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Philippe Molitor

29 April 2004
OCCASIONAL PAPER SERIES - No. 13
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Abstract
Accounting standard setters are considering the wider use of fair value accounting. This paper focuses on the financial stability implications of a move in the banking sector from the current accounting framework to full fair value accounting. A simulation exercise is performed on how various external shocks affect the balance sheet of an average European bank under the two frameworks. The paper further investigates the impact of the alternative framework on the main balance sheet items, and the interaction with banks
JEL Code
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
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
M41 : Business Administration and Business Economics, Marketing, Accounting→Accounting and Auditing→Accounting
18 March 2013
OCCASIONAL PAPER SERIES - No. 2
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Abstract
Supervisory authorities around the world are currently engaged in a policy debate over how to improve the information available on repurchase agreements (repos) and securities lending markets. Repo and securities lending transactions commonly referred to as securities financing transactions (SFTs), play a major role in the financial system. Although these can be relatively low-risk transactions by themselves, their pervasive use may give rise to systemic risk, as was observed during the recent financial crisis. In order to establish and implement a monitoring framework that allows for an effective assessment of the financial stability risks associated with SFTs, a number of considerable hurdles must be overcome and important decisions must be made. One contribution of this paper is to identify the potential obstacles and difficulties that may hinder the implementation of a monitoring framework in Europe.
JEL Code
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
23 September 2014
OCCASIONAL PAPER SERIES - No. 6
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Abstract
Securities financing transaction (SFT) markets and the management and usage of collateral are elements of the financial system which are of systemic relevance. As such, there is a clear need for enhanced transparency and regulatory oversight. The European Systemic Risk board (ESRB) mandated a task force to identify the potential risks related to SFTs in Europe and to develop policy proposals to better monitor any vulnerabilities identified by the analysis. This report presents the results of two data collection exercises that were conducted to gain some initial insights into the structure of the SFT market and the correlated practices adopted by market participants concerning the re-investment or the re-use of the collateral sourced through SFTs or via equivalent transactions. A description of this landscape is, in fact, crucial as a first step in assessing the risks emanating from the cash and securities collateral markets and their potential implications for macro-prudential policy in Europe. By providing a description of the SFT landscape, the data collection exercises undertaken by the ESRB have a macro-prudential dimension in that they provide data at an aggregated level. The first data collection exercise encompassed a sample of 38 EU banks, representing approximately 60% of the EU banking system’s total assets. The institutions covered by this sample are the main players in the management of securities collateral. The second data collection targeted 13 agent lenders that are considered to be the largest re-investors of cash collateral in Europe. The sample period of the data is fixed at the end of February 2013. The ESRB templates yielded a unique set of data on the sources and use of securities collateral (non-cash collateral) by banks, as well as on the re-investment of cash collateral by agent lenders. The data collections were intended to fit in the broader policy context initiated by the Financial Stability Board (FSB) and the resulting analyses ultimately address a number of theFSB’s recommendations. The first element of the analysis in this report is specifically related to the FSB’s fourth recommendation (disclosure of collateral management activities) (FSB, 2013) and, to a certain extent, to the first recommendation (authorities to collect granular information on SFTs of large international financial institutions). The second element is similarly related to the first of the FSB’s recommendations, but also the sixth, which requests better disclosure ofsecurities lending activities. The analysis contained thereafter is relevant for the European Commission’s proposal on the reporting of SFTs to trade repositories (EC, 2014), which will greatly enhance transparency and regulatory oversight of SFT activities in the European Union. Finally, the report is in line with the ESRB’s outline of a monitoring framework (ESRB, 2013).
JEL Code
G15 : Financial Economics→General Financial Markets→International Financial Markets
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
27 June 2016
OCCASIONAL PAPER SERIES - No. 174
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Abstract
This paper first highlights the structural features of shadow banking in the euro area, focussing on investment funds. It then discusses the potential systemic risks that the recent expansion of the investment fund sector presents. While investment funds provide important intermediation services to the real sector, including market and liquidity risk-sharing and the bridging of information gaps, their rapid expansion may present systemic risks that need to be detected, monitored and managed. In particular, the risk of fund outflows and the possible negative impacts on the wider financial system have risen due to the rapid expansion of the investment fund sector, its growing involvement in capital markets, its use of synthetic leverage, and the inherent and growing maturity and liquidity mismatch arising from the demandable nature of fund share investments. While available data suggest that vulnerabilities within the investment fund sector are growing and links to the wider financial system and real economy have strengthened, data limitations prevent drawing a definitive conclusion on the sectors' contribution to systemic risk.
JEL Code
G01 : Financial Economics→General→Financial Crises
G20 : Financial Economics→Financial Institutions and Services→General
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
29 November 2018
FINANCIAL STABILITY REVIEW - BOX
Financial Stability Review Issue 2, 2018
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Abstract
ESTER (euro short-term rate) is the alternative euro risk-free rate administered by the ECB, which will replace EONIA (euro overnight index average) in 2020. The European Money Markets Institute (EMMI), the administrator of EONIA, concluded that under current market conditions, EONIA’s compliance with the EU Benchmarks Regulation (BMR) by January 2020 “cannot be warranted”. This implies that the usage of EONIA, at least in new contracts, may be prohibited by law as of 1 January 2020.
10 November 2020
ECONOMIC BULLETIN - ARTICLE
Economic Bulletin Issue 7, 2020
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Abstract
This article provides an overview of financial fragmentation during the coronavirus (COVID-19) crisis and the policies enacted to counter its effects. It does so through the lens of a set of high-frequency indicators for monitoring developments in financial integration. The readings from these indicators are then linked to unfolding economic and political events and to the main policy responses in monetary, fiscal and financial stability policy at the national and European levels. After initial sharp fragmentation, euro area financial integration broadly recovered to pre-crisis levels by mid-September, but not for all indicators. However, this recovery is still fragile and relies on an unprecedented amount of fiscal, monetary and prudential policy support.
JEL Code
G00 : Financial Economics→General→General
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
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