We test whether measures of potential influence on regulators affect stress test outcomes. The large trading banks – those most plausibly ‘Too big to Fail' – face the toughest tests. In contrast, we find no evidence that either political or regulatory connections affect the tests. Stress...

The issue of bank dividend regulation has become highly controversial as the stress induced on bank capital during the 2008 financial crisis and the covid pandemic created a demand for enhanced regulation and restrictions on bank dividend payments. This paper examines this issue from a...

The paper investigates the effectiveness of dividend-based macroprudential rules in complementing capital requirements to promote bank soundness and sustained lending over the cycle. First, some evidence on bank dividends and earnings in the euro area is presented. When shocks hit their profits,...

This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank, and that their sovereign partially backs up any...

The present paper examines the impact of the current fiscal crisis in the euro area on the Greek banking system and the institutional, regulatory and supervisory measures adopted to preserve its stability. It is divided into 2 Sections:(a) Section 1 deals with the differentiated impact of the...

The unchecked build-up of imbalances during the 2000s exposed the euro area to the risk of sudden stops. Such risk materialized in 2009-10 and its consequences were amplified by the absence of adequate institutions. Europe embarked on a thorough process of reforming its economic governance. We...

In the aftermath of the financial crisis, governments are rightly reducing their exposure to the banking system. Bail-in arrangements should ensure that shareholders and creditors take the first losses. The next line of defence is a resolution fund, which is filled via levies on banks....

This work examines the impacts which the Covid-19 pandemic brought to the stability of the European financial sector. Lockdowns, businesses unable to operate and uncertainty about how the pandemic would evolve fueled a sharp recession. From the lessons learned in the global financial crises and...

This paper seeks to understand the interplay between banks, bank regulation, sovereign default risk and central bank guarantees in a monetary union. I assume that banks can use sovereign bonds for repurchase agreements with a common central bank, and that their sovereign partially backs up any...