Research

Financial Intermediation, Financial Regulation and Stability, Monetary Policy and Macroprudential Policy


Working Papers


With S. Ongena (Univ. of Zurich), S. Pinoli (Bank of Italy) and P. Rossi (Bank of Italy). Revise & Resubmit, Journal of Financial and Quantitative Analysis

CEPR Discussion Paper No.16693, ECB Working Paper No. 2508, Bank of Italy Working Paper No.1315

Abstract: Does a diversification of funding sources affect the financing conditions for firms? To answer this question, we study a regulatory reform which allows unlisted firms to issue minibonds. Using the Italian Credit Register, we compare new loans granted to issuer firms with concurrent new loans to matched non-issuer firms. We find that, after the first minibond issuance, issuer firms obtain lower interest rates on bank loans of the same maturity than non-issuers. Issuer firms reduce their used bank credit but increase their overall external funds, pointing to a partial credit substitution. Moreover, issuer firms expand their total and fixed assets.

Presentations: Bank of Italy (Rome, 2018), “Securities Markets. Trends, Risks and Policies” (Bocconi, 2019), 12th Swiss Winter Conference on Financial Intermediation (Lenzerheide, 2019), 4th ENTFIN Conference on Entrepreneurial Finance (Trier, 2019), “Regulating Financial Markets” (Goethe Univ., 2019), 3rd Annual Workshop of the ESCB Research Cluster 3 (Banco de España, 2019), 35th EEA Annual Conference (online, 2020), European Central Bank (2020), 2021 AFA Annual Meeting (online, 2021), KU Leuven (2021), Halle Institute for Economic Research (2021), UC Louvain (2021), Workshop on Corporate Economics (ECB, 2022), Florence School of Banking and Finance (EUI, 2024)

Grants: ERC ADG 2016 - GA 740272 lending (Principal Investigator: S. Ongena)


With C. Couaillier (ECB), A. Reghezza (ECB), C. Rodriguez D'Acri (ECB). ECB Working Paper No. 2720. Revise & Resubmit, Journal of Financial Intermediation

Abstract. This paper investigates the impact of the capital relief package adopted to support euro area banks at the outbreak of the COVID-19 pandemic. By leveraging on confidential supervisory and credit register data, we uncover two main findings. First, capital relief measures support banks' capacity to supply credit to firms. Second, not all measures are equally successful. Banks adjust their credit supply only if the capital relief is permanent or implemented through established processes. By contrast, discretionary relief measures are met with limited success, possibly owing to the uncertainty surrounding their capital replenishment path. Moreover, requirement releases are more effective for banks with a low capital headroom over requirements and do not trigger additional risk-taking. These findings provide key insights on how to design effective bank capital requirement releases in crisis time.

Presentations:  ECB (2021), IMF (2021), Workshop on Sustainable Banking (U. Zurich, 2021), Bank of England (2022), 2022 European Economic Association Conference (Bocconi, 2022), IFABS 2022 Conference (Naples, 2022), 2023 American Economic Association Annual Meeting (New Orleans, 2023), KU Leuven Finance Brown Bag Seminar (Antwerp, 2023), Columbia SIPA/BPI Bank Regulation Conference (Columbia U., 2023), Central Bank Research Association Annual Meeting (New York, 2023), 2023 International Workshop on Financial System Architecture and Stability (CEPS, Brussels, 2023), Central Bank of Ireland Conference on "Financial Stability Policies in a Changing Lending Landscape" (Dublin, 2023), JFI-CFAR-UNC-Gothenburg Conference on “Frontier Risks, Financial Innovation and Prudential Regulation of Banks” (scheduled, Gothenburg, 2024)

Policy Reports: "Bank Capital Buffers and Lending in the Euro Area during the Pandemic" (with C. Couaillier, M. Lo Duca, A. Reghezza, and C. Rodriguez d'Acri), ECB Financial Stability Review, Special Feature A, November 2021


With C. Altavilla (ECB), C. Melo Fernandes (IMF), S. Ongena (Univ. of Zurich). ECB Working Paper No. 2758

Abstract. What was the impact on bank bond holdings of recent regulatory changes in the requirements for bank bail-inable liabilities? Analyzing confidential data on individual securities holdings by banks, we document that the Minimum Requirements for Eligible Liabilities (MREL) induced banks to increase their holdings of eligible bank bonds, while strengthening their home bias. The Total Loss Absorbency Capacity (TLAC) requirements raised the incentives for other banks – different from the issuer – to invest in eligible subordinated debt issued by global systemically important banks. Cross-holdings of bank bonds did increase bank interconnectedness, thereby potentially undermining any future bail-in implementation.

Presentations:  IFABS 2021 Conference (Oxford Said, online, 2021); SRB-FBF-SAFE Conference on "Bank crisis management – what next?" (online, 2021); Second Conference on the Interconnectedness of Financial Systems (Federal Reserve Board, 2021); 2022 Benelux Banking Research Day (KU Leuven, 2022); 2022 Swiss Winter Financial Intermediation Conference (Lenzerheide, 2022); 3rd Biennial Bank of Italy and Bocconi University Conference on ‘Financial Stability and Regulation’ (Banca d'Italia, online, 2022); ACLE-YSI Young Talents in Law & Finance Conference (Amsterdam, 2022); EBA 2023 Research Workshop on "Interest Rate and Liquidity Risk Management, Regulation and the Macro-economic Environment" (Paris, 2023)


With W. Beyene (Univ. of Zurich), M. Falagiarda (ECB), S. Ongena (Univ. of Zurich). SFI Research Paper Series, No. 22-76

Abstract. The transition to a green economy strongly depends on the existence of appropriate economic incentives for agents. The loan market for car purchases is a paradigmatic example in this respect, as lenders may set credit conditions which may discourage or support the purchase of high-emission vehicles. Using loan-level data for auto ABSs from the European Data Warehouse, we study whether banks adjust lending price and terms in response to events raising awareness on environmental risks and uncertainty related to more polluting cars as “stranded assets”. We focus on the impact of the diesel emissions scandal in the automobile sector in 2015, as well as of local policy shocks regarding circulation restrictions due to air pollution on diesel car loan conditions.

Presentations:  U. Zurich (2021); 5th Annual GRASFI Conference (Zurich, 2022); Frontiers of climate and nature in macroeconomics and finance (Banque de France, Paris, 2022); Sustainable Finance Research Forum (IPAG Business School, Paris, 2022); 2023 Swiss Winter Financial Intermediation Conference (Gerzensee, 2023); 2023 Belgian Financial Research Forum (National Bank of Belgium, 2023); Conference on “Climate change and the financial system: Challenges and opportunities for central banks” (Sveriges Riksbank, 2023); IFABS 2023 Conference (Oxford Said, 2023); Journal of Corporate Finance Conference on "Ownership and Corporate Social and Sustainable Policies" (Helsinki, 2023); 2023 European Economic Association Conference (Barcelona, 2023).

Awards:  Best paper at the 2022 Sustainable Finance Forum (IPAG, Paris); Best paper at the 2023 EFiC Conference 


With A. Maddaloni (ECB). ECB Working Paper No. 2284

Abstract: Prior to the global financial crisis, prudential regulation in the EU was implemented non-uniformly across countries, as options and discretions allowed national authorities to apply a more favourable regulatory treatment. We exploit the national implementation of the Capital Requirements Directive and derive a country measure of regulatory flexibility (for all banks in a country) and of supervisory discretion (on a case-by-case basis). Overall, we find that banks established in countries with a less stringent prudential regime were more likely to require public support during the crisis. We investigate the channels through which a more lenient prudential regulation may have led to greater financial vulnerability of banks. Using an instrumental variable approach, we focus on the component of balance sheet risk-taking explained by the prudential framework incentives and analyse how this affects bank resilience. More regulatory flexibility is associated with higher share of non-interest income, lower ratios of liquid assets and larger credit provision, leading to higher probability of distress. At the same time, in jurisdictions with more supervisory discretion, banks may have been induced to control the lending amount and to hold larger buffers of liquid assets, though by increasing sovereign exposures.

Presentations:  SUERF Colloquium “The SSM at 1” (Frankfurt, 2016), European Finance and Banking Conference (Bologna, 2016), 57th Conference of the Italian Economic Association (Bocconi, 2016), 25th International Rome Conference on Money, Banking and Finance (Rome, 2016), IFABS 2017 conference (Oxford, 2017), 2017 FINEST Conference (Trani, 2017), 1st Annual Workshop of ESCB Research Cluster 3  (Bank of Greece, 2017); 3rd Conference on Contemporary Issues in Banking (St. Andrews, 2019)

Research Bulletin Article: “Prudential Regulation, National Differences and Banking Stability” (with A. Maddaloni), ECB Research Bulletin Article, No. 58, May 2019 

Media Coverage: Il Sole 24 Ore (24 May 2019)


With R. Almarzoqi (IMF) and S. Ben Naceur (IMF). IMF Working Paper Series No. 15/210

Abstract. The paper analyses the relationship between bank competition and stability, with a specific focus on the Middle East and North Africa. Price competition is positively associated with bank liquidity, as it induces self-discipline incentives on banks for the choice of bank funding sources and for the holding of liquid assets. On the other hand, price competition may have potentially negative implications on bank solvency and on the credit quality of the loan portfolio. More competitive banks may be less solvent if the potential increase in the equity base - due to capital adjustments - is not large enough to compensate for the reduction in bank profitability. Also, banks subject to stronger competitive pressures may have a higher rate of nonperforming loans, if the increase in the risk-taking incentives from the lender’s side overcomes the decrease in the credit risk from the borrower’s side. In both cases, 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 implications for policy reforms designed to improve market contestability and to increase the quality and independence of prudential supervision.

Presentations:  IFABS 2016 Conference (Barcelona, 2016), IMF (Washington DC, 2014)


Work in Progress


Abstract. 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 global financial crisis. Since then, banks continued to issue ABSs but retaining them for collateral purposes. Based on this motivation, the analysis investigates the capital implications of securitisation and the potential regulatory arbitrage incentives under risk transfer and retention. Combining tranche- level information for securitisation with bank balance sheet data for originators, I explore the ex-post changes in risk- based capital ratios and leverage ratios of banks after securitisation, for different classes of products. In the pre-crisis period, originator banks increased their risk-based capital ratios, consistently with the risk transfer argument. In the crisis time, while retaining their securitisation issuances, originator banks of ABSs eligible as central bank collateral improved their risk-weighted solvency ratios but without reducing their actual leverage. In fact, they could exploit the difference between the risk weights of the underlying assets and of the securitisation exposures to minimise the regulatory capital implications of this retention behaviour. Across institutions, banks in weaker liquidity conditions – then more subject to funding constraints - exploited relatively more these capital arbitrage opportunities.

Presentations: 3rd ECB Forum on Central Banking (Sintra, 2016), 4th EBA Research Workshop (London, 2015), 14th CREDIT Conference (Venice, 2015), SUERF-FinLawMetrics Conference (Milan, 2014), 29th EEA Conference (Toulouse, 2014), IFABS 2014 Conference (Lisbon, 2014), 4th FEBS Conference (Surrey, 2014), MFS Symposium (Cyprus, 2014), IMF (Washington DC, 2014), Research Seminar on Banking (Zurich, 2015), Barcelona GSE Banking Summer School (UPF, 2015), Macro Workshop (Warwick)

Awards: 2014 SUERF Marjolin Prize; Shortlisted for the 2016 Ieke Van Den Burg Prize; Finalist for the Young Economists' Competition, 2016 ECB Forum on Central Banking


Abstract. The paper analyses the determinants for the issuance and the retention of asset-backed securities (ABSs) by euro area banks, with regard to the effects of monetary policy measures, and in relation to bank characteristics and financial markets developments. Based on a granular dataset for all ABSs and covered bonds issued in the euro area from 2005 to 2018 Q1, and combining tranche-level information on securities with the balance sheet data for the parent banks, I first study the relative incentives for the issuance and the retention of ABSs versus covered bonds. While covered bonds are usually placed among investors, ABSs have been often retained by originator banks particularly after the crisis. I find that the full allotment policy – expanding the amount of available central bank liquidity – increased the probability to retain eligible ABSs particularly for banks with lower liquidity and less capital, as they were more interested in a securitise-to-repo strategy for potential access to central bank liquidity. In addition to this quantity effect, also the price effect of the interbank spread on funding costs contributed to the increase in ABS retention for banks in weaker funding conditions. The introduction of the Additional Credit Claims framework, by allowing for the direct pledge of a larger set of credit claims, was associated with some decrease in ABS retention.

Presentations: ECB (2018)


Book Chapters and Research Bulletin Articles



Pre-PhD Research: Competition Policy, Economic Growth, Political Economy


Working Papers

 The Warwick Economics Research Paper Series, N.924

Abstract. The paper analyzes the interaction between antitrust policy and intellectual property protection, with particular reference to the cases of refusal to supply, when it concerns ideas or inventions protected by an IP right. I analyse the interoperability decisions of an incumbent monopolist, regarding the disclosure of the interface information required for the compatibility between different software platforms. In various cases, the refusal to supply the required protocols to the producers of a complementary product is interpreted as a leverage behaviour, intended to monopolize the other market. But sometimes the refusal to deal may be determined also by a defensive purpose, if the dominant position of such firm is under threat, because of the evolution of that market due to the introduction of a new technology. I extend the theoretical framework by Choi and Stefanadis (2001) to the analysis of the Microsoft Europe case, to propose a defensive leverage explanation. In this perspective, the refusal to supply could be explained not only by the intention to leverage the dominant position to the adjacent market of server operating systems, but also by the concern for keeping the monopoly on its core market, the one of PC operating systems, to the extent that the diffusion of cloud computing could have reduced the importance of the applications entry barrier.

Presentations: EALE 2011 Conference (Hamburg, 2011), SIDE-ISLE 2010 Conference (Turin, 2010), SIEP 2009 Conference (Pavia, 2009), Paris School of Economics (Paris, 2009)


Abstract. This paper aims at studying the relationship between competition policy and economic growth in an economy with heterogeneous industries. In particular, the analysis distinguishes different types of industries, high-technology and low-technology, as well as different forms of competition policy in the market and for the market. Then the objective is to examine the impact of various competition policies in each of these contexts. The model predicts that a policy aimed at increasing competition for the market, through the reduction of barriers to entry, always produces a positive impact on innovation and growth, in each type of industry. On the opposite, a policy designed to improve competition in the market, by imposing the sharing of the technology invented by the leader, may generate a negative effect in high-technology industries: in fact such policy, by eliminating the expected reward due to the innovator, reduces the incentives of firms to invest in R&D and then decreases technological progress in the future. This dynamic efficiency perspective introduces some elements of discussion about the design and the implementation of competition policy, with particular attention to the cases of abuse of dominance in high-technology industries, which involve an interaction between antitrust law and intellectual property protection.

Presentations: SIE 2010 Conference (Catania, 2010), SIEP 2010 Conference (Pavia, 2010), Paris School of Economics (Paris, 2009)


Journal Articles

Abstract. The paper examines the relationship between competition and economic growth, in the theoretical framework described by endogenous growth models, but with a specific interest in the policy implications. In this perspective, the key issue in the debate can be presented as follows: do competition policies always create the best conditions for promoting innovation and growth? Or do they also produce some disincentives for the investment decisions in R&D, such to limit the development of industries with higher innovation? In order to answer these questions, the paper presents a survey of the theoretical literature on competition and growth and it discusses the main models of endogenous growth, both the ones based on horizontal innovation, and the ones based on vertical innovation. In particular, specific attention is paid to the most recent models of Schumpeterian growth, which show the existence of a non-linear relationship between competition and growth, by considering either the initial degree of competition or the distance from the technological frontier. Finally, the review of the previous models of endogenous growth allows drawing some conclusions about further and possible developments of research on the relation between product market competition and economic growth.


Abstract.  An important innovation, introduced by the Lisbon Treaty in the decision-making process in the European institutions, is the new definition of qualified majority in the Council of the European Union.  The present paper develops a new procedure to compute the total power of each member state in the Council and so applies this methodology to evaluate the outcomes from the introduction of the new double-majority rule. In general, the new definition implies a decrease in the total power of the large countries, as well as an increase in the total power of the small states. So, this rule may produce some inefficiency for the political decision-making process of the Council, since it worsens the problem of the over-representation of the small countries and of the under-representation of the large countries, then inducing further difficulties for taking decisions. But, at the same time, the new definition of the Lisbon Treaty produces strong incentives for a cooperative game between the four largest countries of the Union, Germany, France, United Kingdom and Italy: in fact, if they are able to obtain the support of the small countries about their proposals, they can exert a very important role of initiative in the political process of the Council. But this possibility depends crucially on their willingness to cooperate.