Banking Supervision at the Crossroads: Background and Overview

The paper is an introduction to a volume containing the proceedings of a conference hosted by De Nederlandsche Bank (DNB) on 24 and 25 April 2002. The conference has been organized to celebrate the adoption of the Act on the Supervision of the Credit System in the Netherlands 50 years ago, when banking supervision was first formalized.

The term structure of UIP: evidence from survey data

This note focuses on uncovered interest parity (UIP) in the short and medium run using survey-based exchange rate expectations. Analysing the major world currencies over the period 1985-1998 the paper finds that the validity of the UIP relation increases with the term of the investment, thereby supporting the theoretical notions developed by literature.

Fiscal policy and interest rates in the European community

In the early 1980s government budget deficits widened in most industrialised countries. This paper examines whether government budget deficits and public debt in five European countries have pushed up interest rates. Given nearly perfect financial market integration in Europe, aggregated data were used to estimate a reduced-form model for the nominal interest rate. In contrast to the results for Italy, the aggregated model appears reasonably stable. Our findings support the view that government deficits have contributed to higher interest rates. However, there is also evidence in support of partial tax discounting

Do financial conglomerates create or destroy value? Evidence for the EU

There is an ongoing debate about whether firm focus creates or destroys shareholder value. Earlier literature has shown significant diversification discounts: firms that engage in multiple activities are valued lower. Various factors are important in determining the size of the discount, for example cross-subsidization and agency problems. The existing literature, however, generally focuses on non-financial firms or on banks combining investment and commercial banking. Our paper focuses specifically on the valuation of bank-insurance conglomerates. We find no universal diversification discount but significant variability. The discount is explained by the size (increasing), the familiarity with the conglomerate business model (decreasing) and the risk profile (decreasing). Our results are robust to the historical origin, the merger record and the age of the conglomerate, as well as peer group specification and outlier elimination.Financial conglomerates Firm valuation Diversification discount Shareholder value