Using a comprehensive dataset from German banks, we document the usage of sovereign credit default swaps (CDS) during … the European sovereign debt crisis of 2008-2013. Banks used the sovereign CDS market to extend, rather than hedge, their … associated with protection selling. The findings are driven by the actions of a few non-dealer banks which sold CDS protection …

We develop a model of bank risk-taking with strategic sovereign default risk. Domestic banks invest in real projects … government's incentives to repay and therefore lowers its borrowing costs. For low levels of government debt, banks influence … default are perfectly correlated. Banks fail to account for how their bond purchases influence the government's default …

Increases in firm default risk raise the default probability of banks while decreasing output and inflation in US data …. To rationalize the empirical evidence, we analyse firm risk shocks in a New Keynesian model where entrepreneurs and banks … banks' balance sheets; banks respond by selling assets and reducing credit provision. A highly leveraged banking sector …

existing models on contagion via interbank credit, external shocks to banks often spread to other banks only in case of a …: First, the probability of default (PD) of those banks directly affected by some shock increases. This increases the expected … loss of the credit portfolios of the initially affected banks’ counterparties, thereby reducing the counterparties …

highlight an opposite effect: higher profitability loosens bank borrowing constraints. This enables profitable banks to take …

significantly lower for connected banks. -- Extreme Value Theory ; CDS Spreads ; Systemic Institutions ; Network Stability …

In this paper, we use detailed data on the sovereign debt holdings of all German banks to analyse the determinants of …, sovereign bond holdings are heterogeneous across banks. Larger, weakly capitalised banks and banks with a small depositor base … hold more sovereign bonds. Around 31% of all German banks hold no sovereign bonds at all. Second, the sensitivity of banks …

emerging Europe, we show that when local respondent banks lose access to correspondent banking services, their corporate … highlight an often overlooked function of global banks: providing the payment infrastructure that enables firms in less …-developed countries to export to richer parts of the world. …

emerging Europe, we show that when local respondent banks lose access to correspondent banking services, their corporate … findings highlight an often overlooked function of global banks: providing the payment infrastructure and trade finance that … enables firms in less-developed countries to export to richer parts of the world. …

We show that banks' risk exposure in one asset category affects how they report regulatory risk weights for another … asset category. Specifically, banks report lower credit risk weights for their loan portfolio when they face higher risk … exposure in their trading book. This relationship is especially strong for banks that have binding regulatory capital …