Research Statement
Alessandro Diego Scopelliti
University of Warwick – Department of Economics
[email protected]
I am a PhD Candidate in Economics at the University of Warwick (UK). My primary research fields are
Empirical Banking, Financial Regulation and Supervision, Bank Lending and Monetary Policy, SME Finance. My
thesis, “Essays on Banking, Credit and Financial Regulation”, analyses some key issues for the current policy discussion
after the crisis, such as securitisation and bank capital, bank funding costs and lending conditions, bank competition
and stability, the effects of public support to banks, prudential regulation and banking crises, SME finance and capital
markets.
I conducted part of my research in central banks, in particular at the European Central Bank and at the Bank of
England, and in international institutions, at the International Monetary Fund. Also, I recently spent a visiting period at
the University of Zurich, in the Department of Banking and Finance. I am very interested in developing my research on
topics related to the new challenges faced by central banks and supervisory authorities in the areas of financial stability
and banking supervision, also in relation with monetary policy. I discuss my research works in relation to their topics.
SECURITISATION AND BANK CAPITAL
“Securitisation, Bank Capital and Financial Regulation: Evidence from European Banks”
Based on a research project developed at the European Central Bank
2014 Marjolin Prize for the best contribution by an author under 40 at the SUERF-FinLawMetrics Conference
The paper analyses how banks manage their capital position when they securitise, by focusing on the issuances
sponsored by European banks before and after the financial crisis. Stylised facts suggest that, at the time of the crisis,
European banks continued to issue structured products, but by retaining them on balance sheet for collateral purposes.
Based on a new dataset combining tranche-level information for structured products with bank balance sheet data for
the corresponding originators, I investigate the changes in the risk-based capital ratios and in the leverage ratios of
securitiser banks, for different classes of products. In the pre-crisis period, banks observed an increase in their riskbased capital ratios particularly from the transfer of risky assets. In the crisis time, securitiser banks improved their riskweighted solvency ratios but without reducing their actual leverage: across products, this increase in the risk-based
prudential ratios was larger for the issuances of asset-backed securities eligible as collateral for monetary policy, which
banks could retain and pledge in central bank liquidity operations. Also, across banks, institutions in weaker liquidity
conditions exploited the regulatory arbitrage opportunities of the securitisation framework to obtain larger increases in
their prudential solvency ratios. The paper provides some policy implications, both for the collateral framework of
monetary policy, and for the reforms of prudential regulation, such as the introduction of the new leverage ratio in the
Basel framework.
BANK COMPETITION AND STABILITY
“How Does Bank Competition Affect Solvency, Liquidity and Credit Risk?”
With Raja Almarzoqi and Sami Ben Naceur (IMF), developed during the Fund Internship Program
IMF Working Paper No.15/210
The paper analyses the relationship between bank competition and stability, with a specific focus on the Middle
East and North Africa. The empirical analysis distinguishes different dimensions of financial stability, with regard to
distinct sources of individual bank risk: solvency, liquidity and credit risk. The results show that the various effects
observed in the existing literature may be explained in terms of different types of bank risk. Price competition has a
positive effect on bank liquidity, as it induces a self-discipline mechanism on the choice of bank funding sources and
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on the holding of liquid buffers. On the other hand, price competition may have a potentially negative impact on bank
solvency and on the credit quality of the loan portfolio. In particular, more competitive banks may be less solvent if the
potential increase in the capital base is not large enough to compensate for the reduction in bank profitability. Also,
banks operating in a more competitive setting may present a higher rate of non-performing loans if the increase in the
risk-taking incentives from the lender’s side overcomes the decrease of the credit risk from the borrower’s side. In both
cases, the country-specific policies for market entry conditions and for bank regulation and supervision may
significantly affect the sign and the size of the relationship. The paper suggests various recommendations to improve
financial stability through policy reforms designed to improve market contestability and to increase the quality and the
independence of prudential supervision.
BANK FUNDING AND LENDING
“Bank Funding Costs and Lending Price: The Impact of Public Support to UK Banks”
Work in progress, based on a project developed at the Bank of England
This work investigates the impact of public support measures to the UK credit institutions on bank funding
costs and lending rates. The implementation of explicit support in crisis times can produce a positive effect on bank
funding, by inducing a reduction in wholesale funding costs. However, it is not clear whether the funding support may
also improve bank lending conditions, not only in terms of volumes, but also in terms of prices. The UK banking system
provides an interesting framework to assess that, due to the variety of policy actions undertaken by the Authorities, such
as the Capital Injections, the Credit Guarantee Scheme, the Special Liquidity Scheme and more recently the Funding
for Lending Scheme.
The analysis is based on a new dataset, combining monthly bank balance sheet data and tranche-level debt issuance
data for the major UK banks from January 2004 to December 2011. The study is divided in two parts. In the first one,
I explore how shocks affecting various sources of funding (both wholesale and retail) may be transmitted to lending
rates, controlling for bank-specific characteristics. The analysis shows that shocks to wholesale funding costs imply a
positive impact on lending rates, which is significantly larger than the effect of corresponding changes in retail funding
costs. However, the effect of a rise in wholesale funding costs might be non-linear, as banks might not completely adjust
their lending rates to large funding shocks.
In the second part, I investigate whether and to what extent policy measures aimed at improving funding conditions
for banks have produced significant improvements on credit standards and lending rates, controlling for demand factors
based on the Credit Conditions Survey. So I test whether banks benefiting from policy measures charged lower lending
rates than other banks. In order to avoid a possible endogeneity bias due to sample selection, I use a Diff-in-Diff-inDiff approach, by exploiting the role of bank size in determining the systemic risk of the institution and then the
probability of public intervention for a bank. The results show that banks receiving funding support decreased lending
rates more than other banks: however, the pass-through from the policy measures to the credit conditions was only
partial and significantly lagged in time with respect to the policy implementation.
PRUDENTIAL REGULATION AND FINANCIAL STABILITY
“Rules and Discretion(s) in Prudential Regulation: Evidence from EU Banks in the Run-Up to the Crisis”
Work in progress with Angela Maddaloni (ECB)
The study aims at analysing the effects of cross-country heterogeneities in prudential regulation and supervision
within the EU on the stability of credit institutions, focusing on the recent episodes of banking crises and on the
interventions of EU Governments in support of distressed financial institutions. In particular, the EU framework for
banking regulation and supervision provides an interesting case to study the effects of capital regulation on banking
stability, as it shows some cross-country differences in the application of specific prudential rules, which can
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significantly change the effective regulatory burden for financial institutions in one country compared to another one.
Indeed, the key principles for banking regulation have been established at the EU-level through directives, but then they
have been implemented at the country-level through national acts of transposition. In addition, also banking supervision
has been exerted as a task of national supervisors, which has determined substantial differences in the enforcement of
prudential rules.
Given that, we construct an indicator of banking regulation in the EU countries, by considering the
implementation of the Capital Requirements Directive in national systems. Given the large number of options and
discretions, as well as their different impact on capital requirements and regulatory burden, a quantitative index captures
different degrees of stringency in prudential regulation for different countries. The indicator is based on two
components, regulatory flexibility and supervisory discretion, and it is organized according to the pillars of Basel
accord, in order to compare different aspects of the prudential regime and to assess their relative contributions to banking
stability.
Based on this indicator, and controlling for bank-specific characteristics (balance sheet variables) and countrylevel macro factors, we examine how cross-country heterogeneities in banking regulation and supervision may explain,
in isolation or in combination with other factors, differences in the financial resilience of banks during the crisis period.
We use a logit model for the probability of receiving a government bail-out to test the hypothesis that banks established
in countries with more severe regulation and more effective supervision experienced lower financial distress and then
showed lower need of public support measures during the crisis.
We find that credit institutions established in countries with less stringent prudential regulation showed higher
probability of being in distress during the crisis, quantified as measures of crisis support to banks implemented by EU
Governments. We also explore the potential trade-off between rules and discretion in the design of prudential regulation:
general rules define the regulatory treatment for all banks in a given country, without requiring any previous supervisory
assessment; while supervisory discretions assign to the supervisor the power to authorise specific banks to apply a more
permissive treatment, on the basis of a case-by-case examination.
BANK CREDIT AND CAPITAL MARKETS
“Bank Credit and Market-Based Finance for Corporates: The Effects of Minibond Issuances in Italy”
Work in progress with Steven Ongena (Univ. of Zurich), Sara Pinoli and Paola Rossi (Bank of Italy)
The integration between bank credit and market-based finance for corporates and particularly for SMEs is at
the center of the recent policy debate, also in Europe in the perspective of the creation of the “Capital Markets Union”.
Some recent regulatory changes in Italy, focused on the introduction of “minibonds” for non-listed firms, provide an
interesting setting in order to study the ex-post consequences of such policy measures aimed at extending the range of
funding sources.
We exploit such regulatory shocks to investigate the ex-post impact of the issuance of minibonds on the
financing conditions of Italian corporates and on the credit rates charged by banks to each firm. In particular, we explore
how the recourse to capital markets - and so the diversification of funding sources - may have changed ex-post the credit
conditions practised by banks to the issuer firms, possibly by improving the bargaining power of firms with banks; then
we analyze whether corporate issuers were able to obtain lower lending rates from banks after the issuance.
We study the effects of the switching behavior of firms from bank credit to debt funding on the bank-firm
relationships and we focus on the interest rate setting for new loans granted after the issuances. Since the loan offer to
a treated firm in the case of non-issuance would not be observable, we match the new loans granted to issuer firms with
the new loans granted at the same time to non-issuer firms - having the corresponding pre-determined characteristics.
Then we examine whether the rates charged to issuer firms are lower than the rates practiced for new loans to ex-ante
comparable non-issuer firms and we investigate whether such difference may be explained also by some conditions of
the debt contracts.
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