Drivers of Systemic Risk: Do National and European Perspectives Differ?
Claudia M. Buch, Thomas Krause, Lena Tonzer
Journal of International Money and Finance,
March
2019
Abstract
With the establishment of the Banking Union, the European Central Bank has been granted the power to impose stricter regulations than the national regulator if systemic risks are not adequately addressed at the national level. We ask whether there is a cross-border externality in the sense that a bank’s systemic risk differs when applying a national versus a European perspective. On average, banks’ contribution to systemic risk is similar at the two regional levels, and so is the ranking of banks. Generally, larger banks and banks with a lower share of loans are more systemically important. The effects of these variables are qualitatively but not quantitatively similar at the national versus the European level.
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21.03.2018 • 5/2018
What is holding back the banking union?
The European Commission wants to better regulate and monitor the European banking sector. In many EU Member States, however, the necessary directives are being implemented extremely slowly. Surprisingly, the reasons for this do not lie in politics and banking structures, but in the institutional framework conditions and existing regulations in the Member States, as argued by Michael Koetter, Thomas Krause and Lena Tonzer from the Halle Institute for Economic Research (IWH).
Michael Koetter
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Comments on “Consultation BCBS discussion paper on the regulatory treatment of sovereign exposures”
Michael Koetter, Lena Tonzer
Einzelveröffentlichungen,
2018
Abstract
The BCBS discussion paper on the regulatory treatment of sovereign exposures addresses a so far hardly touched topic as concerns capital regulation. While the regulatory framework has been changed substantially over recent years including the establishment of the European Banking Union, risk weights on sovereign exposures have remained mostly unchanged and sovereign exposures of banks benefit from a favourable capital treatment. This applies despite the fact that the recent European sovereign debt crisis has revealed the potential of a doom loop between bank and sovereign risk and demonstrated that sovereign exposures are by no means “risk-free”. The paper is thus an important proposal how to change the risk evaluation of banks’ sovereign exposures.
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Delay Determinants of European Banking Union Implementation
Michael Koetter, Thomas Krause, Lena Tonzer
Abstract
To safeguard financial stability and harmonise regulation, the European Commission substantially reformed banking supervision, resolution, and deposit insurance via EU directives. But most countries delay the transposition of these directives. We ask if transposition delays result from strategic considerations of governments conditional on the state of their financial, regulatory, and political systems? Supervisors might try to protect national banking systems and local politicians maybe reluctant to surrender national sovereignty to deal with failed banks. Alternatively, intricate financial regulation might require more implementation time in large and complex financial and political systems. We therefore collect data on the transposition delays of the three Banking Union directives and investigate observed delay variation across member states. Our correlation analyses suggest that existing regulatory and institutional frameworks, rather than banking market structure or political factors, matter for transposition delays.
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Nationale Aufsicht versus Europäische Bankenunion: Unterscheidet sich die Beurteilung der Einflussfaktoren systemischen Risikos von Banken?
Thomas Krause, Talina Sondershaus, Lena Tonzer
Wirtschaft im Wandel,
No. 3,
2017
Abstract
Als Reaktion auf die Finanzkrise unterliegt das Finanzsystem zahlreichen neuen regulatorischen Änderungen. Zum einen wurden bestehende mikroprudenzielle Regeln für Eigenkapital und Liquidität verschärft. Zum anderen wurden makroprudenzielle Instrumente eingeführt. Makroprudenzielle Regulierung hat dabei zum Ziel, systemische Risiken im Finanzsystem frühzeitig zu erkennen, zu reduzieren und somit die Finanzmarktstabilität zu erhöhen. Zudem wurde mit der Einführung der Bankenunion die Aufsicht der größten Banken des Euroraums der Europäischen Zentralbank (EZB) übertragen. Diese Studie untersucht, ob das systemische Risiko von Banken unterschiedlich groß ist, wenn eine europäische im Vergleich zu einer nationalen Perspektive eingenommen wird. Im Anschluss wird die Frage geklärt, welche Faktoren systemisches Risiko beeinflussen und ob sich diese Faktoren zwischen der nationalen und europäischen Ebene unterscheiden. Es zeigt sich, dass Banken auf nationaler Ebene im Durchschnitt etwas mehr zum systemischen Risiko beitragen, wobei es große Unterschiede zwischen Banken und Ländern gibt. Zudem haben größere und profitablere Banken sowie Banken, deren Geschäftsmodell durch eine geringere Kreditvergabe geprägt ist, ein höheres systemisches Risiko.
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Transposition Frictions, Banking Union, and Integrated Financial Markets in Europe
Michael Koetter, Thomas Krause, Lena Tonzer
G20 Insights Policy Brief, Policy Area "Financial Resilience",
2017
Abstract
In response to the financial crisis of 2007/2008, policymakers implemented comprehensive changes concerning the regulation and supervision of banks. Many of those changes, including Basel III or the directives pertaining to the Single Rulebook in the European Union (EU), are agreed upon at the supranational level, which constitutes a key step towards harmonized regulation and supervision in an integrated European financial market. However, the success of these reforms depends on the uniform and timely implementation at the national level. Avoiding strategic delays to implement EU regulation into national laws should thus constitute a main target of the G20.
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Drivers of Systemic Risk: Do National and European Perspectives Differ?
Claudia M. Buch, Thomas Krause, Lena Tonzer
Abstract
In Europe, the financial stability mandate generally rests at the national level. But there is an important exception. Since the establishment of the Banking Union in 2014, the European Central Bank (ECB) can impose stricter regulations than the national regulator. The precondition is that the ECB identifies systemic risks which are not adequately addressed by the macroprudential regulator at the national level. In this paper, we ask whether the drivers of systemic risk differ when applying a national versus a European perspective. We use market data for 80 listed euro-area banks to measure each bank’s contribution to systemic risk (SRISK) at the national and the euro-area level. Our research delivers three main findings. First, on average, systemic risk increased during the financial crisis. The difference between systemic risk at the national and the euro-area level is not very large, but there is considerable heterogeneity across countries and banks. Second, an exploration of the drivers of systemic risk shows that a bank’s contribution to systemic risk is positively related to its size and profitability. It decreases in a bank’s share of loans to total assets. Third, the qualitative determinants of systemic risk are similar at the national and euro-area level, whereas the quantitative importance of some determinants differs.
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Assessing the Effects of Regulatory Bank Levies
Claudia M. Buch, Lena Tonzer, Benjamin Weigert
VOX CEPR's Policy Portal,
2017
Abstract
In response to the Global Crisis, governments have implemented restructuring and resolution regimes backed by funds financed by bank levies. Bank levies aim to internalise system risk externalities and to provide funding for bank recovery and resolution. This column explores bank levy design by considering the German and European cases. The discussion points to the importance of structured policy evaluations to determine the effects of levies.
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State Aid and Guarantees in Europe
Reint E. Gropp, Lena Tonzer
T. Beck, B. Casu (eds): The Palgrave Handbook of European Banking, London,
2016
Abstract
During the recent financial crisis, governments massively intervened in the banking sector by providing liquidity assistance and capital support to banks in distress. This helped stabilize the financial system in the short run. However, public bailouts also bear the risk of longer-term distortions, for example, by affecting bailout expectations of banks. In this chapter, the authors first provide an overview of state aid interventions during the recent crisis episode. The third section then analyzes the effects of state aid on financial stability from a theoretical view. This is followed by the description of results obtained from empirical studies. The link between the provision of state aid and politics is discussed in the section “Institutional Design and Policy Implications”. Finally, in the section “The European Banking Union” the authors describe the elements of the European Banking Union meant to resolve and restructure banks in distress and to lower the need for public intervention. Based on the preceding analysis, conclusions are drawn regarding the new design.
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Taxing Banks: An Evaluation of the German Bank Levy
Claudia M. Buch, Björn Hilberg, Lena Tonzer
Journal of Banking and Finance,
November
2016
Abstract
Bank distress can have severe negative consequences for the stability of the financial system. Regimes for the restructuring and resolution of banks, financed by bank levies, aim at reducing these costs. This paper evaluates the German bank levy, which has been implemented since 2011. Our analysis offers three main insights. First, revenues raised through the levy were lower than expected. Second, the bulk of the payments were contributed by large commercial banks and by the central institutions of savings banks and credit unions. Third, for those banks, which were affected by the levy, we find evidence for a reduction in lending and higher deposit rates.
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