Feasibility Check: Transition to a New Regime for Bank Sovereign Exposure?
Excessive sovereign debt exposures of banks contributed to the gravity of the financial and sovereign debt crisis in 2011 and 2012, as well as to the slow and asymmetric recovery of European countries. Various policies that improve banks’ resilience were introduced in recent years, however the regulatory regime for the sovereign debt exposure of banks has not changed. We identify four criteria that a new regime for bank sovereign exposures should fulfil: (1) attenuate the home bias to the domestic sovereign, (2) break the doom loop, (3) avoid a flight-to-quality of assets, and (4) mitigate risk spillovers. We assess the implications for banks’ balance sheets for five policy proposals, based on simulations on a sample of European banks. We show that none of the proposals would fulfil all four criteria in the absence of a safe asset. We conclude that a new regime for bank sovereign exposure should be conditional on restoring the value of sovereign bonds as a safe asset.
Studio
Autore esterno
Yannik M. Schneider, Sascha Steffen
Informazioni sul documento
Tipo di pubblicazione
Settore di intervento
Parole chiave
- Autorità bancaria europea
- banca
- Banca centrale europea
- consolidamento del debito
- economia monetaria
- FINANZE
- finanze pubbliche e politica di bilancio
- investimenti dell'UE
- investimenti e finanziamenti
- istituti finanziari e di credito
- istituto finanziario
- istituzioni dell'Unione europea e funzione pubblica europea
- libera circolazione dei capitali
- mercato finanziario
- obbligazione
- politica monetaria unica
- promozione degli investimenti
- relazioni monetarie
- stabilità finanziaria
- UNIONE EUROPEA
- zona euro