Bank sovereign bond holdings, sovereign shock spillovers, and moral hazard during the European crisis / Andrea Beltratti, René M. Stulz.

Format:

Book

Author/Creator:

Beltratti, Andrea.

Contributor:

National Bureau of Economic Research.

Stulz, René M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21150.

NBER working paper series no. w21150

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

From 2010 to 2012, the relation between bank stock returns from European Union (EU) countries and the returns on sovereign CDS of peripheral (GIIPS) countries is negative. We use days with tail sovereign CDS returns of peripheral countries to identify the effects of shocks to the cost of borrowing of these countries on EU banks from other countries. A CDS tail return affects banks with greater exposure to the country experiencing that return more, but it has an impact on banks regardless of exposure. Shocks to peripheral countries that are more pervasive impact the returns of banks from countries that experience no shock more than shocks to small individual peripheral countries. In general, the impact of tail returns is asymmetric in that banks suffer less from adverse shocks to peripheral countries than they gain from favourable shocks to such countries.

Notes:

Print version record

May 2015.