Search Results

All
Data Type
Topic
Year
Refresh

EFN Report Summer 2015: Economic Outlook for the Euro Area in 2015 and 2016

EFN Reports, No. 3, 2015
Abstract
External conditions for the euro area economy are still favourable, albeit somewhat less so than at the beginning of the year. Oil prices are by more than a third lower than they were on average in 2014, but about 10 USD higher than in January. Long term interest rates are still very low, but by half a percentage point higher than in January. Worldwide growth in production and trade has disappointed in the first quarter of 2015, and recent leading indicators point to no more than a slightly faster expansion of world production for the rest of the year. The risks of contagion from the Greek crisis to the partner countries appear limited, because financial exposure to the Greek banking sector has been very much reduced. The EU nowadays has instruments with considerable power to fight losses of confidence, and the other countries that received financial assistance in the euro crisis appear politically much more stable, and their economies (including that of Cyprus in the first quarter of this year) have started growing at quite satisfactory rates. According to our forecasts, the euro area GDP will grow by 1.6% in 2015 and by 2.1% in 2016, as negative factors slowly become less important. Both private consumption and investment will expand at a good pace, and the unemployment rate will diminish, but still remain above 10% by the end of 2016. The main risk is that the Greek crisis has a more negative effect on confidence than initially expected. Our inflation forecast for 2015 is 0.2%, with the possibility of a mild deflation not excluded. During the first quarter of 2015 rising oil prices were the main contributors to the ascending inflation expectations, while during the second quarter upward surprises over expected inflation have come from manufactured goods and services. For 2016, we expect that inflation will increase up to 1.2%, still below the 2% ECB’s target.
Read article

Welche Risikomaße bilden das Ausfallrisiko für Geschäftsbanken adäquat ab? Eine Analyse am Beispiel US-amerikanischer Banken

Felix Noth, Lena Tonzer
Wirtschaft im Wandel, No. 2, 2015
Abstract
Zur Analyse von Risiken im Bankensystem und möglichen Ausfallrisiken von Banken werden verschiedene Maße verwendet, die sowohl auf Bankbilanzdaten als auch auf der Gewinn- und Verlustrechnung von Banken beruhen. Diese Studie vergleicht häufig verwendete Risikomaße für Geschäftsbanken in den USA im Zeitraum von 1995 bis 2013. Es zeigt sich, dass alle getesteten Maße in der Lage sind, das während der Finanzkrise von 2007 bis 2009 stark angestiegene Risiko im US-Bankensystem abzubilden. Zur Prognose einer Bankinsolvenz erweist sich der einfach zu berechnende Anteil an notleidenden Vermögenswerten in der Bilanz als eine gute Ergänzung zu komplexeren Risikomaßen wie dem Z-score.
Read article

EFN Report Spring 2015: Economic Outlook for the Euro Area in 2015 and 2016

EFN Reports, No. 2, 2015
Abstract
Recent movements on world markets for commodities, currencies and capital stimulate the world economy, but they entail also considerable risks: income losses of energy exporting countries might trigger financial crises with worldwide repercussions; crises might also emerge from financial distress of emerging market debtors with liabilities denominated in US dollars. Extremely low interest rates might not only trigger stock and bond price booms, but also more volatility if investors become fearful of financial bubbles. Quite a few conditions are highly beneficial for a recovery of the euro area economy: governments and large corporations benefit from ultra-low bond yields, banks’ composite costs of debt financing have been converging during the past two years to very low levels, and borrowing costs for non-financial corporations have come down markedly. Prices for stocks, bonds and (on average) houses have gone up. Real disposable incomes of private households have risen due to oil prices. The real effective exchange rate is about 10% lower in March 2015 than it was a year ago, strengthening the price competitiveness of firms in the euro area. According to our forecasts, the euro area GDP will grow by 1.6% in 2015 and by 2.1% in 2016. Structural impediments, however, still limit the ability of the euro area economy to grow strongly: firms and, in particular, private households are only slowly reducing their heavy debt burdens, and confidence will not fully come back in France and Italy, as long as reform processes are inconclusive in both countries and as long as unemployment is not coming down markedly. Our inflation forecast for 2015 is 0.1%, with the possibility of a mild deflation not excluded. In 2016 inflation will increase up to 1.3%, still clearly below the 2% ECB’s target. This calls for continued monetary expansion, though its effects could be limited in the absence of a complementary fiscal stimulus, in particular in those countries where the implementation of structural reforms brings long term gains but short term losses.
Read article

Cross-border Interbank Networks, Banking Risk and Contagion

Lena Tonzer
Journal of Financial Stability, 2015
Abstract
Recent events have highlighted the role of cross-border linkages between banking systems in transmitting local developments across national borders. This paper analyzes whether international linkages in interbank markets affect the stability of interconnected banking systems and channel financial distress within a network consisting of banking systems of the main advanced countries for the period 1994–2012. Methodologically, I use a spatial modeling approach to test for spillovers in cross-border interbank markets. The results suggest that foreign exposures in banking play a significant role in channeling banking risk: I find that countries that are linked through foreign borrowing or lending positions to more stable banking systems abroad are significantly affected by positive spillover effects. From a policy point of view, this implies that in stable times, linkages in the banking system can be beneficial, while they have to be taken with caution in times of financial turmoil affecting the whole system.
Read article

Financial Stability and Central Bank Governance

Michael Koetter, Kasper Roszbach, G. Spagnolo
International Journal of Central Banking, No. 4, 2014
Abstract
The financial crisis has ignited a debate about the appropriate objectives and the governance structure of Central Banks. We use novel survey data to investigate the relation between these traits and banking system stability focusing in particular on their role in micro-prudential supervision. We find that the separation of powers between single and multiple bank supervisors cannot explain credit risk prior or during the financial crisis. Similarly, a large number of Central Bank governance traits do not correlate with system fragility. Only the objective of currency stability exhibits a significant relation with non-performing loan levels in the run-up to the crisis. This effect is amplified for those countries with most frequent exposure to IMF missions in the past. Our results suggest that the current policy discussion whether to centralize prudential supervision under the Central Bank and the ensuing institutional changes some countries are enacting may not produce the improvements authorities are aiming at. Whether other potential improvements in prudential supervision due to, for example, external disciplinary devices, such as IMF conditional lending schemes, are better suited to increase financial stability requires further research.
Read article

Should I Stay or Should I Go? Bank Productivity and Internationalization Decisions

Claudia M. Buch, C. T. Koch, Michael Koetter
Journal of Banking and Finance, No. 42, 2014
Abstract
Differences in firm-level productivity explain international activities of non-financial firms quite well. We test whether differences in bank productivity determine international activities of banks. Based on a dataset that allows tracking banks across countries and across different modes of foreign entry, we model the ordered probability of maintaining a commercial presence abroad and the volume of banks’ international assets empirically. Our research has three main findings. First, more productive banks are more likely to enter foreign markets in increasingly complex modes. Second, more productive banks also hold larger volumes of foreign assets. Third, higher risk aversion renders entry less likely, but it increases the volume of foreign activities conditional upon entry.
Read article

Interbank Lending and Distress: Observables, Unobservables, and Network Structure

Ben Craig, Michael Koetter, U. Krüger
Deutsche Bundesbank Discussion Paper, No. 18/2014, No. 18, 2014
Abstract
We provide empirical evidence on the relevance of systemic risk through the interbank lending channel. We adapt a spatial probit model that allows for correlated error terms in the cross-sectional variation that depend on the measured network connections of the banks. The latter are in our application observed interbank exposures among German bank holding companies during 2001 and 2006. The results clearly indicate significant spillover effects between banks’ probabilities of distress and the financial profiles of connected peers. Better capitalized and managed connections reduce the banks own risk. Higher network centrality reduces the probability of distress, supporting the notion that more complete networks tend to be more stable. Finally, spatial autocorrelation is significant and negative. This last result may indicate too-many-to-fail mechanics such that bank distress is less likely if many peers already experienced distress.
Read article

EFN Report Summer 2014: Economic Outlook for the Euro Area in 2014 and 2015

, 2014
Abstract
World growth disappointed at the beginning of the year, when in the US extremely cold weather caused production to contract, the recovery in the euro area stumbled and the slowdown of the Chinese economy continued. At present, however, confidence indicators and order books point to a moderate pickup of growth in most regions. Prices on markets for energy, real and financial assets have reacted little to recent bad news about rising geopolitical risks in the Middle East and Eastern Europe up to now. A sudden increase of risk aversion or a change of believes among investors could trigger a swift deterioration of financial conditions for the world economy. In the euro area, strong stimuli from abroad are not to be expected and private households continue to keep their real spending about constant. Investment has been expanding since summer 2013, but at a very moderate rate. In this context, our forecast for GDP growth is 1.1% in 2014 and 1.6% in 2015. For 2014 and 2015, we do not see any significant reduction of the unemployment rate, because employment dynamics will stay weak due to subdued growth and the still rising participation rate in the euro area. Our inflation forecast for 2014 is 0.6%. In 2015 inflation will also remain subdued, at about 1.0%. In this context of very low price dynamics, monetary policy keeps the recovery alive: official interest rates around zero and the search for yields on financial markets have depressed yields for government bonds; the fall in financing costs allows euro area governments to conduct fiscal policies that are much less restrictive than in the years before, with tax cuts in Italy, France, and Spain starting this year. Nonfinancial firms benefit from a shrinking burden of interest payments, and the availability of bank loans for small and medium enterprises has improved since 2012 in most countries.
Read article

Taxing Banks: An Evaluation of the German Bank Levy

Claudia M. Buch, Björn Hilberg, Lena Tonzer
Deutsche Bundesbank Discussion Paper, No. 38, 2014
published in: Journal of Banking and Finance
Abstract
Bank distress can have severe negative consequences for the stability of the financial system, the real economy, and public finances. Regimes for restructuring and restoring banks financed by bank levies and fiscal backstops seek to reduce these costs. Bank levies attempt to internalize systemic risk and increase the costs of leverage. This paper evaluates the effects of the German bank levy implemented in 2011 as part of the German bank restructuring law. Our analysis offers three main insights. First, revenues raised through the bank levy are minimal, because of low tax rates and high thresholds for tax exemptions. Second, the bulk of the payments were contributed by large commercial banks and the head institutes of savings banks and credit unions. Third, the levy had no effect on the volume of loans or interest rates for the average German bank. For the banks affected most by the levy, we find evidence of fewer loans, higher lending rates, and lower deposit rates.
Read article

Spillover Effects among Financial Institutions: A State-dependent Sensitivity Value-at-Risk Approach

Z. Adams, R. Füss, Reint E. Gropp
Journal of Financial and Quantitative Analysis, No. 3, 2014
Abstract
In this paper, we develop a state-dependent sensitivity value-at-risk (SDSVaR) approach that enables us to quantify the direction, size, and duration of risk spillovers among financial institutions as a function of the state of financial markets (tranquil, normal, and volatile). For four sets of major financial institutions (commercial banks, investment banks, hedge funds, and insurance companies) we show that while small during normal times, equivalent shocks lead to considerable spillover effects in volatile market periods. Commercial banks and, especially, hedge funds appear to play a major role in the transmission of shocks to other financial institutions.
Read article
Mitglied der Leibniz-Gemeinschaft LogoTotal-Equality-LogoSupported by the BMWK