Macroeconomic effects of monetary policy in the Eurozone

To study the macroeconomic effects of unconventional monetary policy across the different countries of the eurozone, I develop an identification scheme to disentangle conventional from non-conventional policy shocks, using futures contracts on overnight interest rates and the size of the European Central Bank balance sheet. Setting these shocks as endogenous variables in a structural vector autoregressive (SVAR) model, along with the CPI and the employment rate, estimated impulse response functions of policy to macroeconomic variables are studied. I find that unconventional policy shocks generated mixed effects in inflation but had a positive impact on employment, with the exception of Portugal, Spain, Greece and Italy where the employment response is close to zero or negative. The heterogeneity that characterizes the responses shows that the monetary policy measures taken in recent years were not sufficient to stabilize the economies of the eurozone countries under more severe economic conditions.

Search-for-yield in Portuguese fixed-income mutual funds and monetary policy

This paper studies the effects of monetary policy on mutual fund risk taking using a sample of Portuguese fixed-income mutual funds in the 2000-2012 period. Firstly I estimate time-varying measures of risk exposure (betas) for the individual funds, for the benchmark portfolio, as well as for a representative equally-weighted portfolio, through 24-month rolling regressions of a two-factor model with two systematic risk factors: interest rate risk (TERM) and default risk (DEF). Next, in the second phase, using the estimated betas, I try to understand what portion of the risk exposure is in excess of the benchmark (active risk) and how it relates to monetary policy proxies (one-month rate, Taylor residual, real rate and first principal component of a cross-section of government yields and rates). Using this methodology, I provide empirical evidence that Portuguese fixed-income mutual funds respond to accommodative monetary policy by significantly increasing exposure, in excess of their benchmarks, to default risk rate and slightly to interest risk rate as well. I also find that the increase in funds’ risk exposure to gain a boost in return (search-for-yield) is more pronounced following the 2007-2009 global financial crisis, indicating that the current historic low interest rates may incentivize excessive risk taking. My results suggest that monetary policy affects the risk appetite of non-bank financial intermediaries.

Financial depth, stock markets and economic growth in the EU-15 countries

The aim of this paper is to assess the impact of financial depth on economic growth in the EU-15 countries from 1970 until 2012, using the two-step System GMM estimator. Even though it might be expected a positive impact, the results show it is negative and sometimes even negative and statistically significant. Among the reasons presented for this, the existence of banking crises seems to better explain these results. In tranquil periods, financial deepening appears to have a positive impact, whereas in banking crises it is persistently negative and statistically significant. Also, after an assessment of the impact of stock markets on economic growth, it appears that more developed countries in the EU-15 have an economy more reliant on this segment of the financial system rather than in bank intermediation.

Managing marginal capital requirements in solvency II: Analysis of a real insurance portfolio

This thesis provides a complete analysis of the Standard Capital Requirements given by Solvency II for a real insurance portfolio. We analyze the investment portfolio of BPI Vida e Pensões, an insurance company affiliated with a Portuguese bank BPI, both at security, sub-portfolio and asset class levels. By using the Standard Formula from EIOPA, Total SCR amounts to 239M€. This value is mostly explained by Market and Default Risk whereas the former is driven by Spread and Concentration Risks. Following the methodology of Leblanc (2011), we examine the Marginal Contribution of an asset to the SCR which allows for the evaluation of the risks of each security given its characteristics and interactions in the portfolio. The top contributors to the SCR are Corporate Bonds and Term Deposits. By exploring further the composition of the portfolio, our results show that slight changes in allocation of Term and Cash Deposits have severe impacts on the total Concentration and Default Risks, respectively. Also, diversification effects are very relevant by representing savings of 122M€. Finally, Solvency II represents an opportunity for the portfolio optimization. By constructing efficient frontiers, we find that as the target expected return increases, a shift from Term Deposits/ Commercial Papers to Eurozone/Peripheral and finally Equities occurs.

Basel III new capital requirements, impacts and bank behavior

For some years, researchers could not find a clear effect of capital adequacy on the risk profile of banks, as shareholders could increase the riskiness of the assets (qualitative effect), crowding-out the effect of reduced leverage (volume effect). Some shareholders might have the will to increase the riskiness of the assets, but they may lack the power to do so. Considering only ”powerful” shareholders, definitive conclusions were drawn but with constant ownership profile. In this paper I investigate whether there is a significant change in the type of shareholders in response to regulatory capital shocks and, if so, will the banking system be in the hands of more “desired” shareholders. I find that ownership profile responds to a regulatory shock, changing the risk appetite of the ruling power at the bank. I find more banks and the government in the ownership of undercapitalised banks and much less institutional shareholders and free float. I claim that these new shareholders may not the desired ones, given the objective of the regulatory change, as they are associated with a preference for more leverage. One possible explanation for this crowding-out effect is that regulators are trying to contain idiosyncratic risk (more linked to the riskiness of the assets) with a rule that contains systematic risk (capital adequacy). This has a distorting effect on ownership. Another insight can be drawn from the tests: supervisors should be aware of significant ownership movements that cause the crowding-out.

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.

On project finance and the first road concession in Portugal

In broad sense, Project Financing1 as a mean of financing large scale infrastructural projects worldwide has had a steady growth in popularity for the last 20 years. This growth has been relatively unscathed from most economic cycles. However in the wake of the 2007 systemic Financial Crisis, Project Financing was also in trouble. The liquidity freeze and credit crunch that ensued affected all parties involved. Traditional Lenders, of this type of financial instrument, locked-in long-term contractual obligations, were severely hit with scarcity of funding compounded by rapidly increasing cost of funding. All the while, Banks were “rescued” by the concerted actions of Central Banks and other Multi-Lateral Agencies around the world but at the same time “stressed” by upcoming regulatory effort (Basel Committee). This impact resulted in specific changes to this type of long-term financing. Changes such as Commercial Banks’ increased risk aversion; pricing increase and maturities decrease of credit facilities; enforcement of Market Disruption Event clauses; partial responsibility for project risk by Multilateral Agencies; and adoption of utility-like availability payments in other industrial sectors such as transportation and even social infrastructure. To the extent possible, this report is then divided in three parts. First, it begins with a more instructional part, touching academic literature (theory) and giving the Banks perspective (practice), but mostly as an overview of Project Finance for awareness’ sake. The renowned Harvard Business School professor – Benjamin Esty, states2 that Project Finance is a “relatively unexplored territory for both empirical and theoretical research” which means that academic research efforts are lagging the practice of Project Finance. Second, the report presents a practical case regarding the first Road Concession in Portugal in 1998 ending with the lessons learned 10 years after Financial Close. Lastly, the report concludes with the analysis of the current trends and changes to the industry post Financial Crisis of the late 2000’s. To achieve this I’ll reference relevant papers, books on the subject, online articles and my own experience in the Project Finance Department at a major Portuguese Investment Bank. Regarding the latter, with the signing of a confidentiality agreement, I’m duly omitting sensitive and proprietary bank information.

Improving Millennium Bank's personal finance manager

Double Degree

Structure of the extracellular domains of human and Xenopus Fn14: implications in the evolution of TWEAK and Fn14 interactions.

TWEAK (TNF homologue with weak apoptosis-inducing activity) and Fn14 (fibroblast growth factor-inducible protein 14) are members of the tumor necrosis factor (TNF) ligand and receptor super-families. Having observed that Xenopus Fn14 cross-reacts with human TWEAK, despite its relatively low sequence homology to human Fn14, we examined the conservation in tertiary fold and binding interfaces between the two species. Our results, combining NMR solution structure determination, binding assays, extensive site-directed mutagenesis and molecular modeling, reveal that, in addition to the known and previously characterized β-hairpin motif, the helix-loop-helix motif makes an essential contribution to the receptor/ligand binding interface. We further discuss the insight provided by the structural analyses regarding how the cysteine-rich domains of the TNF receptor super-family may have evolved over time. DATABASE: Structural data are available in the Protein Data Bank/BioMagResBank databases under the accession codes 2KMZ, 2KN0 and 2KN1 and 17237, 17247 and 17252. STRUCTURED DIGITAL ABSTRACT: TWEAK binds to hFn14 by surface plasmon resonance (View interaction) xeFn14 binds to TWEAK by enzyme linked immunosorbent assay (View interaction) TWEAK binds to xeFn14 by surface plasmon resonance (View interaction) hFn14 binds to TWEAK by enzyme linked immunosorbent assay (View interaction).

Second Welland Canal - Book 2, Survey Map 8 - Little Deep Cut in Thorold

Survey map of the Second Welland Canal created by the Welland Canal Company showing the canal in Thorold South. Identified structures associated with the Canal include the Little Deep Cut and the towing path. The surveyors' measurements and notes can be seen in red and black ink and pencil. Local area landmarks are also identified and include streets and roads (ex. Road to Beaverdams and Road to Allanburgh), two unnamed bridges, the Spoil Bank, a pond, and the Back Water. Properties and property owners of note are: Lots 29 and 30, Jacob Keefer, John Brown, William Bouck, C. Gisso, and a property reserved for Bridge Tender.

Second Welland Canal - Book 2, Survey Map 15 - Deep Cut in Thorold

Survey map of the Second Welland Canal created by the Welland Canal Company showing the canal in the Thorold Township just south of Allanburgh. Identified structures and features associated with the Canal include the Deep Cut and the towing path. The surveyors' measurements and notes can be seen in red and black ink and pencil. Local area landmarks are also identified and include streets and roads (ex. Road to Port Robinson), and the Spoil Bank. Properties and property owners of note are: Lots 142 and 143, John J. Church, Henry Vanderburgh, and Martin Delamatter and G. Coulter.

Second Welland Canal - Book 2, Survey Map 16 - Deep Cut in Thorold

Survey map of the Second Welland Canal created by the Welland Canal Company showing the canal in the Thorold Township between Allanburg and Port Robinson. Identified structures and features associated with the Canal include the Deep Cut and the towing path. The surveyors' measurements and notes can be seen in red and black ink and pencil. Local area landmarks are also identified and include streets and roads (ex. Road to Port Allanburg), and the Spoil Bank. Properties and property owners of note are: Lots 185, 186, and 187, J. J. Church and H. Vanderburgh. Four properties adjacent to the canal are outlined in blue and labeled J through M, with L and K belonging to John Beatty, M belonging to John Coulter, and J belonging to G. Jordan (formerly belonging to John Coleman Jordan).

Second Welland Canal - Book 3, Survey Map 8 - Quaker Bridge in Thorold

Survey map of the Second Welland Canal created by the Welland Canal Company showing the canal in the Thorold Township between Port Robinson and Welland. Identified structures and features associated with the Canal include the towing path, back ditch, and the waterway itself. The surveyors' measurements and notes can be seen in red and black ink and pencil. Local area landmarks are also identified and include roads and streets (ex. Road to Port Robinson), Quaker Bridge, Hagar's Wood Wharf, Spoil Bank, and several ponds. Properties and property owners of note are: Lots 222, 223, and 224, Johnathan Hagar, E. Shotwell, and Alem Marr.

Second Welland Canal - Book 3, Survey Map 9 - Canal along Chippewa Creek in Thorold

Survey map of the Second Welland Canal created by the Welland Canal Company showing the canal in the Thorold Township between Port Robinson and Welland. Identified structures and features associated with the Canal include the towing path, back ditches, and the waterway itself. The surveyors' measurements and notes can be seen in red and black ink and pencil. Local area landmarks are also identified and include several road allowances, two bridges(Northern most bridge would be the Quaker Bridge), Spoil Bank, two ponds, and several fences. Properties and property owners of note are: Lot 229, and Jacob Silverthorne.