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Bank Exposures and Sovereign Stress Transmission

Carlo Altavilla (), Marco Pagano () and Saverio Simonelli

No 11269, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Using novel monthly data for 226 euro-area banks from 2007 to 2015, we investigate the determinants of changes in banks’ sovereign exposures and their effects during and after the crisis. First, public, bailed out and poorly capitalized banks responded to sovereign stress by purchasing domestic public debt more than other banks, with public banks’ purchases growing especially in coincidence with the largest ECB liquidity injections. Second, bank exposures significantly amplified the transmission of risk from the sovereign and its impact on lending. This amplification of the impact on lending does not appear to arise from spurious correlation or reverse causality.

Keywords: bank lending; credit risk; crisis; euro; sovereign exposures; sovereign risk (search for similar items in EconPapers)
JEL-codes: E44 F3 G01 G21 H63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-mac
Date: 2016-05
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Related works:
Journal Article: Bank Exposures and Sovereign Stress Transmission (2017) Downloads
Working Paper: Bank Exposures and Sovereign Stress Transmission (2017) Downloads
Working Paper: Bank exposures and sovereign stress transmission (2016) Downloads
Working Paper: Bank Exposures and Sovereign Stress Transmission (2016) Downloads
Working Paper: Bank exposures and sovereign stress transmission (2016) Downloads
Working Paper: Bank exposures and sovereign stress transmission (2016) Downloads
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