The zero risk fallacy? Banks' sovereign exposure and sovereign risk spillovers

Arbeitspapier

European banks are exposed to a substantial amount of risky sovereign debt. The "missing bank capital" resulting from the zero-risk weight exemption for European banks for European sovereign debt amplifies the co-movement between sovereign CDS spreads and facilitates cross-border financial-crisis spillovers. Risks spill over from risky periphery sovereigns to safer core countries, but not in the opposite direction nor for exposures to countries not exempted from risk-weighting. We consider the trade-off of benefits of sovereign debt (for banks and sovereigns) and spillover risk when applying risk-weights. More bank capital as well as positive risk-weighting for sovereign exposures mitigates spillovers.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: ZEW Discussion Papers ; No. 17-069

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation ; Information and Market Efficiency; Event Studies; Insider Trading ; International Financial Markets ; Multinational Firms; International Business
• Thema: sovereign debt ; sovereign risk ; bank risk ; CDS ; contagion ; zero risk weight ; Basel III ; CRD ; EBA capital exercise

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Kirschenmann, Karolin ; Korte, Josef ; Steffen, Sascha
• Ereignis: Veröffentlichung
• (wer): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (wo): Mannheim
• (wann): 2017

Weitere Informationen

• Handle: http://hdl.handle.net/10419/172521
• URN: urn:nbn:de:bsz:180-madoc-438874
• Letzte Aktualisierung: 10.03.2025, 11:46 MEZ