Link to the University of Pittsburgh
Link to the University Library SystemContact us link
AEI Banner

Are banks affected by their holdings of government debt? Bruegel Working Paper 2012/07, 26 March 2012

Angeloni, Chiarra and Wolff, Guntram B. (2012) Are banks affected by their holdings of government debt? Bruegel Working Paper 2012/07, 26 March 2012. [Working Paper]

[img]
Preview
PDF - Published Version
Download (1254Kb) | Preview

    Abstract

    The strong relation between sovereign and banking stress is frequently emphasised, especially since the start of the European sovereign debt crisis. This working paper sheds light on the determinants of the link. It studies the stock market performance and the holdings of government debt of the banks stress tested by the European Banking Authority in July and December 2011. A number of results stand out: Banks’ holdings of the sovereign bonds of vulnerable countries generally decreased during the period December 2010 to September 2011. The average stock market performance of each country’s banks was very uneven during 2011. The long-term refinancing operation (LTRO) had no material effect on banks’ stock market values. Greek debt holdings had an effect on banks’ market values in the period July to October 2011 while after October this effect disappeared. Holdings of Italian and Irish debt had a material effect on banks’ market value in the period October to December 2011. Holdings of debt of other periphery countries, in particular Spain, were not an issue. The July PSI deal did not substantially affect the risk resulting from holdings of debt other than Greek debt. The location of banks matters for their market value. This highlights the need to form a banking union in the euroarea.

    Export/Citation:EndNote | BibTeX | Dublin Core | ASCII (Chicago style) | HTML Citation | OpenURL
    Social Networking:
    Item Type: Working Paper
    Subjects for non-EU documents: Countries > Greece
    Countries > Ireland
    Countries > Italy
    Countries > Spain
    EU policies and themes > Policies & related activities > economic and financial affairs > Single Market > capital, goods, services, workers
    EU policies and themes > Policies & related activities > economic and financial affairs > financial crisis 2008-on and consequences/reforms
    Subjects for EU documents: UNSPECIFIED
    EU Series: UNSPECIFIED
    ["eprint_fieldname_eusries" not defined]: UNSPECIFIED
    EU Annual Reports: UNSPECIFIED
    Series: Series > Bruegel (Brussels) > Working Papers
    Depositing User: Phil Wilkin
    Official EU Document: No
    Language: English
    Date Deposited: 26 Mar 2012 09:15
    Number of Pages: 24
    Last Modified: 26 Mar 2012 09:15
    URI: http://aei.pitt.edu/id/eprint/34328

    Actions (login required)

    View Item

    Document Downloads