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Reassessing bank monitoring models: an empirical analysis of the value of market signals in the period 2008–2020

ABSTRACT: One of the major goals of bank supervisors is to predict bank distress events. As the environment changes, it is crucial to reassess and improve the models used in monitoring banks. The financial soundness of banks is traditionally assessed based on accounting ratios. However, the incorporation of market information in these models may significantly improve its ability to predict bank distress. The present paper has two main objectives, the first is to assess if market information adds value to accounting-based monitoring models when the purpose is to detect bank distress situations. Further, it also seeks to understand if the predictive power of market signals increased with transparency requirements. To accomplish this purpose, a total of 81 distress events from a sample of 248 European banks between 2008 and 2020 were analyzed. First, a logit univariate analysis was used to evaluate the relevance of each accounting and market variable. Then, the optimal multivariate accounting-based model to predict distress events was constructed using a stepwise approach. Finally, the previous model was extended to include the relevant market variables. The results support the use of market variables in bank monitoring models. Further, the present study provides evidence that the predictive power of market variables increased after the strengthening of the information requirements set by the Basel agreements. It can be concluded that the results support the use of market information for banking supervisory purposes, especially, in transparent markets.

Supplementary Information

The online version contains supplementary material available at 10.1057/s41261-022-00194-4.

SUBMITTER: Costa T

PROVIDER: S-EPMC8951667 | biostudies-literature |

REPOSITORIES: biostudies-literature

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Project description:BackgroundPharmaceutical products are an important component of expenditure on public health insurance in the Federal Republic of Germany. For years, German policy makers have regulated public pharmacies in order to limit the increase in costs. One reform has followed another, main objective being to increase competition in the pharmacy market. It is generally assumed that an increase in competition would reduce healthcare costs. However, there is a lack of empirical proof of a stronger orientation of German public pharmacies towards competition thus far.MethodsThis paper analyses the self-perceptions of owners of German public pharmacies and their orientation towards competition in the pharmacy markets. It is based on a cross-sectional survey (N?=?289) and distinguishes between successful and less successful pharmacies, the location of the pharmacies (e.g. West German States and East German States) and the gender of the pharmacy owner. The data are analysed descriptively by survey items and employing bivariate and structural equation modelling.ResultsThe analysis reveals that the majority of owners of public pharmacies in Germany do not currently perceive very strong competitive pressure in the market. However, the innovativeness of the pharmacist is confirmed as most relevant for net revenue development and the profit margin. Some differences occur between regions, e.g. public pharmacies in West Germany have a significantly higher profit margin.ConclusionsThis study provides evidence that the German healthcare reforms aimed at increasing the competition between public pharmacies in Germany have not been completely successful. Many owners of public pharmacies disregard instruments of active customer-orientated management (such as customer loyalty or an offensive position and economies of scale), which could give them a competitive advantage. However, it is clear that those pharmacists who strive for systematic and innovative management and adopt an offensive and competitive stance are quite successful. Thus, pharmacists should change their attitude and develop a more professional business model.

Project description:Following a request from the European Commission; the European Food Safety Authority (EFSA) assessed the 2020 post-market environmental monitoring (PMEM) report on the cultivation of Cry1Ab-expressing maize event MON 810. Like previous years, there was full compliance with refuge requirement in Portugal and partial compliance with refuge requirements by Spanish farmers growing MON 810 varieties. European and Mediterranean corn borer populations collected from north-eastern Spain during the 2020 maize growing season and tested for Cry1Ab susceptibility show no symptoms of resistance to maize MON 810. The assessment of farmer questionnaires and relevant scientific publications does not indicate any unanticipated adverse effects on human and animal health or the environment arising from the cultivation of maize MON 810. Overall, EFSA concludes that the evidence reported in the 2020 PMEM report does not invalidate previous EFSA evaluations on the safety of maize MON 810. However, as in previous years, EFSA identifies shortcomings on resistance monitoring that need revision in future reports. In particular, the monitoring plan, as implemented in 2020, is not sufficiently sensitive to detect the recommended 3% resistance allele frequency. Consequently, EFSA strongly recommends the consent holder to achieve full compliance with refuge obligations in areas where adoption of maize MON 810 is high and increase the sensitivity of the monitoring plan by performing periodic F2-screens on corn borer populations from north-eastern Spain. EFSA recommends revising the farmer questionnaires when new characteristics of the receiving environment emerge which are relevant for the environmental risk assessment of MON 810 such as the emergence of teosinte. EFSA encourages the Competent authorities of concerned EU Member States, the consent holder and environmental networks to engage in a dialogue to develop a framework on how to best identify and report unexpected adverse effects from the cultivation of Bt maize varieties.

Dataset Information

Reassessing bank monitoring models: an empirical analysis of the value of market signals in the period 2008–2020

Supplementary Information

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