What drives sovereign debt portfolios of banks in a crisis context?

Arbeitspapier

We study determinants of sovereign portfolios of Spanish banks over a long time-span, starting in 2008. Our findings challenge the view that banks engaged in moral hazard strategies to exploit the regulatory treatment of sovereign exposures. In particular, we show that being a weakly capitalized bank is not related to higher holdings of domestic sovereign debt. While a strong link is present between central bank liquidity support and sovereign holdings, opportunistic strategies or reach-for-yield behavior appear to be limited to the non-domestic sovereign portfolio of well-capitalized banks, which might have taken advantage of their higher risk-bearing capacity to gain exposure (via central bank liquidity) to the set of riskier sovereign bonds. Furthermore, we document that financial fragmentation in EMU markets has played a key role in reshaping sovereign portfolios of banks. Overall, our results have important implications for the ongoing discussion on the optimal design of the risk-weighted capital framework of banks.

Angaben zum Objekt

• ISBN: 978-92-95210-00-4
• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ESRB Working Paper Series ; No. 88

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; National Debt; Debt Management; Sovereign Debt
• Thema: Banks' sovereign holdings ; sovereign crisis ; moral hazard ; central bank liquidity ; EMU financial fragmentation

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Lamas, Matías ; Mencía, Javier
• Ereignis: Veröffentlichung
• (wer): European Systemic Risk Board (ESRB), European System of Financial Supervision
• (wo): Frankfurt a. M.
• (wann): 2019

Weitere Informationen

• DOI: doi:10.2849/619802
• Handle: http://hdl.handle.net/10419/193595
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ