Author : Stefan Gerlach
Publisher :
Page : 0 pages
File Size : 37,2 MB
Release : 2010
Category :
ISBN : 9783865586193
Banking and Sovereign Risk in the Euro Area
Stefan Gerlach
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Managing the Sovereign-Bank Nexus
Mr.Giovanni Dell'Ariccia
Author : Mr.Giovanni Dell'Ariccia
Publisher : International Monetary Fund
Page : 54 pages
File Size : 40,2 MB
Release : 2018-09-07
Category : Business & Economics
ISBN : 1484359623
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.
Sovereign Risk and Belief-Driven Fluctuations in the Euro Area
Giancarlo Corsetti
Author : Giancarlo Corsetti
Publisher : International Monetary Fund
Page : 49 pages
File Size : 21,52 MB
Release : 2013-11-06
Category : Business & Economics
ISBN : 1475516800
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.
Euro Area Sovereign Risk During the Crisis
Ms.Silvia Sgherri
Author : Ms.Silvia Sgherri
Publisher : International Monetary Fund
Page : 25 pages
File Size : 21,89 MB
Release : 2009-10-01
Category : Business & Economics
ISBN : 1451873697
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.
Banking and Sovereign Risk in the Euro Area
Stefan Gerlach
Author : Stefan Gerlach
Publisher :
Page : 68 pages
File Size : 40,32 MB
Release : 2016
Category :
ISBN :
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.
Sovereign Risk and Deposit Dynamics
Mr.David A. Grigorian
Author : Mr.David A. Grigorian
Publisher : International Monetary Fund
Page : 24 pages
File Size : 35,89 MB
Release : 2016-09-07
Category : Business & Economics
ISBN : 1475534140
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.
The European Sovereign Debt Crisis
Phoebus L. Athanassiou
Author : Phoebus L. Athanassiou
Publisher : Routledge
Page : 165 pages
File Size : 13,24 MB
Release : 2021-08-23
Category : Law
ISBN : 1000423093
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.
Financial Crises, Sovereign Risk and the Role of Institutions
Dominik Maltritz
Author : Dominik Maltritz
Publisher : Springer
Page : 0 pages
File Size : 17,68 MB
Release : 2016-09-17
Category : Business & Economics
ISBN : 9783319353616
The recent world economic crisis showed very clearly that financial crises and sovereign defaults are severe threats to economic and social prosperity. In addition, it became apparent that currency crises and banking crises often occur together and are closely related to sovereign debt crises and defaults. The present book contains new research on various important issues related to financial crises and sovereign default risk by leading experts in the field. The book discusses new modelling approaches to financial crises, defaults and their interdependencies. It also sheds light on the consequences of different sorts of crises for the trust in the institutions which are concerned with managing them. Moreover, it provides discussions of several institutional features of the EMU and the world financial system and in particular the risks inherent in these institutions. The book also includes interesting suggestions for solving crises and improving financial stability.
Equity Returns in the Banking Sector in the Wake of the Great Recession and the European Sovereign Debt Crisis
Mr.Jorge A. Chan-Lau
Author : Mr.Jorge A. Chan-Lau
Publisher : International Monetary Fund
Page : 22 pages
File Size : 23,69 MB
Release : 2012-07-01
Category : Business & Economics
ISBN : 1475505221
This study finds that equity returns in the banking sector in the wake of the Great Recession and the European sovereign debt crisis have been driven mainly by weak growth prospects and heightened sovereign risk and to a lesser extent, by deteriorating funding conditions and investor sentiment. While the equity return performance in the banking sector has been dismal in general, better capitalized and less leveraged banks have outperformed their peers, a finding that supports policymakers’ efforts to strengthen bank capitalization.
Sovereign Risk and Bank Risk-Taking
Mr.Anil Ari
Author : Mr.Anil Ari
Publisher : International Monetary Fund
Page : 72 pages
File Size : 29,91 MB
Release : 2017-12-14
Category : Business & Economics
ISBN : 1484333055
I propose a dynamic general equilibrium model in which strategic interactions between banks and depositors may lead to endogenous bank fragility and slow recovery from crises. When banks' investment decisions are not contractible, depositors form expectations about bank risk-taking and demand a return on deposits according to their risk. This creates strategic complementarities and possibly multiple equilibria: in response to an increase in funding costs, banks may optimally choose to pursue risky portfolios that undermine their solvency prospects. In a bad equilibrium, high funding costs hinder the accumulation of bank net worth, leading to a persistent drop in investment and output. I bring the model to bear on the European sovereign debt crisis, in the course of which under-capitalized banks in defaultrisky countries experienced an increase in funding costs and raised their holdings of domestic government debt. The model is quantified using Portuguese data and accounts for macroeconomic dynamics in Portugal in 2010-2016. Policy interventions face a trade-off between alleviating banks' funding conditions and strengthening risk-taking incentives. Liquidity provision to banks may eliminate the good equilibrium when not targeted. Targeted interventions have the capacity to eliminate adverse equilibria.