Shadow banking is a broad concept. A possible definition is that it comprises non-bank institutions which undertake bank-like activities. Another characteristic is that the sector is overall less regulated. Therefore there are still shortcomings in systematic collection of information of the sector.

A macro-prudential policy maker can manage risks to financial stability only if currentand future risks can be reliably assessed. We propose a novel framework to assessfinancial system risk. Using a dynamic factor framework based on state-space methods, we model latent macro-financial and credit...

We examine the pervasive view that equity is expensive which leads to claims that high capital requirements are costly and would affect credit markets adversely. We find that arguments made to support this view are either fallacious, irrelevant, or very weak. For example, the return on equity...

SUERF – The European Money and Finance Forum, the Deutsche Bundesbank and the Institute for Monetary and Financial Stability (IMFS) took the opportunity of the first anniversary of this new institution to organise a joint conference in Berlin on 8-9 November 2011. The purpose of this event was...

We examine the financial stability implications of covered bonds. Banks issue covered bonds by encumbering assets on their balance sheet and placing them within a dynamic ring fence. As more assets are encumbered, jittery unsecured creditors may run, leading to a banking crisis. We provide...

The macroprudential regulatory framework of Basel III imposes the same capital and liquidity requirements on all banks around the world to ensure global competitiveness of banks. Using an agent-based model of the financial system, we find that this is not a robust framework to achieve...

This paper examines the impact of bank heterogeneity on the assessment of systemic risk in the context of the German banking sector. Precisely, it is questioned whether currently employed systemic risk indicators are able to account for banks' heterogeneity and to signal systemic risk reliably...

We build a textual score measuring the tone of bank earnings press release documents. We use this measure to define bank manager sentiment as the variation in the textual tone score which is orthogonal to bank-specific and macroeconomic fundamentals. Using this definition of sentiment, we...

We propose a simple network–based methodology for ranking systemically important financial institutions. We view the risks of firms –including both the financial sector and the real economy– as a network with nodes representing the volatility shocks. The metric for the connections of the...

We analyze shareholders' incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer. This resistance is present even without any government...