Politics, banks, and sub-sovereign debt: Unholy trinity or divine coincidence?

Arbeitspapier

We exploit election-driven turnover in State and local governments in Germany to study how banks adjust their securities portfolios in response to the loss of political connections. We find that local savings banks, which are owned by their host county and supervised by local politicians, increase significantly their holdings of home-State sovereign bonds when the local government and the State government are dominated by different political parties. Banks' holdings of other securities, like federal bonds, bonds issued by other States, or stocks, are not affected by election outcomes. We argue that banks use sub-sovereign bond purchases to gain access to politically distant government authorities.

Object Details

• ISBN: 978-92-899-3251-6
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 2146

Classification and Topics

• Classification: Wirtschaft ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; National Debt; Debt Management; Sovereign Debt ; Capitalist Systems: Political Economy
• Subject: political connections ; government-owned banks ; sub-sovereign debt

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koetter, Michael ; Popov, Alexander
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2018

Further information

• DOI: doi:10.2866/700142
• Handle: http://hdl.handle.net/10419/183328
• Last update: 08.05.0016, 11:43 AM CET