After August 2007 the plumbing system that supplied banks with wholesale funding, the interbank market, failed because toxic assets obstructed the pipes. Banks were forced to squeeze liquidity in a �lemons market� or to ask for liquidity �on tap� from central banks. This...

The aim of the paper is to understand the interaction between market and credit risk. Using a comprehensive set of Italian data, we apply a factor model to identify the common sources of risk driving fluctuations in the real and financial sectors. The common latent factors are then inserted in a...

Current policy debate has renewed interest in countercyclical provisioning policies; dynamic provisions are regarded as a valuable device for pursuing this goal. Last July, Ecofin supported "the introduction of forward-looking provisioning, which consists in constituting provisions deducted from...

In the recent banking literature on the relationship between credit risk and the business cycle, the presence of asymmetric effects both across credit risk regimes and through the business cycle has been generally neglected. Employing threshold regression models both at the aggregate and the...

Using information on about 2 million house purchase loans to households, this paper analyses the effects of the financial crisis on this portion of the credit market. From 2008 to 2011 the total number and value of new mortgages decreased sharply. The results show that young households and...

Many studies have questioned the reliability of banks� calculations of risk-weighted assets (RWA) for prudential purposes. The significant divergences found at international level are taken as indicating excessive subjectivity in the current rules governing banks� risk measurement and...

This paper reviews the quantitative methods used at selected central banks to stress testing credit risk, focusing in particular on the methods used to link macroeconomic drivers of stress with bank specific measures of credit risk (macro stress test). Stress testing credit risk is an essential...

This paper summarizes the results attained by the Eurosystem in harmonizing the statistics used for the conduct of monetary policy. Since the creation of the euro area, in January 1999, significant progress has been made in the harmonization of data on banks’ balance sheets, central banks and...

In this paper we test for the potential bias in the estimated contribution of a supply restriction on lending to enterprises, as captured by the assessment of credit standards provided by the banks participating in the Eurosystem Bank Lending Survey (BLS banks). For Italy, we combine the...