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Katharina Cera

29 November 2018
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 2, 2018
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Abstract
Liquidity in the Italian sovereign bond market deteriorated sharply at the end of May. Heightened political uncertainty led to a rise in Italian sovereign bond yields and triggered a short-lived flattening of the yield curve (see Chart 2.12, right panel). At the same time, liquidity conditions deteriorated significantly. On 29 May intraday bid-ask spreads increased to levels not seen since the height of the euro area sovereign debt crisis in 2011 (see Chart A, left and right panels). On the interdealer MTS platform specialised in the Italian market, the ratio of the bid-ask spread to the mid bid-ask price for the most recently issued ten-year (on-the-run) bond – a measure that moves inversely with market liquidity – rose from below 0.1% to above 5%. The resilience of the market has been adversely affected too. Orders larger than €50 million could no longer be executed at the best five prices quoted by participating dealers, according to intraday order-book data.
2 July 2019
OCCASIONAL PAPER SERIES - No. 226
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Abstract
This paper presents an approach to a macroprudential stress test for the euro area banking system, comprising the 91 largest euro area credit institutions across 19 countries. The approach involves modelling banks’ reactions to changing economic conditions. It also examines the effects of adverse scenarios on economies and the financial system as a whole by acknowledging a broad set of interactions and interdependencies between banks, other market participants, and the real economy. Our results highlight the importance of the starting level of bank capital, bank asset quality, and banks’ adjustments for the propagation of shocks to the financial sector and real economy.
JEL Code
E37 : Macroeconomics and Monetary Economics→Prices, Business Fluctuations, and Cycles→Forecasting and Simulation: Models and Applications
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
25 May 2020
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 1, 2020
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Abstract
Euro area money market funds (MMFs) provide short-term credit to banks and non-financial corporations (NFCs) through purchases of commercial paper (CP). MMFs also play an important role in non-banks’ cash and liquidity management, given that the funds offer stable value and the possibility to redeem at short notice. As the coronavirus crisis deepened, euro area MMFs experienced large outflows and a number of them had difficulties in raising sufficient cash from maturing assets and liquid positions. Stress in MMFs can impair the financial system’s and the real economy’s access to short-term funding and liquidity during crises. Monetary policy action helped to improve financial market conditions more broadly, thereby also alleviating liquidity strains in the MMF sector.
JEL Code
G10 : Financial Economics→General Financial Markets→General
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
26 May 2020
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 1, 2020
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Abstract
Recent events have shown that stress in non-banks can affect other parts of the financial system, for example through forced asset sales and reduced short-term funding. This box examines the interconnections between banks and non-banks through direct exposures, overlapping portfolios and ownership links, and considers how these can increase the risk of systemic contagion.
9 November 2020
ECONOMIC BULLETIN - BOX
Economic Bulletin Issue 7, 2020
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Abstract
Newly released data on the written premiums, incurred claims and acquisition expenses of insurance corporations help monitor the euro area insurance sector, which is growing in total assets and becoming increasingly important for financing the economy. The data reveal a significant growth in premiums and claims over the past two years, with considerable differences across insurance sectors. Incurred claims remain below premiums written and are growing at a slower pace. The data can also be used to assess the share of premiums used to attract new business and to monitor cross-border business activities via branches in the insurance sector.
JEL Code
E01 : Macroeconomics and Monetary Economics→General→Measurement and Data on National Income and Product Accounts and Wealth, Environmental Accounts
G22 : Financial Economics→Financial Institutions and Services→Insurance, Insurance Companies, Actuarial Studies
G52 : Financial Economics
25 November 2020
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 2, 2020
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Abstract
Market participants have been slow in transitioning to the euro short-term rate (€STR) as the new reference rate in the overnight index swap (OIS) market. The OIS market segment is a potential source of alternative risk-free interest rates to serve as a fall-back for the euro interbank offered rate (EURIBOR), the benchmark term rate underlying loan and debt security pricing for euro area households and corporates. The euro overnight index average (EONIA) rate is due to cease in January 2022. But trading activity in €STR-referencing OISs, although constantly growing, has remained at very low levels compared with EONIA-referencing OISs. Moreover, EONIA OIS trades that mature after the transition deadline have continued to rise. Market participants are encouraged are encouraged to redouble their efforts to ensure sufficient technical preparedness to trade, price and account for €STR-based products and manage risk related to usage of the €STR.
JEL Code
G10 : Financial Economics→General Financial Markets→General
G12, G13 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
19 May 2021
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 1, 2021
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Abstract
During the March 2020 market turmoil, investment funds shed assets on a large scale. But was this selling commensurate with the outflows they faced or was it much larger? This box finds evidence for the latter, highlighting that the less regulated non-UCITS funds tended to engage in more procyclical selling and cash hording than UCITS funds. While it can be rational for fund managers individually to sell assets in excess of current outflows when uncertainty about future redemptions is high, such cash hoarding can be detrimental to the stability of financial markets from a macroprudential perspective. The findings discussed in this box suggest that macroprudential regulation of the fund sector could help to mitigate procyclical behaviour.
JEL Code
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors