Managing the Sovereign-Bank Nexus

Dell’Ariccia, Giovanni; Ferreira, Caio; Jenkinson, Nigel; Laeven, Luc; Martín, Alberto; Minoiu, Camelia; Popov, Alexander

doi:10.5089/9781484359624.087

Cited by 43 publications

(30 citation statements)

References 50 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…e.g., Altavilla et al 2017). However, the link has not been identified in other works (Dell'Ariccia et al 2018).…”

Section: Risk Transfer From Sovereigns To Banksmentioning

confidence: 81%

Negative Feedback Loop between Banks and Sovereigns in the Euro Area – Experience of the Crisis and Post-Crisis Perspective

Stawasz‐Grabowska

2020

CER

View full text Add to dashboard Cite

The euro area crisis was characterised by a negative feedback loop between banks and sovereigns. The paper aims to indicate the genesis of this phenomenon and to determine the scale of its operation during the crisis and post-crisis conditions, as well as to identify the threats it brings. In addition, the paper discusses the actions that have been taken so far at the euro area level to reduce the feedback loop and the existing challenges in this area. The following hypothesis has been formulated: in the post-crisis conditions the euro area remains vulnerable to the sovereign-bank nexus, which in particular stems from the very legacy of the crisis, bank-based financial system, as well as incomplete reforms of the euro area institutional architecture. The research methods include data selection and evaluation as well as descriptive statistics. The main contribution of the study stems from the adoption of a post-crisis perspective and the assessment of the loop with the use of the most recent data and in relation to the crisis period. The results show that in the post-crisis period, a reduction in interconnectedness has been observed, although it has not been evenly experienced by all euro area countries. At the same time, despite some progress in recent years, institutional reforms aimed at breaking the sovereign-bank nexus are far from complete.

show abstract

“…e.g., Altavilla et al 2017). However, the link has not been identified in other works (Dell'Ariccia et al 2018).…”

Section: Risk Transfer From Sovereigns To Banksmentioning

confidence: 81%

Negative Feedback Loop between Banks and Sovereigns in the Euro Area – Experience of the Crisis and Post-Crisis Perspective

Stawasz‐Grabowska

2020

CER

View full text Add to dashboard Cite

show abstract

“…According to this functionalist logic, BU was necessary in order to break the 'doom loop' whereby weak domestic banking systems damaged sovereign fiscal positions, and weak sovereign positions threatened domestic banking stability. Since banks -especially in the Euro Area periphery -held large quantities of government bonds, the sovereign debt crisis weakened the capital position of banks, increasing their funding costs on the market, while the 'fragility of the banks undermined the borrowing status of the sovereign that [had] to stand behind them' (Begg 2012, p. 15;Dell'Ariccia et al 2018).…”

Section: Crises and Banking Unionmentioning

confidence: 99%

One money, two markets? EMU at twenty and European financial market integration

Howarth

Quaglia

2020

Journal of European Integration

View full text Add to dashboard Cite

This contribution combines neo-functionalism and historical institutionalism to understand the implications of differentiated integration in Economic and Monetary Union (EMU) and Banking Union (BU) for the single market in financial services in the European Union (EU). From the 1980s, the relaunch of the Single Market and monetary integration in the EU were presented by the supporters of EMU as mutually reinforcing, as in the logic of the Commission's Report 'One Market, One Money'. Initially, EMU appeared to reinforce financial integration, especially in the Euro Area banking sector, even though EMU was a case of differentiated integration in the EU. Subsequently, the incomplete EMU triggered the sovereign debt crisis, which undermined financial market integration and was addressed through the establishment of BU, which reinforced differentiated integration. Both EMU and BU have negative implications for the 'singleness' of the single market in financial services, potentially resulting in 'One Money, Two Markets'.

show abstract

“…Generally, increases in the index indicate positive investor sentiment towards that country's banking sector. Sovereign and banking distress feed into each other, with balance sheet interconnections, credit dynamics, financial openness and economic growth being important ((Erce and Balteanu 2017, Del 'Ariccia et al 2018).…”

Section: Future Redemptions Profilementioning

confidence: 99%

Quantifying Risks to Sovereign Market Access: Methods and Challenges

Erce

Jiang²,

Žigraiová³

2020

SSRN Journal

View full text Add to dashboard Cite

In this paper we use data from the euro area to study episodes when sovereigns lose market access. We construct a detailed dataset with potential indicators of market access tensions, and evaluate their ability to forecast episodes when market access is lost, using various econometric approaches. We find that factors associated with high market access tensions are not limited to financial markets, but also encompass developments in global demand, macroeconomic conditions and the fiscal stance. Using the top-performing indicators, we construct a number of market tension indices and use them as single predictors of market access tensions. While such indices are helpful in capturing worsening conditions, they do not yield satisfactory out-of-sample results. On the other hand, using the same top-performing indicators in various multivariate models generates good forecasts of upcoming difficulties in accessing sovereign bond markets. Our results thus point to a trade-off between communicability and accuracy that policymakers face in the search for tools to evaluate risks to market access.

show abstract

Managing the Sovereign-Bank Nexus

Cited by 43 publications

References 50 publications

Negative Feedback Loop between Banks and Sovereigns in the Euro Area – Experience of the Crisis and Post-Crisis Perspective

Negative Feedback Loop between Banks and Sovereigns in the Euro Area – Experience of the Crisis and Post-Crisis Perspective

One money, two markets? EMU at twenty and European financial market integration

Quantifying Risks to Sovereign Market Access: Methods and Challenges

Contact Info

Product

Resources

About