banks. Net interest mar-gins and spreads serve as indicators of financial intermediation efficiency. This paper employed a bank-level unbalanced panel dataset prolonging from 2005 to 2014. My main empirical results show that bank characteristics explain the most of the variation in not only net interest margins but also in spreads. Capi-talization, liquidity risk, inflation, economic growth, private and government debt are important determi-nants of margin in Russia. In Japan to the contrary loan and deposit market concentration along with bank size do predominate. Common significant variables in both countries are the substitution effect, cost effi-ciency and profitability. Turning to net interest spreads, micro- and macro-specific variables are the main significant drivers in Russia. I reach the conclusion that there are no significant determinants of net interest spreads in Japan within the original selection of variables, but operating efficiency and deposits to total funding seem to prevail. In both countries, there are solid differences in the net interest margins as well as spreads once the pre- and the post-crisis periods are considered.

Mota-Engil new prospects of growth: Overcoming the financial crisis

The 2008 global financial crisis caused the collapse of business key sectors, declines in consumer wealth and a fall in economic activity resulting in a global recession. In some European countries, the 2008 crisis contributed to a sovereign-debt crisis which had a strong impact in Southern European countries. The construction sector was particularly affected, with budget cuts disturbing public investment and no financing available for private constructors. This report intends to explain how Mota-Engil, faced this situation of low growth, and which strategies were adopted by the management to overcome the difficult economic conjecture, mainly in its domestic market: Portugal. The report is organized as a case-study. The first part, the case narrative, is subdivided into 6 parts, and the second part is the teaching note. The teaching note is constituted by the four questions and their respective responses.

Direito a ser esquecido na internet

With the recent technological development, we have been witnessing a progressive loss of control over our personal information. Whether it is the speed in which it spreads over the internet or the permanent storage of information on cloud services, the means by which our personal information escapes our control are vast. Inevitably, this situation allowed serious violations of personal rights. The necessity to reform the European policy for protection of personal information is emerging, in order to adapt to the technological era we live in. Granting individuals the ability to delete their personal information, mainly the information which is available on the Internet, is the best solution for those whose rights have been violated. However, once supposedly deleted from the website the information is still shown in search engines. In this context, “the right to be forgotten in the internet” is invoked. Its implementation will result in the possibility for any person to delete and stop its personal information from being spread through the internet in any way, especially through search engines directories. This way we will have a more comprehensive control over our personal information in two ways: firstly, by allowing individuals to completely delete their information from any website and cloud service and secondly by limiting access of search engines to the information. This way, it could be said that a new and catchier term has been found for an “old” right.

Banco BPI and the reimbursement of contingent convertible subordinated bonds (CoCos)

This case study focuses on the BPI’s recapitalization plan, its causes and the reasons for the early reimbursement of CoCos in June 2014. The need for a capital intervention and the subsequent subscription agreement with the Portuguese Government of €1 500 million Core Tier 1 instruments were the result of a temporary capital buffer for sovereign debt exposures imposed by the European Banking Authority. The capital increase, the positive earnings in 2012 and 2013, the improvements in the sovereign debt crisis, the implementation of Basel III, in addition to the public exchange offer and the conversion of deferred tax assets into tax credits are the main factors for concluding the entire recapitalization operation three years before the deadline.

Trading the differences in expectations between the CDS and bond markets

This paper uses the framework developed by Vrugt (2010) to extract the recovery rate and term-structure of risk-neutral default probabilities implied in the cross-section of Portuguese sovereign bonds outstanding between March and August 2011. During this period the expectations on the recovery rate remain firmly anchored around 50 percent while the instantaneous default probability increases steadily from 6 to above 30 percent. These parameters are then used to calculate the fair-value of a 5-year and 10- year CDS contract. A credit-risk-neutral strategy is developed from the difference between the market price of a CDS of the same tenors and the fair-value calculated, yielding a sharpe ratio of 3.2

Cross sectional default probabilities in european corporate bonds

This study attempts to identify basis-trading opportunities in the European banking sector by comparing two different measures for the market’s assessment of risk: market-observed CDS spreads and model-implied Z-spreads. Using a sample of 10 banks, over a period of 3 years following the European banking crisis, it can be concluded that there were arbitrage opportunities in the sector, as evidenced by the derived negative bases.

Do Comandante Supremo das Forças Armadas

The President of the Portuguese Republic’s relation with the Armed Forces in the current political system is not confined to the vast legislative and constitutional set. As Chief of State and Supreme Commander of the Armed Forces, the President holds different powers. We develop an approach through the main concepts and themes that regulate the Armed Forces and National Defense, focusing the relations that involve the President directly. The attribution by inherence of the Supreme Command of the Armed Forces to the Chief of State, imposes a peculiar relation with the remainder sovereign institutions. The need to analyze the intermediate services as far as military and defense issues are concerned becomes necessary, in particular the role of the Military Cabinet – as a structure of direct support – and the High Council of National Defense – as an advisory body.

CTT, the mail going public

The main purpose of this case-study is to analyse CTT’s privatisation process, a previously Government-owned firm, which went public in 2013, under the terms of the adjustment program agreed between Portugal, the European institutions (ECB and European Commission) and the IMF. The emphasis will be placed on the IPO process, but also on the company itself (its history, current situation and prospects for its new phase, as a publicly listed company). This piece of work aims to evaluate the different alternatives for the privatisation of the company along with the respective implications, as well as the outcome of the actual decision taken by the Portuguese Government. One key aspect of the case is also to understand the importance that the privatisation of the Royal Mail, which can be seen as a peer of the Portuguese company, in the unfolding of the process and in the choice of the privatisation model. The case intends to show how the British process influenced the subsequent option of the Portuguese entities to sell CTT through an IPO, instead of a trade sale. All in all, the overall objective of this case-study is to analyse CTT’s successful sale process, which created the first Portuguese company with 100% free-float. 3 On the last days of November 2013, Steven Bernstein was staring at the window of his office overlooking downtown Manhattan, not even noticing the intense rain that was pouring down. As senior manager at ABC Fund, a pension fund responsible for managing more than 800 million dollars, his thoughts were focused on a very important decision that ABC Fund would have to make in just a matter of days. The American pension fund was considering whether or not to invest in the upcoming Initial Public Offering of CTT- Correios de Portugal, the Government-owned Portuguese mail company. Is this investment opportunity in accordance with the risk profile of a pension fund? Is it a wise decision to acquire shares in a Portuguese company when the country is at the centre of the European Sovereign debt crisis, going through a very demanding economic adjustment program imposed by its bail-out creditors? Would the creation of Portugal's Postal Bank make CTT a sure bet today when its price does not fully reflect the future benefits from entering financial services? Those were some of the questions that were constantly in Mr. Bernstein’s mind over the last couple of days and he was struggling to find the answers…

As Comissões Parlamentares de Inquérito no Portugal democrático, 1976-2015

As transformações operadas no mundo contemporâneo, em especial no que respeita às estruturas do poder, à sua maior autonomização e diferenciação, tiveram particulares reflexos ao nível dos Parlamentos e das funções que prosseguem. Desde a sua origem, no passado século XIII, à atualidade, grandes acontecimentos, clivagens e factos históricos estão presentes na sua linha evolutiva. A democratização do regime parlamentar e a legitimidade outorgada através de eleições democráticas e concorrenciais são um marco ímpar na sua história. A complexidade das sociedades hodiernas catapultou o Poder Executivo em detrimento do Parlamento, enquanto órgão legislativo por excelência. Tal circunstancialismo levou, não ao proclamado declínio dos Parlamentos, mas a reformas estruturantes. Outras e mais importantes funções seriam prosseguidas. Se as iniciativas legislativas e a definição das políticas públicas passaram a ser quase um exclusivo do Governo, havia que desenvolver e ampliar, por parte dos Parlamentos, os instrumentos de controlo, fiscalização e escrutínio da ação governativa. Entre os clássicos instrumentos de controlo avulta o Inquérito Parlamentar, materializado em Comissões Parlamentares de Inquérito, dotadas de poderes especiais para recolha de informação e para investigação. No seu percurso parlamentar, também as Comissões de Inquérito foram sendo alvo de constantes aperfeiçoamentos, de ordem constitucional, legal e regimental. A excessiva partidarização da atividade parlamentar de outrora e sobretudo a confusão entre o governo e o partido que o sustentava a nível parlamentar, o confronto desequilibrado de meios entre as maiorias e as minorias, levaram a um reposicionamento do inquérito parlamentar enquanto garante do direito das minorias. Não sendo expectável que as grandes iniciativas de controlo sejam tomadas pelo partido maioritário, cabe à oposição esse papel. Em Portugal, diminuta era a tradição do instituto do inquérito parlamentar, razão porque foi efémera e sem resultado a sua utilização no tempo da monarquia constitucional. O regime democrático, abraçado com o 25 de abril de 1974, relançou o órgão de soberania Parlamento e estabeleceu prioridades. Até ao amadurecimento da democracia viveram-se tempos mais conturbados mas de grande aprendizagem. O inquérito Parlamentar, a partir da revisão constitucional de 1982, passou conceptualmente a integrar um dos meios mais relevantes da fiscalização política. É, pois, o levantamento exaustivo e a análise das Comissões Parlamentares de Inquérito no Portugal democrático, período de 1976-2015, o objetivo a que nos propomos neste estudo.

As peculiaridades da democratização da região do Cáucaso do Sul no contexto da Política Europeia de Vizinhança

O período após o colapso da União Soviética foi o tempo da procura de novas identidades na nova realidade e de escolha de novos parceiros e aliados, o tempo da construção de novos estados e de formulação das regras e normas nacionais. Após o desmoronamento da ideologia soviética - um facto reconhecido oficialmente durante o período da Perestroika –, as pessoas sentiram uma necessidade de preencher o vácuo ideológico e desenvolver uma nova identidade. Foi proclamada a rejeição da estrutura política administrativa herdada da União Soviética e do sistema de economia planificada, e desenvolvida a tendência para a construção do estado democrático fundado numa economia de mercado. As expectativas relativas às transformações no período pós-soviético estavam relacionadas com o Ocidente (EUA e UE), e a construção do estado soberano foi fundada em modelos ocidentais de estado de direito, ‘boa governança’ e a economia de mercado. A UE desempenhou um papel importante na democratização dos estados da região do Sul do Cáucaso através de vários projetos e programas bilaterais e multilaterais no âmbito da Política Europeia de Vizinhança e da Parceria Oriental. Embora as reformas democráticas tenham sido realizadas com vista ao estabelecimento de uma Constituição democrática, à implementação de eleições democráticas e ao desenvolvimento da sociedade civil, fortaleceram, também, ainda mais, a natureza autoritária do poder, impediram a criação de um estado de direito, reforçaram violação dos direitos e das liberdades humanas. (NODIYA, 2003: 30; BAKHMAN, 2003: 17; BADALOV, 2003: 20). Deste modo, o processo da promoção da democracia através das reformas nos três estados do Sul do Cáucaso conduziu à criação de estados de “conteúdo autocrático misto, mas de forma democrática” (CHETERYAN, 2003: 41). Embora seja possível identificar as semelhanças entre os três estados da região do Sul do Cáucaso nas reformas do processo de desenvolvimento, os métodos e meios de implementação de reformas nas realidades dos estados regionais pela administração nacional foram bastante diferentes, por razões associadas às especificidades de cada um (DELCOUR e WOLCZUK, 2013: 3). Cada país é caracterizado pelas suas peculiaridades ao nível da situação geopolítica e diversidade do potencial económico – fatores que definem a trajetória política e económica do estado no período pós-soviético e, em certa medida, influenciam o modo como se desenvolvem as relações com a UE e, portanto, o processo de adoção das reformas e a sua introdução a nível nacional.