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Bank exposures and sovereign stress transmission

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

No 11, ESRB Working Paper Series from European Systemic Risk Board

Abstract: Using novel monthly data for 226 euro-area banks from 2007 to 2015, we investigate the causes and effects of banks’ sovereign exposures during and after the euro crisis. First, in the vulnerable countries, the publicly owned, recently bailed out and less strongly capitalized banks reacted to sovereign stress by increasing their domestic sovereign holdings more than other banks, suggesting that their choices were affected both by moral suasion and by yield-seeking. Second, their exposures significantly amplified the transmission of risk from the sovereign and its impact on lending. This amplification of the impact on lending cannot be ascribed to spurious correlation or reverse causality. JEL Classification: E44, F3, G01, G21, H63

Keywords: sovereign exposures; sovereign risk; credit risk; diabolic loop; lending; euro debt crisis (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban
Date: 2016-05
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https://www.esrb.europa.eu/pub/pdf/wp/esrbwp11.en.pdf (application/pdf)

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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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:201611

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