Banks, government bonds, and default: What do the data say?

Nicola Gennaioli, Alberto Martin, Stefano Rossi, 19 July 2014

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Recent events in Europe have illustrated how government defaults can jeopardise domestic bank stability. Growing concerns of public insolvency since 2010 caused great stress in the European banking sector, which was loaded with Euro-area debt (Andritzky 2012).

Topics: Financial markets
Tags: bank lending, banking, banks, bonds, credit, financial crises, risk-weighting, sovereign debt, sovereign default

Making macroprudential regulation operational

Anil K Kashyap , Dimitri Tsomocos, Alexandros Vardoulakis, 18 July 2014

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The IMF staff (Benes et al. 2014) recently unveiled a new model that “has been developed at the IMF to support macrofinancial and macroprudential policy analysis”. In introducing the model they argue that “such new analytical frameworks require a major revamp of the conventional linear dynamic stochastic general equilibrium (DSGE) models”. We agree with Benes et al.

Topics: Macroeconomic policy
Tags: banks, Macroprudential policy, model building, savers

Spillovers from systemic bank defaults

Mark Mink, Jakob de Haan, 24 May 2014

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Financial-crisis management and prevention policies often focus on mitigating spillovers from the default of systemically important banks. During the recent crisis, governments avoided large bank failures by insuring and purchasing intermediaries’ troubled assets, by providing them with capital injections, and even by outright nationalisations.

Topics: Financial markets
Tags: banking, banks, financial stability, regulation, spillovers, systemic risk

Exploring the transmission channels of contagious bank runs

Martin Brown, Stefan Trautmann, Razvan Vlahu, 10 April 2014

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Financial contagion – the situation in which liquidity or insolvency risk is transmitted from one financial institution to another – is viewed by policymakers and academics as a key source of systemic risk in the banking sector.

Topics: Financial markets
Tags: bank runs, banking, banks, contagion, experimental economics, financial crisis, financial stability, global crisis, systemic risk

Estimating the impact of changes in aggregate bank capital requirements during an upswing

Joseph Noss, Priscilla Toffano, 6 April 2014

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The recent financial crisis and economic contraction that followed highlighted the crucial role that banks play in facilitating the extension of credit and enabling economic growth. This underlies the economic rationale for imposing regulations on the banking industry, including minimum capital requirements designed to mitigate risks banks would not otherwise account for in their behaviour.

Topics: Financial markets
Tags: bank capital, bank regulation, banking, banks, BASEL III, capital requirements, credit, Macroprudential policy, regulations

The puzzling pervasiveness of dysfunctional banking

Charles W Calomiris interviewed by Romesh Vaitilingam, 21 Mar 2014

Charles Calomiris talks to Romesh Vaitilingam about his recent book, co-authored with Stephen Haber, ‘Fragile by Design: The Political Origins of Banking Crises and Scarce Credit’. They discuss how politics inevitably intrudes into bank regulation and why banking systems are unstable in some countries but not in others. Calomiris also presents his analysis of the political and banking history of the UK and how the well-being of banking systems depends on complex bargains and coalitions between politicians, bankers and other stakeholders. The interview was recorded in London in February 2014.

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See Also

Calomiris, C W and S H Haber (2014), Fragile by Design: The Political Origins of Banking Crises and Scarce Credit, Princeton University Press.

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Topics: Financial markets
Tags: bank capital, Bank credit, banking, banks, credit booms, Eurozone crisis, recapitalisation, systemic risk

The AQR and stress testing the European banking system

Viral Acharya interviewed by Viv Davies, 14 Mar 2014

Viral Acharya talks to Viv Davies about his recent work with Sascha Steffen that, using publicly available data and a series of shortfall measures, estimates the capital shortfalls of EZ banks that will be stress-tested under the proposed Asset Quality Review. They also discuss the difference in accounting rules between US and EZ banks and the future potential for banking union in the Eurozone. The interview was recorded by phone on 25 February 2014.

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See Also

Acharya, V and S Steffen (2014) "Falling short of expectations? Stress-testing the European banking system", VoxEU.org, 17 January.

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Topics: Financial markets
Tags: Asset Quality Review, bank capital, banking, banking union, banks, Eurozone crisis, recapitalisation, stress testing, systemic risk

A call for liquidity stress testing and why it should not be neglected

Clemens Bonner, 6 February 2014

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The recent financial crisis has shown that neglecting liquidity risks comes at substantial costs. In order to reinforce banks’ resilience to liquidity risks, the Basel Committee on Banking Supervision (BCBS) proposed the introduction of two harmonised liquidity standards:

Topics: Financial markets
Tags: banks, liquidity, stress tests

Falling short of expectations? Stress-testing the European banking system

Viral Acharya, Sascha Steffen, 17 January 2014

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The Eurozone is mired in a recession. In 2013, the GDP of the 17 Eurozone countries fell by an average of 0.5%, and the outlook for 2014 shows considerable risks across the region. To stabilise the common currency area and its (partly insolvent) financial system, a Eurozone banking union is being established.

Topics: Financial markets
Tags: Asset Quality Review, bank capital, banking, banking union, banks, Eurozone crisis, recapitalisation, stress testing, systemic risk

Why fiscal sustainability matters

Willem Buiter, 10 January 2014

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Does fiscal sustainability matter only when there is a fiscal house on fire, as was the case with the Greek sovereign insolvency in 2011–12? Far from it.

Topics: Financial markets, Global crisis, International finance, Macroeconomic policy
Tags: balance-sheet recession, banking, banking union, banks, capital flows, credit booms, Currency wars, emerging markets, eurozone, Eurozone crisis, financial crisis, fiscal policy, fiscal sustainability, global financial crisis, sovereign debt, sovereign debt restructuring

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