Sustainable Architecture for Finance in Europe (SAFE)
Refine
Year of publication
Document Type
- Working Paper (809)
- Part of Periodical (502)
- Report (62)
- Article (32)
- Contribution to a Periodical (2)
- Conference Proceeding (1)
- Review (1)
Has Fulltext
- yes (1409) (remove)
Is part of the Bibliography
- no (1409)
Keywords
- Financial Institutions (90)
- Capital Markets Union (67)
- ECB (62)
- Financial Markets (58)
- Banking Union (52)
- Banking Regulation (51)
- Household Finance (43)
- Banking Supervision (40)
- Macro Finance (40)
- Monetary Policy (35)
Institute
- Sustainable Architecture for Finance in Europe (SAFE) (1409)
- Wirtschaftswissenschaften (1357)
- Center for Financial Studies (CFS) (783)
- House of Finance (HoF) (688)
- Institute for Monetary and Financial Stability (IMFS) (125)
- Rechtswissenschaft (63)
- Foundation of Law and Finance (48)
- Institute for Law and Finance (ILF) (7)
- Gesellschaftswissenschaften (6)
- Frankfurt MathFinance Institute (FMFI) (3)
Nicht nur die Geräuschkulisse des Brexits absorbierte ein Stück weit die Aufmerksamkeit für das Urteil des Europäischen Gerichtshofs (EuGH) zur Zulässigkeit des Anleihenkaufprogramms der EZB. Denn immerhin entschied Luxemburg damit über eine der nach wie vor seltenen Vorlagen aus Karlsruhe. Dazu mag auch beigetragen haben, dass seit der Stellungnahme des Generalanwalts Wathelet nicht mehr damit gerechnet wurde, dass der EuGH der Europäischen Zentralbank (EZB) einen sprichwörtlichen Strich durch die Rechnung machen würde. Dennoch ist das Urteil aus einigen Gründen bemerkenswert.
How demanding and consistent is the 2018 stress test design in comparison to previous exercises?
(2018)
Bank regulators have the discretion to discipline banks by executing enforcement actions to ensure that banks correct deficiencies regarding safe and sound banking principles. We highlight the trade-offs regarding the execution of enforcement actions for financial stability. Following this we provide an overview of the differences in the legal framework governing supervisors’ execution of enforcement actions in the Banking Union and the United States. After discussing work on the effect of enforcement action on bank behaviour and the real economy, we present data on the evolution of enforcement actions and monetary penalties by U.S. regulators. We conclude by noting the importance of supervisors to levy efficient monetary penalties and stressing that a division of competences among different regulators should not lead to a loss of efficiency regarding the execution of enforcement actions.
This paper analyzes how the combination of borrowing constraints and idiosyncratic risk affects the equity premium in an overlapping generations economy. I find that introducing a zero-borrowing constraint in an economy without idiosyncratic risk increases the equity premium by 70 percent, which means that the mechanism described in Constantinides, Donaldson, and Mehra (2002) is dampened because of the large number of generations and production. With social security the effect of the zero-borrowing constraint is a lot weaker. More surprisingly, when I introduce idiosyncratic labor income risk in an economy without a zero-borrowing constraint, the equity premium increases by 50 percent, even though the income shocks are independent of aggregate risk and are not permanent. The reason is that idiosyncratic risk makes the endogenous natural borrowing limits much tighter, so that they have a similar effect to an exogenously imposed zero-borrowing constraint. This intuition is confirmed when I add idiosyncratic risk in an economy with a zero-borrowing constraint: neither the equity premium nor the Sharpe ratio change, because the zero-borrowing constraint is already tighter than the natural borrowing limits that result when idiosyncratic risk is added.
Departing from the principle of absolute priority, CoCo bonds are particularly exposed to bank losses despite not having ownership rights. This paper shows the link between adverse CoCo design and their yields, confirming the existence of market monitoring in designated bail-in debt. Specifically, focusing on the write-down feature as loss absorption mechanism in CoCo debt, I do find a yield premium on this feature relative to equity-conversion CoCo bonds as predicted by theoretical models. Moreover, and consistent with theories on moral hazard, I find this premium to be largest when existing incentives for opportunistic behavior are largest, while this premium is non-existent if moral hazard is perceived to be small. The findings show that write-down CoCo bonds introduce a moral hazard problem in the banks. At the same time, they support the idea of CoCo investors acting as monitors, which is a prerequisite for a meaningful role of CoCo debt in banks' regulatory capital mix.
This paper provides a complete characterization of optimal contracts in principal-agent settings where the agent's action has persistent effects. We model general information environments via the stochastic process of the likelihood-ratio. The martingale property of this performance metric captures the information benefit of deferral. Costs of deferral may result from both the agent's relative impatience as well as her consumption smoothing needs. If the relatively impatient agent is risk neutral, optimal contracts take a simple form in that they only reward maximal performance for at most two payout dates. If the agent is additionally risk-averse, optimal contracts stipulate rewards for a larger selection of dates and performance states: The performance hurdle to obtain the same level of compensation is increasing over time whereas the pay-performance sensitivity is declining.