Fulvia Fringuellotti

I am an economist at the Federal Reserve Bank of New York.

My research interests lie in the areas of financial intermediation, banking, insurance and household finance.

Disclaimer: This is a private website, the views expressed here are my own and do not necessarily represent the views of the Federal Reserve Bank of New York or the Federal Reserve System.

Publications

Fixed Rate versus Adjustable Rate Mortgages: Evidence from Euro Area Banks, with Ugo Albertazzi and Steven Ongena

European Economic Review, Volume 161, January 2024, 104643.

A Cost-Benefit Analysis of Capital Requirements Adjusted for Model Risk, with Walter Farkas and Radu Tunaru, Journal of Corporate Finance, Volume 65, December 2020, 101753.

Working Papers

Payout Restrictions and Bank Risk-Shifting, with Thomas Kroen

Abstract: What are the effects of payout restrictions on bank risk-shifting? To answer this question, we exploit the restriction policies imposed during the Covid-crisis on US banks as a natural experiment. Using a high-frequency differences-in-differences empirical strategy, we show that, when share buybacks are banned and dividends restricted, banks’ equity prices fall while their CDS spreads and bond yields decline. These results indicate that payout restrictions shift risk from debtholders into equityholders. Consistent with a risk-shifting channel, we find that these effects revert once restrictions are lifted. Moreover, banks that are ex-ante more reliant on share buybacks than dividends in their payout policies, decrease risk-taking relative to banks that are ex ante more dividends reliant, with those effects reverting when the restrictions are relaxed. These results indicate that payout and risk-taking choices are complementary and that regulatory payout restrictions endogenously affect bank risk-shifting incentives.

Insurance Companies and the Growth of Corporate Loans’ Securitization, with João A.C. Santos

2024 BEAR Conference, 2023 ECB-FRBNY Workshop on Non-Bank Financial Institutions, Financial Stability, and Monetary Policy · 2023 Workshop on Non-Bank Financial Institutions of the Federal Reserve Bank of Chicago · AFA 2023 · EEA 2022 · ECWFC 2022 Press coverage: NYTimes
Abstract: Insurance companies nonupled their CLO investments in the post-crisis period. This growth has far outpaced that of loans and bonds, and is characterized by a strong preference for mezzanine tranches over triple-A tranches. Conditional on capital charges, insurance companies invest more in bonds and CLOs with higher yields. Importantly, they prefer CLO tranches because these carry higher yields relative to bonds. Preferences increased following the 2010 capital regulatory reform, resulting in insurance companies holding 40% of outstanding mezzanine tranches. Insurance companies contributed positively to CLOs' equity returns and played a critical role in the rise of loan securitization.

The Effect of Bank Monitoring on Loan Repayment, with Nicola Branzoli

AFA 2022 · EEA 2020 · 2020 Swiss Winter Conference on Financial Intermediation (poster session, cancelled)
Abstract: Monitoring is one of the main activities explaining the existence of banks, yet empirical evidence about its effect on loan outcomes is scant. Using granular loan-level information from the Italian Credit Register, we build a novel measure of bank monitoring based on banks’ requests for information on their existing borrowers and we investigate the effect of bank monitoring on loan repayment. We perform a causal analysis exploiting changes in the regional corporate tax rate as a source of exogenous variation in bank monitoring. Our identification strategy is supported by a theoretical model predicting that a decrease in the tax rate improves bank incentives to monitor borrowers by increasing returns from lending. We find that bank monitoring reduces the probability of a delinquency in a substantial way and that the effect is stronger for the types of loans that benefit most from bank oversight, such as term loans.

Credit, Income, and Income Inequality, with Manthos Delis and Steven Ongena

R&R at European Economic Review 5th IMF Annual Macro-Financial Conference · 2021 Federal Reserve Day-Ahead Conference on Financial Markets and Institutions · AEA 2021 (poster session) · Paris December Finance Meeting 2020 · EFA 2020 · EEA 2020 · Conference on Sustainable development, firm performance and competitiveness policies in small open economies · 9th MoFiR Workshop on Banking · CFIC 2020 (cancelled) · 1st Endless Summer Conference on Financial Intermediation and Corporate Finance (poster session)
Abstract: How does credit access for small business owners affect income inequality? A bank's cutoff rule, employed in the decision to grant loans and based on applicant's credit scores, provides us with the exogenous variation needed to answer this question. Analyzing uniquely detailed loan application data, we find that application acceptance increases recipient's income five years later by more than 10% compared to denied applicants. This effect is mostly driven by upward mobility of poor individuals, especially if credit-constrained, hereby reducing income inequality among those who get credit. Looking across various salient groups of applicants, we find that relatively constrained groups, i.e., firms from low-income regions, new or high-growth firms, or female-owned firms, display higher responses to credit origination for their relatively poor applicants, while the effects for the rich applicants are at best negligible.

A Generalized Bachelier Formula for Pricing Basket and Spread Options, with Ciprian Necula

10th World Congress of the Bachelier Finance Society
Abstract: In this paper we propose a closed-form pricing formula for European basket and spread options. Our approach is based on approximating the risk-neutral probability density function of the terminal value of the basket using a Gauss-Hermite series expansion around the Gaussian density. The new method is quite general as it can be applied for a basket with a large number of assets and for all dynamics where the joint characteristic function of log-returns is known in closed form. We provide a simulation study to show the accuracy and the speed of our methodology.

Blog Posts

A Retrospective on the Life Insurance Sector after the Failure of Silicon Valley Bank, with Saketh Prazad.

Federal Reserve Bank of New York Liberty Street Economics, April 10, 2024.Press coverage: FTimes

Banking System Vulnerability: 2023 Update, with Matteo Crosignani and Thomas M. Eisenbach

Federal Reserve Bank of New York Liberty Street Economics, November 6, 2023.Press coverage: Bloomberg

Does Bank Monitoring Affect Loan Repayment?, with Nicola Branzoli

Federal Reserve Bank of New York Liberty Street Economics, December 02, 2022.

Banking System Vulnerability: 2022 Update, with Matteo Crosignani and Thomas M. Eisenbach

Federal Reserve Bank of New York Liberty Street Economics, November 14, 2022.

Banking System Vulnerability through the COVID-19 Pandemic, with Matteo Crosignani and Thomas M. Eisenbach

Federal Reserve Bank of New York Liberty Street Economics, November 15, 2021.

Insurance Companies and the Growth of Corporate Loans’ Securitization, with João A.C. Santos

Federal Reserve Bank of New York Liberty Street Economics, October 13, 2021.

Credit, Income, and Inequality, with Manthos Delis and Steven Ongena

Federal Reserve Bank of New York Liberty Street Economics, July 01, 2021.

How Has COVID-19 Affected Banking System Vulnerability?, with Kristian S. Blickle, Matteo Crosignani, Fernando M. Duarte, Thomas M. Eisenbach, and Anna Kovner

Federal Reserve Bank of New York Liberty Street Economics, November 16, 2020.