scholarly journals MACROPRUDENTIAL SUPERVISION AND AGENTS’ INFORMATION: WHAT STRESS TESTS REALLY TELL THE MARKETS

2022 ◽  
Author(s):  
FAUSTO PACICCO ◽  
LUIGI VENA ◽  
ANDREA VENEGONI
Keyword(s):  
Risk Perception ◽  
Banking System ◽  
Market Risk ◽  
Stress Tests ◽  
European Banking Authority ◽  
Idiosyncratic Shocks ◽  
Systemic Crisis ◽  
European Banking

Central bank’s macroprudential supervisory activities have to fulfill three distinct tasks: (i) assessing the banking system’s vulnerability to exogenous adverse turbulence, (ii) evaluating the risk of systemic crisis originating from idiosyncratic shocks, and (iii) measuring financial market’s sensitivity to policy stimuli. Given that macroprudential stress tests are the centerpiece of this policy approach, it is important to establish whether they are up to the task. We study how the 2011–2018 European Banking Authority stress tests affected market risk perception and show that they provided agents with valuable information on the policy stances and the vulnerabilities of the banking system, carrying out the above tasks successfully, especially the second and third tasks.

scholarly journals Stress Tests By The European Banking Authority: The Immunity Of Italian Cooperative Banks

2017 ◽  
Vol 33 (5) ◽  
pp. 873-886
Author(s):  
Andrea Quintiliani
Keyword(s):  
Comparative Analysis ◽  
Empirical Analysis ◽  
Stress Tests ◽  
Critical Elements ◽  
Risk Return ◽  
European Banking Authority ◽  
European Banking ◽  
Cooperative Banks ◽  
The Empirical Analysis ◽  
Quantitative Nature

Purpose. The objectives of the paper are two-fold. The first objective of the research is formulated with the intent to analyze the existence or not of a possible “European Banking Authority (EBA) effect” on the credit offer of local banks compared with national banks subject to the requests of capital from European Authority. The second research objective aims to understand what are the conditions that allow to develop a model of a local bank capable of supporting SMEs, with a suitable risk-return profile. Methodology. This paper presents an empirical comparative analysis between Cooperative Credit Banks (BCCs) and Italian banking groups. Findings. The empirical analysis shows how the financial then real crisis has not induced BCCs to restrict credit to firms. In particular, the BCCs not included in stress exercises, show, unlike national banks, a substantial “independence” of credit trend from the advices of the Authority. The survey evidences have however highlighted some critical elements that are reflected inevitably on the local bank’s risk-return profile. Research Limitations. The quantitative nature of the empirical analysis must be followed by a qualitative analysis in order to strengthen the validity of the results. Implications. This work will be useful to stimulate the debate on the studies of local banks and their anti-cyclic role in favor of the SMEs. Originality. The work affects an aspect which has hitherto been little studied.

scholarly journals The hyperbolic geometry of financial networks

2021 ◽  
Vol 11 (1) ◽  
Author(s):  
Martin Keller-Ressel ◽  
Stephanie Nargang
Keyword(s):  
Hyperbolic Geometry ◽  
Structural Changes ◽  
Banking System ◽  
Financial Networks ◽  
Stress Tests ◽  
Disc Model ◽  
European Banking ◽  
European Banks ◽  
Hyperbolic Embedding ◽  
Embedding Methods

AbstractBased on data from the European banking stress tests of 2014, 2016 and the transparency exercise of 2018 we construct networks of European banks and demonstrate that the latent geometry of these financial networks can be well-represented by geometry of negative curvature, i.e., by hyperbolic geometry. Using two different hyperbolic embedding methods, hydra+ and Mercator, this allows us to connect the network structure to the popularity-vs-similarity model of Papdopoulos et al., which is based on the Poincaré disc model of hyperbolic geometry. We show that the latent dimensions of ‘popularity’ and ‘similarity’ in this model are strongly associated to systemic importance and to geographic subdivisions of the banking system, independent of the embedding method that is used. In a longitudinal analysis over the time span from 2014 to 2018 we find that the systemic importance of individual banks has remained rather stable, while the peripheral community structure exhibits more (but still moderate) variability. Based on our analysis we argue that embeddings into hyperbolic geometry can be used to monitor structural change in financial networks and are able to distinguish between changes in systemic relevance and other (peripheral) structural changes.

scholarly journals Malta

2019 ◽  
Vol 19 (350) ◽  
Author(s):  
Keyword(s):  
Euro Area ◽  
Stress Testing ◽  
Business Models ◽  
Banking Sector ◽  
Stress Test ◽  
Financial System ◽  
Stress Tests ◽  
European Banking Authority ◽  
European Banking ◽  
Shed Light

The Malta FSAP stress testing exercise took place immediately following the IMF’s 2018 Euro Area FSAP and concurrently with the 2018 stress test of the European Banking Authority (EBA). A comprehensive set of stress tests and interconnectedness analyses were conducted to assess the resilience of Malta’s financial system and shed light on potential vulnerabilities, complementing the euro area FSAP and EBA exercises by tailoring the scope and depth to the Maltese financial system. The solvency stress test covered 11 banks representing 93 percent of the banking sector assets (excluding foreign branches) and diverse business models.

scholarly journals European Monetary Measures to Support Economic Recovery

2017 ◽  
Vol 4 (2) ◽  
pp. 101
Author(s):  
Bogdan Munteanu
Keyword(s):  
Economic Growth ◽  
Cost Benefit Analysis ◽  
Banking System ◽  
Cost Benefit ◽  
Economic Recovery ◽  
Fiscal Policies ◽  
The European Union ◽  
Benefit Analysis ◽  
Stress Tests ◽  
European Banking

The present article aims to look at the current monetary measures deployed by ECB to address the economic context of below expectations economic growth and inflation, taking into account the expression of monetary policy via the Expanded Asset Purchase Programme. This tool is used to push financial liquidity into the economies of the European Union, in a banking system affected by the crisis and which has been shown to be still at risk by the latest stress tests conducted by the European Banking Authority. The article points out why monetary measures are important to support the economic recovery in Europe, in an interventional context of monetary and fiscal policies of governing authorities, appealing to economic models to explain how the policies contribute to economic growth and development. The methodology used by the article is economic analysis and rationale, cost-benefit analysis, statistics of money market and banking industry indicators, etc. The conclusion emerging from this article is that the Asset Purchase Programme of ECB led in a certain degree to an improvement in the macro-economic environment on yields and on its transmission channels into the financial system and into economies.

Same Story, Different Place?

2018 ◽  
Author(s):  
Viral V. Acharya ◽  
Tim Eisert ◽  
Christian Eufinger ◽  
Christian Hirsch
Keyword(s):  
Banking Sector ◽  
Debt Crisis ◽  
Banking System ◽  
Policy Implications ◽  
Balance Sheets ◽  
System P ◽  
Loan Supply ◽  
European Banking ◽  
European Debt Crisis

This chapter compares the recapitalizations of the Japanese banking sector in the 1990s with those in the ongoing European debt crisis. The analysis points to four main policy implications. First, recapitalizing banks by insuring or purchasing troubled assets alone is not likely to solve the problem of banks’ weak capitalization, as this measure is not able to adjust the extent of the recapitalization to the banks’ specific needs. Second, the amount of the recapitalization should be based on actual capital shortages and not risk-weighted assets to avoid banks decreasing their loan supply. Third, banks should face restrictions regarding the amount of dividends they are allowed to pay out. Finally, banks must be induced to clean up their balance sheets and reduce the amount of bad (non-performing) loans to rebuild confidence in the European banking system.

“The Crooked Smile of TCR”: Banks’ Solvency and Restructuring Costs in the European Banking Industry

SAGE Open ◽  
2021 ◽  
Vol 11 (3) ◽  
pp. 215824402110459
Author(s):  
Małgorzata Iwanicz-Drozdowska ◽  
Krzysztof Jackowicz ◽  
Maciej Karczmarczyk
Keyword(s):  
Probability Function ◽  
Bank Failure ◽  
Capital Adequacy ◽  
Special Importance ◽  
Stress Tests ◽  
Distribution Probability ◽  
Total Capital ◽  
European Banking ◽  
European Banks ◽  
Bank Restructuring

In this study, we analyze the probability of bank failure, the expected losses, and the costs of bank restructuring with the application of a lognormal distribution probability function for three categories of European banks, that is, small, medium, and large, over the post-crisis period from 2012 to 2016. Our goal was to determine whether the total capital ratio (TCR) properly reflects banks’ solvency under stress conditions. We identified a phenomenon that one can call the “crooked smile of TCR”. Medium-sized banks with relatively high TCRs performed poorly in stress tests; however, the probability of bank failure increases slightly with the size of the bank, while the TCR decreases. We claim that the focus on capital adequacy measures is not sufficient to achieve the goal of improving banks’ stability and reducing their restructuring costs. Our results are of special importance for medium-sized banks, as these banks are not regularly subjected to publicly available stress tests.

scholarly journals The regulation of crypto-assets in the EU – investment and payment tokens under the radar

2020 ◽  
Vol 27 (3) ◽  
pp. 325-342
Author(s):  
Valeria Ferrari
Keyword(s):  
Eu Law ◽  
Electronic Money ◽  
Ongoing Debate ◽  
European Institutions ◽  
European Banking Authority ◽  
European Banking ◽  
Payment Services ◽  
Legal Frameworks ◽  
The Eu ◽  
Regulatory Intervention

Based on the guidelines issued by the European Securities and Market Authority and by the European Banking Authority, the article deals with the legal qualification of blockchain-based crypto-assets under EU law. Focusing on crypto-assets that function as a) investment instruments (that is, investment tokens) and as b) electronic money (that is, payment tokens), the work outlines shortages and drawbacks in the applicability and enforcement of existing EU legal frameworks regulating investment activities and payment services. With such analysis, the article seeks to inform the ongoing debate within European institutions on the need of regulatory intervention in this area, and it points out pressing questions to be tackled by further research.

Sign in / Sign up

Export Citation Format

Share Document