Contributions published at Banking (Steven Ongena)

Do borrowers demand less credit from banks with weak balance sheet positions? To answer this question we use novel bank-specific survey data matched with confidential balance sheet information on a large set of euro area banks. We find that, following a conventional monetary policy shock, bank balance sheet strength influences not only credit supply but also credit demand. The resilience of lenders plays an important role for firms when selecting whom to borrow from. We also assess the impact on credit origination of unconventional monetary policies using survey responses on the exposure of individual banks to quantitative easing and negative interest rate policies. We find that both policies do stimulate loan supply even after fully controlling for bank-specific demand, borrower quality, and balance sheet strength.

Some regulators grant contingent convertible bonds (CoCos) the status of “going-concern” capital. Theory, however, suggests that CoCos can induce debt overhang, thereby amplifying the leverage ratchet effect. In this paper, we provide empirical evidence consistent with this theory. Our results suggest that banks with more volatile assets (riskier banks) (i) are less likely to issue CoCos, (ii) conditional on having CoCos outstanding are less likely to issue equity, and (iii) prefer issuing equity over CoCos. Since riskier banks suffer from more debt overhang it is more costly for them to issue CoCos.

This thesis examines the underlying reasoning behind the introduction of Basel III and the impact of the framework on the Swiss banking sector. The thesis provides a summary of the literature regarding the characteristics of banks and the associated market imperfections, as well as a descriptive analysis of the balance sheet of a set of Swiss banks. The main findings of this analysis are that the sample banks reacted in a similar way to the introduction of Basel III. Most sample banks reduced their lending in form of non-mortgage loans as a share of their total balance sheet assets, mainly by reducing the granting of non-mortgage loans to companies and retail customers. Moreover, within the scope of the thesis, it was shown that the sample banks change the focus of their granting of loans, non-mortgage loans were either reduced or grown at lower rate than the mortgage loans. Thus, the banks increasingly focused on lending in the form of mortgage loans rather than on non-mortgage loans.

Die vorliegende Bachelorarbeit befasst sich mit dem Thema des Crowdlendings über Onlineplattformen für kleine und mittlere Unternehmen (KMU) in der Schweiz und seiner zukünftigen Entwicklung. Die Untersuchung wird anhand von Erkenntnissen aus bestehender Literatur und bereits erhobenen Daten durchgeführt. Im Theorieteil werden zunächst die relevanten Begriffe definiert. Danach wird genauer auf das globale sowie das Schweizer Crowdlending eingegangen. Auf Basis der gewonnenen Erkenntnisse wird daraufhin eine Prognose der Entwicklung des Crowdlendings für Schweizer Un-ternehmen erstellt. Dafür werden Expertenmeinungen und prognostizierte Daten zu-sammengeführt. Als Ergebnis zeigt diese Arbeit, dass die Zukunft viele Herausforde-rungen im Crowdlendingmarkt mit sich bringt. Neue Regulierungen, die coronavirus disease 2019 (COVID-19) und die Fähigkeit, funktionierende Kollaborationen einzuge-hen, werden die Entwicklung dieses Marktes in den nächsten Jahren entscheidend be-einflussen. Ob diese Art der Finanzierung die Kredite traditioneller Banken ersetzen oder doch nur supplementieren wird, kann nicht abschliessend beantwortet werden. Dies wird sich zeigen, wenn der Markt des Crowdlendings weiterhin wächst.

This thesis aims to answer the question of whether the severity of the outcome from the 2007- 2008 financial crisis has had a significant influence on Covid-19 measures taken by governments across EU countries? In order to achieve this, the relationship between four different financial crisis severity measures and several Covid-19 countermeasures has been analyzed. When regressing multiple normalized and aggregated Covid-19 measures in form of an index on financial crisis severity data no significant effects can be found. However, when regressing individual countermeasures on financial crisis measures it results in consistent and significant effects for some countermeasures like international travel controls or debt & contract relief policies. The second question this thesis tries to answer is whether the financial crisis severity as well as Covid-19 countermeasure policies had a significant impact on stock market returns across the major European stock indices? To answer this question an analysis of the relationship between said variables has been made for two different time periods, with the first period going from January through June 2020 and with the second period going from January 2020 until the beginning of May 2021. The result show that in case of the four different measures for the 2007-2008 financial crisis severity no consistently significant effect could be determined for either of the analyzed periods. On contrary, for both periods several different Covid-19 countermeasures showed a consistent and significant impact on returns, across the major European stock indices.

Am 15. September 2008 beantragte die 150 Jahre alte US-amerikanische Investmentbank Lehman Brothers Holdings Inc. Insolvenz nach Chapter 11 des US-amerikanischen Konkursgesetzes. In der Literatur wird dieser Tag als der Höhepunkt der jüngsten Finanzkrise angesehen. Das Ziel in der vorliegenden Arbeit ist es, die Auswirkungen der Insolvenz von Lehman Brothers auf die Aktienrenditen von Schweizer Banken aufzuzeigen. Die Stichprobe enthält 18 Banken, die im Swiss Performance Index gelistet sind. Anhand einer Ereignisstudie wurden mit Hilfe des Marktmodells die erwarteten Renditen ermittelt sowie die abnormalen Renditen der Banken. Die Ergebnisse zeigen eine signifikant negative durchschnittliche abnormale Rendite für die Stichprobenunternehmen am Tag der Bekanntgabe der Insolvenz von Lehman Brothers. In einem zweiten Schritt wurden die durchschnittlichen abnormalen Renditen über einen bestimmten Zeitraum aggregiert. Bei vier von sechs Ereignisfenstern lässt sich eine signifikant negative kumulierte durchschnittliche abnormale Rendite der Stichprobenunternehmen feststellen.

The goal of this thesis is to answer how adoption rates in online banking in Switzerland have been impacted by the covid-19 crisis and the related government restriction measures. To give more context to this question I first review the existing literature concerning how the banking industry has been digitalized over the last few decades and what the historical impact of several crises, like the dotcom bubble or the financial crisis in 2007/2008, has been on the banking industry. I then analyze how the Swiss online banking industry has been impacted in the most recent covid-19 crisis by looking at daily app download data of various Swiss banks, most importantly Swissquote, serving as an example for a modern digitalized bank, in contrast to long-established banks like UBS or Raiffeisen. I analyze the data by conducting simple linear regressions for the respective bank’s app. I find that Swissquote has seen significant growth in daily app download numbers in relation to the restriction measures taken by the Swiss government, in contrast to UBS. Other banks like Raiffeisen, Migros Bank, or ZGKB have seen significant growth, but at a much lower level than Swissquote. These results indicate that banks which have historically focused more strongly on digitalization have seen more growth in app downloads in connection with the covid-19 crisis compared to their peers.

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Several studies have shown the increasing hazards of climate change and estimate the cost of its mitigation to be in trillions of dollars. Accords like Paris climate agreements have taken steps towards a committed ght against climate change. We study green bonds, which are xed-income instruments specically earmarked to raise money for climate and environmental projects. Our study focuses on nding evidence of Green Premium as compared to ordinary or Normal Bonds. Our study is one of the rst to generate a Greenness score based on contextual analysis of issue documents, specically the intended use of proceeds. Using state-of-the-art natural language processing we develop Green Scores using Green Bond Principles issued by International Capital Markets Association as benchmark.

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Fossil fuel investments over the past few years are at the centre of political debates about climate change policy. This article explores the role market- and bank-based debt play in the climate transition process. It presents evidence that fossil fuel firms increasingly substitute bonds for syndicated bank loans, when banks price the risk of stranded assets less than the bond market.

Fossil fuel investments over the past few years are at the centre of political debates about climate change policy. This article explores the role market- and bank-based debt play in the climate transition process. It presents evidence that fossil fuel firms increasingly substitute bonds for syndicated bank loans, when banks price the risk of stranded assets less than the bond market.

We study local loan conditions when, under external pressure, banks close branches. After the closure of nearby branches of their credit granting banks, firms that locally and hurriedly transfer to other banks receive an equivalent interest rate. However, and in stark contrast, where branch closures do not take place firms that purposely switch banks receive a 63 basis points discount. At the same time, the loan default rate for the (more expensive) transfer loans is on average a full percentage point lower than that for the (cheaper) switching loans. This suggests that firms that establish new relationships after their bank branch closes are “better” than regular switchers in terms of unobservable characteristics. Taken together, these findings provide evidence of losses for firms when banks close branches, even if local markets remain competitive.

s there a connection between the 2007-2009 financial crisis and the COVID-19 pandemic? Steven Ongena talks to Tim Phillips about the relation between both macroeconomic and financial losses derived from the financial crisis and the health outcomes associated with the first wave of the pandemic. You can find the paper behind this interview here

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The presentthesisgives the reader an overview ofthe developments of living situation in the pastas well as over the recent situation. Additionally, the reader gets an outlook on the possible future evolution based on historical data ofreal estate transactions collected by Wuest and Part-nerand the Swiss FederalStatistical Officeover the last 20 years. Recent numbers as unem-ployment ratio, raise in population and life expectation will support to illustrate hypothesis about the future.Furthermore, the financial point of view of the investor as well as theone of the banksand therewith connected investmentdecisions into real estate are taken into consid-eration as well.This topic is especially relevant for research since it could influence the plan-ning of future infrastructure and furthermore the mortgage lending business what is one of the main fields of Swiss banks. The thesis will be based on literature, historical data stemming from historical real estate transactions as well as recent statistics.

Over recent years stricter EU capital requirements have resulted in constraining bank lending to SMEs. Alternative finance is expected to ease such constraints, but what would it be its impact on bank fragility? This paper examines whether alternative finance for Small and Medium Enterprises (SMEs) in the euro area would moderate bank fragility. We employ a bank profit model from which we derive a novel measure of bank fragility that is based on micro-foundations and is estimated in a single stage with Bayesian techniques. Controlling for many bank and firm specific variables, including bank capital adequacy ratios and volatility, we find that alternative finance overall strengthens bank stability, but that there is some variability in this impact over time and across countries. Interestingly, while higher bank capital adequacy ratios at times may even increase fragility, their interactions with alternative finance could help reduce it.