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agents in the economy over time and space; they increase the money base through credit creation; they hold fractional … that enables the bank credit manufacturing process. In this way, all the banks become interdependent on the flow of … inter-bank clearing and credit arrangements provide this coordination at the inter-bank level, which is effectuated through …
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We propose a tractable, model-based stress-testing framework where the solvency risks, funding liquidity risks and market risks of banks are intertwined. We highlight how coordination failure between a bank's creditors and adverse selection in the secondary market for the bank's assets interact,...
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This in-depth analysis proposes ways to retract from supervisory COVID-19 support measures without perils for financial stability. It simulates the likely impact of the corona crisis on euro area banks' capital and predicts a significant capital shortfall. We recommend to end accounting...
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Interconnectedness is an inherent feature of the modern financial system. While it contributes to efficiency of financial services, it also creates structural vulnerabilities: pernicious shock transmission and amplification impacting banks' capitalization. This has recently been seen during the...
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