Using bank level data this paper examines how bank’s specific characteristics and the overall banking environment affect the profitability of commercial domestic and foreign banks operating in the 15 EU countries over the period 1995–2001. The results indicate that profitability of both domestic and foreign banks is affected not only by bank’s specific characteristics but also by financial mark...

In this article we first document the evidence showing how an efficient retail payment infrastructure enhances economic performance. We then review the policy tools available to promote efficient retail payments in Europe. We argue that while SEPA is an important policy initiative that harmonizes payment methods across the EU, it alone is not enough. Vigorous competition and consumer protection...

This paper compares the timeliness and accuracy of (confidential) government assessments of bank condition against market evaluations of large U.S. bank holding companies. We find that supervisors and bond rating agencies both acquire some information that would help the other group forecast changes in bank condition. In contrast, supervisory assessments and equity market indicators are not str...

I analyze banks’ incentives to acquire expertise in judging the credit-worthiness of borrowers in an industry with uncertain business conditions. The optimal industrial organization of bank lending features several banks with industry expertise, as well as a competitive fringe of banks without such expertise. The analysis provides a foundation for analyzing the relative merits of focus vs. dive...

Traditional models of bank runs do not allow for herding e¤ects, because in these models withdrawal decisions are assumed to be made simultaneously. I extend the banking model to allow a depositor to choose his withdrawal time. When he withdraws depends on his consumption type (patient or impatient), his private, noisy signal about the quality of the bank’s portfolio, and the withdrawal histori...

The purpose of this paper is to examine the financing behaviour of Dutch corporations and its impact on firm performance. First, I present some stylised facts of corporate financing in the Netherlands. I show how the Dutch financial system differs from other major financial systems. Second, I analyse the valuation effect of different types of security offerings made by Dutch quoted firms. An ev...

This paper develops a refinance model that provides pertinent information for investors about refinancing their mortgage. We discuss the input variables and how to compute the breakeven number of months when deciding to refinance a mortgage. We incorporate the interest rate tax effects that are normally ignored by investors when making their refinancing decision. We also compute the net present...

The principal driving force in the development of the financial system of pre-industrial Europe was not lending per se, but payments. Trade among strangers required the development of methods of payment that did not require mutual acquaintance and trust. The two principal financial innovations of pre-industrial Europe—the deposit bank and the bill of exchange—evolved to address this need. Lendi...

and Headnote We put “runs” back in the bank runs literature. A unified bank, one that invests in both liquid and illiquid assets, can easily avoid runs but it still faces a small probability of non-run rationing of depositors. In a separated financial system, the bank only holds relatively liquid assets; it is subject to runs with small probability, but because of its overinvestment in the liqu...

We examine the roles of idiosyncratic and systemic funding liquidity risks in bank failures. We estimate a discrete-time hazard model of bank failure using data of U.S. commercial banks between 1985 and 2004, and examine its out-of-sample forecasting performance between 2005 and 2011. The out-of-sample performance comparison shows this model outperforms typical bank failure prediction models. W...