Arbeitspapier
The Euro Area's Common Pool Problem Revisited: Has the Single Supervisory Mechanism Ameliorated Forbearance and Evergreening
The Single Supervisory Mechanism was introduced to eliminate the common-pool problem and limit uncontrolled lending by national central banks (NCBs). We analyze its effectiveness. Second, we model how, by forbearing and providing refinancing credit, NCBs avoid domestic resolution costs and, instead, share potential losses within the Euro Area. This results in “evergreening” of bad loans. Third, we construct a new evergreening index based on a large worldwide survey administered by the ifo institute. Regressions show evergreening is significantly greater in the Euro Area and where banks are in distress. Finally, greater evergreening accompanies higher growth of NCB-credit and Target2-liabilities.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 6670
- Classification
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Wirtschaft
International Monetary Arrangements and Institutions
International Institutional Arrangements
Central Banks and Their Policies
- Subject
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single supervisory mechanism
evergreening
nonperforming loans
common-pool problem
- Event
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Geistige Schöpfung
- (who)
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Steinkamp, Sven
Tornell, Aaron
Westermann, Frank
- Event
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Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
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2017
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Steinkamp, Sven
- Tornell, Aaron
- Westermann, Frank
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2017
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