Banking And Sovereign Risk In The Euro Area
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Banking And Sovereign Risk In The Euro Area
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Author : Stefan Gerlach
language : en
Publisher:
Release Date : 2016
Banking And Sovereign Risk In The Euro Area written by Stefan Gerlach and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
We study the determinants of sovereign bond spreads in the euro area since the introduction of the euro. We show that an aggregate risk factor is a main driver of spreads. This factor also plays an important indirect role for risk spreads through its interaction with the size and structure of national banking sectors. When aggregate risk increases, countries with large banking sectors and low equity ratios in the banking sector experience greater widening in yield spreads, suggesting that financial markets perceive a larger risk that governments will have to rescue banks, increasing public debt and therefore sovereign risk. Moreover, government debt levels and forecasts of future fiscal deficits are also significant determinants of sovereign spreads.
Banking And Sovereign Risk In The Euro Area
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Author : Stefan Gerlach
language : en
Publisher:
Release Date : 2010
Banking And Sovereign Risk In The Euro Area written by Stefan Gerlach and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
The European Sovereign Debt Crisis
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Author : Phoebus L. Athanassiou
language : en
Publisher: Routledge
Release Date : 2021-08-23
The European Sovereign Debt Crisis written by Phoebus L. Athanassiou and has been published by Routledge this book supported file pdf, txt, epub, kindle and other format this book has been release on 2021-08-23 with Law categories.
The European Sovereign Debt Crisis: Breaking the Vicious Circle between Sovereigns and Banks explains why the euro area’s progress towards reining in the risks arising from the well-documented bi-directional financial contagion transmission mechanism that links sovereigns to commercial banks has been more prominent compared to the channel of contagion moving from banks to sovereigns. Providing an analysis of the legal and regulatory measures that Europe and the euro area have taken to mitigate the exposure of sovereigns to financial crises generated by commercial banks, this book draws attention to areas where improvements to the arsenal of tools hitherto introduced are either desirable or necessary. Chapters further explain – with recourse to economic and legal arguments – why the channel of contagion moving from sovereigns to commercial banks has proven harder to close, and explores ways in which progress could be made in the direction of closing it so as to avert the risk of future banking sector crises. This work provides essential reading for students, researchers and practitioners with an interest in sovereign debt crises and the euro-area banking system.
Sovereign Risk And Belief Driven Fluctuations In The Euro Area
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Author : Giancarlo Corsetti
language : en
Publisher: International Monetary Fund
Release Date : 2013-11-06
Sovereign Risk And Belief Driven Fluctuations In The Euro Area written by Giancarlo Corsetti and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2013-11-06 with Business & Economics categories.
Sovereign risk premia in several euro area countries have risen markedly since 2008, driving up credit spreads in the private sector as well. We propose a New Keynesian model of a two-region monetary union that accounts for this “sovereign risk channel.” The model is calibrated to the euro area as of mid-2012. We show that a combination of sovereign risk in one region and strongly procyclical fiscal policy at the aggregate level exacerbates the risk of belief-driven deflationary downturns. The model provides an argument in favor of coordinated, asymmetric fiscal stances as a way to prevent selffulfilling debt crises.
Monetary Policy Bank Bailouts And The Sovereign Bank Risk Nexus In The Euro Area
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Author :
language : en
Publisher:
Release Date : 2015
Monetary Policy Bank Bailouts And The Sovereign Bank Risk Nexus In The Euro Area written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
The paper analyses the empirical relationship between bank risk and sovereign credit risk in the euro area. Using structural VAR with daily financial markets data for 2003-13, the analysis confirms two-way causality between shocks to sovereign risk and bank risk, with the former being overall more important in explaining bank risk, than vice versa. The paper focuses specifically on the impact of non-standard monetary policy measures by the European Central Bank and on the effects of bank bailout policies by national governments. Testing specific hypotheses formulated in the literature, we find that bank bailout policies have reduced credit risk in the banking sector, but partly at the expense of raising the credit risk of sovereigns. By contrast, monetary policy was in most, but not all cases effective in lowering credit risk among both sovereigns and banks. Finally, we find spillover effects in particular from sovereigns in the euro area periphery to the core countries.
Euro Area Sovereign Risk During The Crisis
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Author : Ms.Silvia Sgherri
language : en
Publisher: International Monetary Fund
Release Date : 2009-10-01
Euro Area Sovereign Risk During The Crisis written by Ms.Silvia Sgherri and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009-10-01 with Business & Economics categories.
While the use of public resources is critical to cushion the impact of the financial crisis on the euro-area economy, it is key that the entailed fiscal costs not be seen by markets as undermining fiscal sustainability. From this perspective, to what extent do movements in euro area sovereign spreads reflect country-specific solvency concerns? In line with previous studies, the paper suggests that euro area sovereign risk premium differentials tend to comove over time and are mainly driven by a common time-varying factor, mimicking global risk repricing. Since October 2008, however, there is evidence that markets have become progressively more concerned about the potential fiscal implications of national financial sectors' frailty and future debt dynamics. The liquidity of sovereign bond markets still seems to play a significant (albeit fairly limited) role in explaining changes in euro area spreads.
Sovereign Risk And Deposit Dynamics
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Author : Mr.David A. Grigorian
language : en
Publisher: International Monetary Fund
Release Date : 2016-07-22
Sovereign Risk And Deposit Dynamics written by Mr.David A. Grigorian and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016-07-22 with Business & Economics categories.
The unprecedented expansion of sovereign balance sheets since the global financial crisis has given a new meaning to the term sovereign risk. Developments in Europe since early 2010 presented new challenges for the functioning of private banks in an environment of heightened sovereign risk. This paper uses an innovative way of measuring the perception of sovereign risk and its impact on deposit dynamics during 2006–11. Using an extension of a common market discipline framework, it shows that exposure to sovereign risk may have limited the ability of banks in Europe to attract deposits. The results are robust to inclusion of conventional measures of bank performance and the sector-wide holdings of foreign sovereign debt.
Managing The Sovereign Bank Nexus
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Author : Mr.Giovanni Dell'Ariccia
language : en
Publisher: International Monetary Fund
Release Date : 2018-09-07
Managing The Sovereign Bank Nexus written by Mr.Giovanni Dell'Ariccia and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018-09-07 with Business & Economics categories.
This paper reviews empirical and theoretical work on the links between banks and their governments (the bank-sovereign nexus). How significant is this nexus? What do we know about it? To what extent is it a source of concern? What is the role of policy intervention? The paper concludes with a review of recent policy proposals.
Risk And Regulation In Euro Area Banks
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Author : Francesca Arnaboldi
language : en
Publisher: Springer Nature
Release Date : 2019-10-31
Risk And Regulation In Euro Area Banks written by Francesca Arnaboldi and has been published by Springer Nature this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019-10-31 with Business & Economics categories.
Since the last financial crisis, much work has been undertaken to strengthen the ability to respond to distress in the EU financial system. However, reforms enacted since the Single Resolution Mechanism was created in July 2014 as part of the Banking Union initiated in 2012 mainly focused on non-performing loans, and the third pillar of the Banking Union, namely a European Deposit Insurance Scheme, has not been completed. Against this backdrop, this book focuses on the reasons why the EU banking system continues to remain fragile. In particular, high stocks of non-performing loans in some countries, the Level 3 assets evaluation and high exposure of many banks to the debts of their own governments are among the major concerns. Secondly, the book discusses the completion of the public safety net for banks, including deposit insurance, which remains primarily at the national level. This creates scope for contagion from banking sector fragility to national sovereign debt distress. Of interest to banking researchers, academics and students, this book combines rigorous analysis of the regulatory framework and empirical investigation on EU banking system data to prove that market discipline and risk sharing should be viewed as complementary pillars of the Euro-area financial architecture rather than as substitutes, requiring a reformed institutional framework.
Euro Area Policies
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Author : International Monetary Fund. European Dept.
language : en
Publisher: International Monetary Fund
Release Date : 2015-07-27
Euro Area Policies written by International Monetary Fund. European Dept. and has been published by International Monetary Fund this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015-07-27 with Business & Economics categories.
This Selected Issues paper discusses the risks of low growth and inflation over the medium term for the euro area. It examines the consequences of longer term trends that predate the crisis and the progress made in addressing the crisis legacies of high unemployment and debt. The paper illustrates, in a downside scenario, how low potential growth and crisis legacies leave the euro area vulnerable to the risks of stagnation. The weak medium-term prospect and limited policy space leave the euro area vulnerable to shocks that could lead to a prolonged period of low growth and inflation. Model simulations suggest that a modest shock to investor confidence could push up risk premia and real interest rates, as policy space is constrained at the zero lower bound and fiscal policy space to provide stimulus is limited. Moreover, the lingering crisis legacies of high debt and unemployment could amplify the original shocks, creating a bad feedback loop and keeping the economy stuck in equilibrium of stagnation.