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Josep Maria Vendrell Simon

18 June 2024
FINANCIAL INTEGRATION AND STRUCTURE BOX
Financial Integration and Structure in the Euro Area 2024
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Abstract
The issuance of these temporary recovery instruments has renewed the discussion on the benefits of a common safe asset and their transformative potential for EU financial integration. Given that a common safe asset may foster financial integration in the euro area by facilitating diversification and de-risking banks’ sovereign portfolios, this box assesses the extent to which these newly issued EU bonds (i) are perceived by market participants as a common safe asset, and (ii) can facilitate diversification and affect banks’ sovereign portfolio composition.
JEL Code
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
H63. : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
31 May 2023
FINANCIAL STABILITY REVIEW - ARTICLE
Financial Stability Review Issue 1, 2023
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Abstract
Climate change can have a negative effect on sovereign balance sheets directly (when contingent liabilities materialise) and indirectly (when it has an impact on the real economy and the financial system). This special feature highlights the contingent sovereign risks that stem from an untimely or disorderly transition to a net-zero economy and from more frequent and severe natural catastrophes. It also looks at the positive role that governments can play in reducing climate-related financial risks and incentivising adaptation. If the recent trend of ever-lower emissions across the EU is to be sustained, further public sector investment is essential. In this context, the progress made to strengthen green capital markets has fostered government issuance of green and sustainable bonds to finance the transition. While putting significant resources into adaptation projects can increase countries’ resilience to climate change, the economic costs of extreme climate-related events are still set to rise materially in the EU. Only a quarter of disaster losses are currently insured and fiscal support has mitigated related macroeconomic and financial stability risks in the past. Looking ahead, vulnerabilities arising from contingent liabilities may increase in countries with high physical risk and a large insurance protection gap. If these risks rise alongside sovereign debt sustainability concerns, the impact on financial stability could be amplified by feedback loops that see sovereign credit conditions and ratings deteriorate.
JEL Code
G10 : Financial Economics→General Financial Markets→General
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G20 : Financial Economics→Financial Institutions and Services→General
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
Q51 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Valuation of Environmental Effects
Q54 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Climate, Natural Disasters, Global Warming
Q58 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Environmental Economics→Government Policy
25 November 2015
FINANCIAL STABILITY REVIEW - ARTICLE
Financial Stability Review Issue 2, 2015
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Abstract
The current environment of protracted low interest rates poses major challenges to euro area insurance companies. This special feature discusses how a prolonged low-yield period might affect the profitability and the solvency of euro area insurers. In the article, it is argued that if interest rates were to stay low for a long time, this could have material implications for the profitability and the solvency of many insurers. However, it is also shown that the impact of low interest rates is likely to differ markedly across insurance companies depending on their business model and balance sheet structure. In particular, the impact is expected to be highest for small and medium-sized life insurers with large government bond portfolios and high guarantees to policyholders that reside in countries where these guarantees are rigid and where contracts embed a long time to maturity.
JEL Code
G00 : Financial Economics→General→General