We investigate whether sovereign bond holdings of European banks are determined by a risk-return trade-off. Using data between 2011 and 2018 for 75 European banks, we confirm that banks exhibited risk-taking behavior during the sovereign debt crisis, e.g., due to moral suasion. In the period...

We investigate whether sovereign bond holdings of European banks are determined by a risk-return trade-off. Using data between 2011 and 2018 for 75 European banks, we confirm that banks exhibited risk-taking behavior during the sovereign debt crisis, e.g., due to moral suasion. In the period...

We investigate the effectiveness of the Bank Recovery and Resolution Directive (BRRD) in mitigating the bank-sovereign nexus for 39 banks in 8 Euro Area countries, using CDS spreads to capture bank and sovereign credit risk between 2008-2020. If the BRRD bail-in framework is credible, exogenous...

We investigate the effectiveness of the Bank Recovery and Resolution Directive (BRRD) in mitigating the bank-sovereign nexus in the Euro Area. Using CDS spreads to measure bank and sovereign credit risk and a DCC-MIDAS model to capture the long-term component of bank sovereign...