A sovereign debt crisis can have significant knock-on effects in the financial markets and put financial stability at risk. This paper focuses on the transmission of sovereign risk to insurance companies as some of the largest institutional investors in the sovereign bond market. We use a firm...

In this paper, we present a new approach to measuring interest rate risk for insurers within the Swiss Solvency Test, which overcomes the shortcomings of the standard model. The standard model of the Swiss Solvency Test is based on more interest rate risk factors than are actually needed to...

Life insurance companies are affected directly by the impact of the low-interestrate environment. To fulfil promised guarantees they may be forced to tap into their own funds, say if the current income generated is no longer sufficient to cover the policyholders’ profit participation share as...

Die Lebensversicherer sind von den Auswirkungen des Niedrigzinsumfelds unmittelbar betroffen. Damit sie die zugesicherten Garantien erfüllen können, müssen sie unter Umständen Eigenmittel aufwenden. Dies ist dann der Fall, wenn die von den Unternehmen festgelegte Überschussbeteiligung oder...

This paper adds to the growing body of literature on the design of Contingent Convertible Bonds (CoCos). We discuss how the design of the loss absorption mechanism affects the stability of bank funding and distinguish between Conversion-to-Equity (CE) CoCos, Principal WriteDown (PWD) CoCos with...

In this paper, we analyze the impact of loan growth and business model on bank risk in 15 EU countries. In contrast to the literature, we include a large number of unlisted banks in our sample which represent the majority of banks in the EU. We show that banks with high rates of loan growth are...

We study the response of bond spreads to a liquidity supply shock in the credit default swap (CDS) market. Our identification strategy exploits the exogenous exit of a large dealer from the single-name CDS market as well as granular data on CDS transactions and bond portfolio holdings of German...

In this paper, we analyze the impact of banks' non-interest income share on risk in the German banking sector for the period between 2002 and 2010. Using linear and quantile regression estimators, we find that the impact of non-interest income on risk significantly differs depending on banks’...

We exploit variation in the share of seniors across European banking markets to construct an IV for banks’ dependence on long-term deposit funding and find that greater long-term deposit funding reduces demand for long-term central bank funding via targeted longer-term refinancing operations...

This paper documents significant cross-border effects of the 2014 US money market fund (MMF) reform on MMFs in the euro area. As US-based prime MMFs became less money-like due to the reform, euro area-based prime MMFs received large inflows from foreign investors. These cross-border flows were...