Portuguese banks and the economic adjustment programme: balance sheet adjustments and impact on profitability

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

Determinants of Portuguese bank’s provisioning policies: Discretionary behaviour of generic and specific allowances

In this paper we test for the impact of the regulatory environment on a bank’s discretionary provisioning practices. We develop a model that structures the dynamics of the provision policy for the two classes of provisions: generic provisions and specific provisions. The model is tested using a comprehensive database of all financial institutions operating in Portugal for 1990-2000. This unique dataset comprises banks subject to the Portuguese rules as well as bank subsidiaries subject to their home-country regulation and we were able to identify distinct behaviours between them. Our results show the importance of handling he two types of provisions separately. They support the hypothesis that banks have a discretionary behaviour in setting up their provisions, and find evidence of income smoothing and capital management. We also find that the regulatory regime impacts on discretionary provisioning policies because banks when forced to increase one type of provision react by reducing the iscretionary component of the other, a finding we designated as a substitution effect.

electronic payments in mozambique: A Baseline on their adoption in Maputo and Matola

This study analyses the access and use of financial services by small business owners in the cities of Mozambique, as an important tool for boosting economic growth and diminishing inequality. It correlates owners’ and business characteristics with the probability of adopting Points-of-Sale (POS), Mobile Banking and Mobile Money in everyday transactions. The main findings highlight that what mostly affects the use of POS is the size of business and the volume of transactions (positively correlated with POS adoption), while using mobile phone technologies for payments predominantly depends on the owner’s age and whether he/she is a frequent cellphone user. Moreover, to increase the use of electronic means of payment it is necessary to increase financial literacy and improve the banking services.

The good, the bad and the ugly: The fall and resolution of Banco Espírito Santo

This case study – and accompanying teaching note – briefly describes the history of the Espírito Santo family, a banking dynasty who led one of Portugal’s leading economic and financial groups, along with its “crown jewel”, Banco Espírito Santo. It chronicles how the corporate governance issues at BES allowed the family to exploit the bank, its shareholders and its customers, so as to support its unprofitable non-financial businesses. This left the bank in a poor financial situation, which deteriorated beyond control, leaving regulators – whose actions are also analysed here – with no alternative, amidst a severe liquidity crisis, but to apply a resolution measure, pinning large losses on junior bondholders and shareholders before recapitalising the bank.

Banco popular: Equity research

UNL - NSBE

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 financial system in Mozambique: Opportunities, barriers and market potential

This research is empirical and exploratory intending to analyse the attractiveness of banking in Mozambique, considering its positive outlook. To identify the opportunities and barriers, the methods adopted were elite interviews with banking executives, complemented by secondary data. The opportunities for new entrants seem to include bankarization and the emergence of micro and smallmedium enterprises; other avenues seem to include investment banking, support of mega-projects (e.g. energy, infrastructures) through syndicates and cooperation with multilaterals, and the participation in developing capital markets. Conversely, the main barriers include shortage of talent, inadequate infrastructures, poverty, unsophisticated entrepreneurial culture (e.g. informal economy, inadequate financial reporting), burdensome bureaucracy (e.g. visas), foreign exchange regulation, as well as low liquidity and high funding costs for banks. The key conclusions suggest a window of opportunity for niche markets, and new products and services in retail and investment banking.

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.

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.

Integration of speech-processing technologies into Activobank's client interaction process

This dissertation analyzes the possibilities of utilizing speech-processing technologies to transform the user experience of ActivoBank’s customers while using remote banking solutions. The technologies are examined through different criteria to determine if they support the bank’s goals and strategy and whether they should be incorporated in the bank’s offering. These criteria include the alignment with ActivoBank’s values, the suitability of the technology providers, the benefits these technologies entail, potential risks, appeal to the customers and impact on customer satisfaction. The analysis suggests that ActivoBank might not be in a position to adopt these technologies at this point in time.

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.

Arquivos bancários em Portugal: requisitos para a gestão de documentos de arquivo

Versão corrigida e melhorada após a sua defesa pública

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 flow-performance relationship around the world

We use a new dataset to study how mutual fund flows depend on past performance across 28 countries. We show that there are marked differences in the flow-performance relationship across countries, suggesting that US findings concerning its shape do not apply universally. We find that mutual fund investors sell losers more and buy winners less in more developed countries. This is because investors in more developed countries are more sophisticated and face lower costs of participating in the mutual fund industry. Higher country-level convexity is positively associated with higher levels of risk taking by fund managers.

Universal banks and corporate control: Evidence from the global syndicated loan market

We investigate the effects of bank control over borrower firms whether by representation on boards of directors or by the holding of shares through bank asset management divisions. Using a large sample of syndicated loans, we find that banks are more likely to act as lead arrangers in loans when they exert some control over the borrower firm. Bank-firm governance links are associated with higher loan spreads during the 2003-2006 credit boom, but lower spreads during the 2007-2008 financial crisis. Additionally, these links mitigate credit rationing effects during the crisis. The results are robust to several methods to correct for the endogeneity of the bank- firm governance link. Our evidence, consistent with intertemporal smoothing of loan rates, suggests there are costs and benefits from banks’ involvement in firm governance.