Inte tillgängligt på svenska
Allegra Pietsch
- 26 November 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2025Details
- Abstract
- This box presents the business rationale for euro area banks’ US dollar activities and assesses the associated financial stability risks. It finds that euro area banks’ US dollar assets and liabilities are mainly linked to capital market activities and are concentrated in a few global systemically important banks. Banks’ activities represent a diverse set of financial services as they intermediate US dollars to other European parties, in the form of unsecured and secured lending and borrowing, FX swaps and currency hedges. Euro area banks’ US credit exposures are largely limited to holding high-quality debt securities and lending to the non-financial corporate sector. While asset-liability mismatches appear to be limited in extent, banks are exposed to liquidity risks due to mismatches between the specific counterparties providing and receiving funding. These liquidity risks may not materialise in banks’ own balance sheets, as they may deleverage in times of stress, but rather affect their counterparties. Therefore, maintaining adequate balance sheet capacity is necessary to enable banks to act as shock absorbers, given the lack of regulatory requirements for matching asset and liability positions within a given currency.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
F31 : International Economics→International Finance→Foreign Exchange
F34 : International Economics→International Finance→International Lending and Debt Problems
- 21 May 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2025Details
- Abstract
- The box estimates the deposit franchise value of euro area banks and examines its relationship with the interest rate environment, market concentration and bank valuations. The deposit franchise value is defined as the long-term present value of earnings from low-cost, stable deposit funding, minus operating expenses. It can act as a stabilising force by bolstering profitability and containing interest rate risk. The deposit franchise value rises as market rates increase. Banks with greater market concentration, cost efficiency and market power tend to have higher deposit franchise values. Higher deposit franchise values are also associated with more favourable market valuations.
- JEL Code
- E41, E43, G21 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
- 22 November 2023
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2023Details
- Abstract
- The digitalisation of financial services brings a variety of benefits but could also amplify and accelerate the materialisation of financial stability risks. While the increased popularity of retail trading via apps enables wider risk sharing across the economy, it could result in more procyclicality in financial markets. In addition, digitalisation in the form of social media allows information to spread faster but could also trigger or amplify shocks in financial markets or the banking sector especially when interacting with the increased use of online banking. Overall, the digitalisation of financial services may have broader policy-relevant implications for financial markets and banks that should be monitored.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G2 : Financial Economics→Financial Institutions and Services
G41 : Financial Economics
G53 : Financial Economics
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- 22 November 2023
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2023Details
- Abstract
- The smooth absorption of sovereign debt issuance by the financial sector is essential for financial stability. Newly issued government debt has been absorbed smoothly so far in 2023, despite the absence of net central bank purchases. Sovereign debt absorption patterns have been in line with empirical evidence, which suggests that investors tend to increase their bond purchases when yields rise. Non-bank investors tend to absorb less issuance in times of elevated financial market uncertainty, while accounting and leverage requirements influence the absorption capacity of banks. Higher government funding needs, especially in an environment of high market volatility, can imply rising yield levels and spreads.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
- 22 September 2022
- WORKING PAPER SERIES - No. 2728Details
- Abstract
- The green bond market has increased rapidly in recent years amid growing concerns about climate change and wider environmental issues. However, whether green bonds provide cheaper funding to issuers by trading at a premium, so-called greenium, is still an open discussion. This paper provides evidence that a key factor explaining the greenium is the credibility of a green bond itself or that of its issuer. We define credible green bonds as those which have been under external review. Credible issuers are either firms in green sectors or banks signed up to UNEP FI. Another important factor is investors’ demand as the greenium becomes more statistically and economically significant over time. This is potentially driven by increased climate concerns as the green bond market follows a similar trend to that observed in ESG/green equity and investment fund sectors. To run our analysis, we construct a database of daily pricing data on closely matched green and non-green bonds of the same issuer in the euro area from 2016 to 2021. We then use Securities Holdings Statistics by Sector (SHSS) to analyse investors’ demand for green bonds.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
Q50 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→General
A56 : General Economics and Teaching
- 18 May 2021
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2021Details
- Abstract
- Policy measures aimed at supporting corporates and the economy through the coronavirus pandemic may have supported not just otherwise viable firms, but also unprofitable but still operating firms – often referred to as “zombies”. This has in turn raised questions about an increased risk of zombification in the euro area economy, which could constrain the post-pandemic recovery. Firm-level, loan-level and supervisory data for euro area companies suggest that zombie firms may have temporarily benefited from loan schemes and accommodative credit conditions – but likely only to a modest degree. These firms may face tighter eligibility criteria for schemes and more recognition of credit risk in debt and loan pricing in the future. Tackling the risk of zombification more fundamentally requires the consideration of suggested reforms to insolvency frameworks and better infrastructure for banks to manage non-performing loans.
- JEL Code
- E51 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Money Supply, Credit, Money Multipliers
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
L25 : Industrial Organization→Firm Objectives, Organization, and Behavior→Firm Performance: Size, Diversification, and Scope