Research statement
My main research interest is empirical banking, and I investigate how financial intermediation and financial stability are affected by regulation and monetary policy, climate change, and bank business model choices. I have published in the Journal of Banking & Finance, the Journal of International Money and Finance, Finance Research Letters, and Climate Policy. In my research, I combine multidimensional data with state-of-the-art empirical techniques, such as staggered difference-in-differences, panel regressions with granular fixed effects, event studies, and propensity score matching. I have experience with bank-, firm- and loan-level datasets, including syndicated loans and the euro area credit register. An important goal of my research is to be policy-relevant, and I have engaged in discussions with policy experts at the ECB and the Banque de France, as well as disseminated my research findings through the SUERF Policy Brief and VoxEU column series.
Work in progress
The expert's edge? Bank lending specialization and informational advantages for credit risk assessment (job market paper)
ECB Working Paper No. 3041 (link); latest version (link)
Abstract: We examine whether loan portfolio sectoral specialization provides informational advantages to banks, enabling better credit risk assessment of their corporate exposures. Using euro area credit register data, we compare probabilities of default assigned by specialized and non-specialized banks to the same borrowing firm several quarters before the borrower defaults. We find that banks specialized in the borrower's sector assign higher probabilities of default to borrowers prior to their actual default compared to non-specialized banks. As a result, specialized banks also allocate higher provisions to these borrowers. We find no evidence of higher default probabilities for healthy borrowers by specialized banks, suggesting that the observed effect is not attributable to general conservatism but to more accurate evaluation of credit risk in the sectors of banks' specialization. We show that our results are primarily driven by smaller firms and are stronger when banks do not have long-term relationships with their defaulting borrowers.
(Winner of best PhD paper award at 9th EFiC Conference in Banking and Corporate Finance)
Loan performance and loan loss provisioning in the presence of physical risk
Joint work with Michael Grill and Wolfgang Lefever
Banking competition and monetary policy passthrough: evidence from the Belgian mortgage market
Joint work with Rudi Vander Vennet
Publications
Designing a macroprudential capital buffer for climate-related risks: an application to transition risk
Florian Bartsch, Iulia Busies, Tina Emambakhsh, Michael Grill, Mathieu Simoens, Martina Spaggiari, Fabio Tamburrini. Climate Policy, 2025, forthcoming (link) + SUERF Policy Brief No. 959 (link)
Abstract: This paper investigates macroprudential capital buffers to mitigate systemic transition risks and increase the resilience of the banking sector. Leveraging granular data and state-of-the-art stress testing methods, it quantifies potential bank losses attributed to transition risks. Focusing on short-term transition scenarios, the paper documents a significant variance among banks in their risk exposure, with the most exposed institutions being those characterized by lower excess capital. We introduce a methodological framework for tailoring bank-specific buffer requirements to cover these losses, offering macroprudential authorities a practical method for calibrating climate-related macroprudential capital buffers, complementing microprudential policies. While the focus of this application is on transition risks, the framework can be extended to capture all climate risks in general. The study demonstrates the potential of macroprudential capital buffers to mitigate potential climate-related losses and contributes to the understanding of the appropriate prudential policy response to these challenges.
Curse and blessing: the effect of the dividend ban on euro area bank valuations and syndicated lending
Emiel Sanders, Mathieu Simoens, Rudi Vander Vennet. Journal of Banking & Finance 163, 2024, 107190 (link) + VoxEU (link)
Abstract: At the outbreak of the Covid-19 pandemic, the European Central Bank issued a strong recommendation towards banks to halt dividend payouts. The goal of this de facto dividend ban was to boost banks' capital to ensure the supply of credit. However, given the importance of dividends for investors, this unprecedented measure is likely to have impacted bank valuations. Hence, banks may have chosen to preserve their higher capital buffers to boost payouts after the lifting of the ban, rendering the intended positive effect on credit supply a priori uncertain. We first investigate the effect of the dividend ban announcement on euro area banks' valuations and find a significantly negative impact. Second, we show that banks significantly expanded credit supply in the syndicated loan market, without counteracting effect of the negative stock market reaction. Our findings are corroborated when we exploit the multi-bank nature of syndicated loans in a within-loan setup.
European bank margins at the zero lower bound
Thomas Present, Mathieu Simoens, Rudi Vander Vennet. Journal of International Money and Finance 131, 2023, 102803 (link)
Abstract: Post-2014, the zero lower bound on household deposits has intensified the downward pressure of the ECB’s accommodative monetary policy on banks’ net interest margins. Using a shadow rate to capture the stance of (unconventional) monetary policy, we construct counterfactual deposit rates, representing the path that deposit rates in 10 euro area countries would have followed in absence of the zero lower bound. Based on this counterfactual, we investigate whether banks attempt to compensate foregone deposit margins by increasing their lending margins. Our results show a substantial degree of margin compensation (around 44%). Moreover, banks which are highly dependent on net interest income increase their lending margins more, while higher shares of fee and commission income soften the compensation effect. Our estimations reveal important heterogeneity across euro area countries, with the end-2019 impact on lending margins ranging from negligible to more than 100 bps. These findings have implications for bank profitability, but also for the transmission of monetary policy to bank lending.
Does diversification protect European banks' market valuations in a pandemic?
Mathieu Simoens, Rudi Vander Vennet. Finance Research Letters 44, 2022, 102093 (link)
Abstract: We use the Covid-19 pandemic to assess whether diversification in various dimensions can protect European banks from substantial negative valuation shocks. Our results demonstrate that functional diversification acts as an economically significant shock absorber: it mitigates banks’ stock market decline by approximately 10 percentage points. Loan portfolio diversification also contributes to dampening the valuation shock, but with a much lower impact (4.4 percentage points). Geographical diversification fails to act as a shock absorber. Banks with lower pre-Covid systematic risk, higher liquidity buffers, higher cost efficiency and active in countries with better post-Covid growth prospects weathered the storm better.
Bank performance in Europe and the US: a divergence in market-to-book ratios
Mathieu Simoens, Rudi Vander Vennet. Finance Research Letters 40, 2021, 101672 (link)
Abstract: In the 2007–2017 period, the market-to-book ratios of European and US banks diverged markedly. We use panel regressions to investigate the determinants of market-to-book ratios for 112 European and US banks. We show that higher US valuations were driven by profitability and cost efficiency. The underperformance in Europe was associated with declines in the net interest margin and low policy rates, as well as with inadequate resolution of non-performing loans and an increasing share of deposits. Our results stress the importance of provisioning and non-performing loan resolution in Europe. Moreover, low-for-long policy rates may be detrimental for bank franchise values.