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.
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Autor extern
Yannik M. Schneider, Sascha Steffen
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Domeniul tematic
Cuvânt-cheie
- Autoritatea bancară europeană
- Banca Centrală Europeană
- bancă
- economie monetară
- FINANŢE
- finanţe publice şi politică bugetară
- instituţii financiare şi de credit
- instituții financiare
- Instituțiile Uniunii Europene și funcția publică europeană
- investiţii şi finanţare
- investiție a UE
- libera circulaţie a capitalului
- obligațiune
- piață financiară
- politică monetară unică
- promovarea investițiilor
- relaţii monetare
- replanificarea datoriei publice
- stabilitate financiară
- UNIUNEA EUROPEANĂ
- zonă euro