PUBLICATION
7 July 2025
Residential real estate sector vulnerabilities
Deputy Head of ESRB Secretariat Tuomas Peltonen spoke at the public hearing of the European Parliament’s Special Committee on the Housing Crisis in the EU, addressing vulnerabilities in the residential real estate sector.
Read the speech
CONFERENCE
18 June 2025
ESRB Annual Conference
The ESRB will hold its ninth annual conference on 3 September in Frankfurt am Main. Senior policymakers, central bankers and leading academics will gather to discuss “Broadening Horizons: The ESRB’s Next Decade of Impact”. ESRB Chair Christine Lagarde will open the hybrid event.
Read the full conference programme
PUBLICATION
12 May 2025
Restructuring and insolvency reform
Bo Becker and Martin Oehmke, members of the ESRB Advisory Scientific Committee, propose a reform of restructuring and insolvency rules in the latest ASC Insight. They envisage a new EU-wide opt-in framework that would operate alongside national insolvency frameworks.
Read the ASC Insight- 7 July 2025
- SPEECHSpeech by Tuomas Peltonen, Deputy Head of Secretariat, European Systemic Risk Board, at the public hearing of the HOUS committee
- 3 July 2025
- PRESS RELEASE
- 16 June 2025
- PRESS RELEASE
- 3 April 2025
- PRESS RELEASE
- 19 March 2025
- SPEECHSpeech by Francesco Mazzaferro, Head of the ESRB Secretariat, at the Exchange of views of the Committee on Economic and Monetary Affairs of the European Parliament
- 3 July 2025
- RISK DASHBOARDAnnexes
- 3 July 2025
- RISK DASHBOARD
- 3 July 2025
- RISK DASHBOARD
- 16 June 2025
- WORKING PAPER SERIES - No. 151Details
- Abstract
- This paper examines how the ECB’s 2022–2023 interest-rate hikes affected euro-area banks’ economic net worth and vulnerability to deposit runs. Drawing on granular, confidential data for 139 banks, we estimate each bank’s economic net worth and find that unrealised losses on loans and bonds averaged around 30 per cent of equity. By September 2023, however, roughly half of these losses had been offset by gains from the deposit franchise and interest-rate swaps. We develop a theoretical framework linking banks’ economic net worth and deposit-rate setting to depositor behaviour and run incentives. Further results indicate that banks with larger unrealised losses raised their deposit rates by less - a pattern we interpret as banks leveraging a more valuable deposit franchise to fund longer-duration assets. Although euro-area banks as a whole avoided widespread runs, several institutions nonetheless carried substantial mark-to-market losses, suggesting latent fragilities.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
E43 : Macroeconomics and Monetary Economics→Money and Interest Rates→Interest Rates: Determination, Term Structure, and Effects
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 12 May 2025
- ASC INSIGHT - No. 4
- 5 May 2025
- REPORTS
- 3 April 2025
- RISK DASHBOARDAnnexes
- 3 April 2025
- RISK DASHBOARD
- 3 April 2025
- RISK DASHBOARD
- 3 February 2025
- REPORTS
- 31 January 2025
- REPORTS
- 2 January 2025
- WORKING PAPER SERIES - No. 150Details
- Abstract
- Using supervisory data of alternative investment funds investing in bonds, I exploit the COVID-19 crisis to examine the effectiveness of redemption restrictions. First, I find that redemption restrictions reduced outflows during the March 2020 market turmoil, but did not result in higher outflows in the periods following the crisis episode. Second, I find that funds with higher redemption restrictions engaged less in procyclical cash hoarding during the COVID-19 crisis period, even after controlling for the size of their outflows. Third, I find that redemption restrictions do not have a significant impact on the sensitivity of investor inflows to good performance, but they significantly reduce the sensitivity of outflows to bad performance. These findings suggest that redemption restrictions can mitigate fragility in open-ended investment funds.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 2 January 2025
- WORKING PAPER SERIES - No. 149Details
- Abstract
- Exchange-traded funds (ETFs) are typically considered to be passive investment vehicles designed to track a benchmark index. However, with the promulgation of the Securities and Exchange Commission’s 2019 ETF Rule, funds are permitted the use of custom creation/redemption baskets. This change effectively enables a form of active basket management during the ETF’s arbitrage process. In this paper, I show that the uptake of custom baskets has heterogeneous effects on the microstructure of corporate bond ETFs. While custom baskets enhance the liquidity transformation of bond ETFs, this comes at a cost, as they concurrently produce larger index tracking errors. To isolate these effects empirically, I exploit the 2019 ETF Rule as a quasi-natural experiment. My findings substantiate the presence of a trade-off between liquidity enhancement and tracking error minimization, and underscore the role of custom baskets as contributors to this trade-off.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
D47 : Microeconomics→Market Structure and Pricing→Market Design
- 18 December 2024
- REPORTS
- 5 December 2024
- RISK DASHBOARDAnnexes
- 5 December 2024
- RISK DASHBOARD
- 5 December 2024
- RISK DASHBOARD
- 4 December 2024
- REPORTS
- 4 November 2024
- WORKING PAPER SERIES - No. 148Details
- Abstract
- Over the past decade, European investment funds have substantially increased their investment in dollar-denominated assets to more than 3.8 USD trillion, which should give raise to substantial currency hedging if US investor have reciprocal currency exposures in their international portfolios. Using comprehensive new contract level data (EMIR) for the period 2019-2023, we explore how the FX derivative trading by European funds compares to a feasible theoretical benchmark of optimal hedging. We find that hedging behaviour by all fund types is often partial, unitary (i.e., with a single currency focus), and sub-optimal. Overall, the observed FX derivative trading does not significantly reduce the return risk of the average European investment funds, even though optimal hedging strategies could without incurring substantial trading costs.
- JEL Code
- E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
F31 : International Economics→International Finance→Foreign Exchange
F32 : International Economics→International Finance→Current Account Adjustment, Short-Term Capital Movements
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 4 October 2024
- RISK DASHBOARDAnnexes
- 4 October 2024
- RISK DASHBOARD
- 4 October 2024
- RISK DASHBOARD
- 29 August 2024
- ADVISORY SCIENTIFIC COMMITTEE REPORT - No. 15
- 1 August 2024
- OCCASIONAL PAPER SERIES - No. 26Details
- Abstract
- We present a methodology based on quarterly sectoral accounts to build a map of the euro area financial system. The map can be used to visualise existing cross-sectoral interconnections and exposures, to analyse how the main bilateral positions have evolved over time, and to understand how past episodes of financial stress affected balance sheet structures and inter-sectoral flows. We find that the euro area financial system was essentially bank-centric when it entered the global financial crisis, and only afterwards has the importance of investment funds, government debt and central banks increased substantially. In particular, investment funds are used by euro area economic agents to gain exposure to the rest of the world and vice versa. We also document weak dynamics since the global financial crisis in lending between euro area banks and non-financial corporations. Next, we look at the financial system during the global financial crisis and the outbreak of the COVID-19 pandemic, a further four episodes of financial stress (sovereign debt crisis, the US taper tantrum, the Brexit referendum, the start of Russia’s invasion of Ukraine) and the monetary policy tightening between 2005 and 2007. While there are differences across them, we unveil interesting common features. The map can be useful in determining which sectors are resilient enough to absorb losses and whether they can serve as transmitters of stress. Finally, turning to liquidity, bank deposits, money market fund shares and securities financing transactions are key to ensure a smooth supply of liquidity and should continuously be on the radar of policymakers.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G20 : Financial Economics→Financial Institutions and Services→General
G10 : Financial Economics→General Financial Markets→General
Annexes- 1 August 2024
- OCCASIONAL PAPER SERIES
- 1 August 2024
- OCCASIONAL PAPER SERIES
- 19 July 2024
- ANNUAL REPORTEnglishOTHER LANGUAGES (23) +
- 27 June 2024
- RISK DASHBOARDAnnexes
- 27 June 2024
- RISK DASHBOARD
- 27 June 2024
- RISK DASHBOARD
- 13 June 2024
- NBFI MONITOR REPORT
- 16 April 2024
- REPORTS
- 3 April 2024
- REPORTS
- 28 March 2024
- RISK DASHBOARDAnnexes
- 28 March 2024
- RISK DASHBOARD
- 28 March 2024
- RISK DASHBOARD
- 25 March 2024
- OCCASIONAL PAPER SERIES - No. 25Details
- Abstract
- We set out a stylised framework for the policies enacted to address the risks posed by systemically important institutions (SIIs) and to counter the too-big-to-fail (TBTF) problem, examining conceptually how far supervisory and resolution policies are complementary or substitutable. The Financial Stability Board (FSB) TBTF reforms comprise (i) a higher loss-absorbing capacity in the form of regulatory capital buffers for SIIs, (ii) more intensive and effective supervision and (iii) a recovery and resolution regime, including sufficient loss-absorbing and recapitalisation capacity in the form of capital and eligible liabilities, to deal with distressed or failing institutions. These reform strands are part of a fundamentally integrated concept, but were largely developed and implemented independently of each other. Therefore, they may fall short of fully taking interdependencies into account, rendering policies less effective and consistent than an integrated approach, which we outline as an alternative. The analysis discusses the regulatory interplay, its implications for policymaking based on the FSB TBTF reforms for banks and its operationalisation in the Basel framework at the global level and in the European Union.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
G38 : Financial Economics→Corporate Finance and Governance→Government Policy and Regulation
- 1 March 2024
- WORKING PAPER SERIES - No. 147Details
- Abstract
- This paper studies market liquidity in interest rate swaps (IRS) before and during the global tightening of monetary policy. IRS constitute the single largest derivatives segment globally. Banks and Pension Funds extensively rely on IRS to hedge interest rate risk. Hence, providing an understanding of this market and the drivers of market liquidity is a key research question in the current market context. We use price and volume data from around 338.000 trades in the most active long-horizon swap contract denominated in EUR to construct seven liquidity measures. Taking a comprehensive approach, we ap-ply linear regressions to determine the drivers of variation in liquidity. Our liquidity measures are significantly related to monetary policy, market-wide fixed income liquidity, EURIBOR rate volatility and Dealer behaviour. Indicators for generic market stress such as VIX which are often documented in the literature are not strongly connected to IRS trading conditions.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 15 February 2024
- WORKING PAPER SERIES - No. 146Details
- Abstract
- The bulk of cash is held for store of value purposes, with such holdings sharply increasing in times of high economic uncertainty and only a fraction of the population choosing to hoard cash. We develop a Diamond and Dybvig model with public money as a store of value and heterogeneous beliefs about bank stability that accounts for this evidence. Only consumers who are sufficiently pessimistic about bank stability hold cash. The introduction of a central bank digital currency (CBDC) as a store of value lowers the storage cost of public money and induces partial bank disintermediation, which is nevertheless mitigated by an increase in relative maturity transformation. This has heterogeneous welfare consequences across the population. While cash holders always benefit by switching to CBDC, each of all other consumers may be better off or not depending on the probability of a bank run, her (and all others’) belief about such probability and the degree of technological superiority of CBDC.
- JEL Code
- E41 : Macroeconomics and Monetary Economics→Money and Interest Rates→Demand for Money
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 30 June 2025
- OPINIONSAnnexes
- 30 June 2025
- OPINIONS
- 30 June 2025
- OPINIONS
- 30 June 2025
- OPINIONSAnnexes
- 30 June 2025
- OPINIONS
- 30 June 2025
- OPINIONS
- 17 June 2025
- OPINIONS
- 6 June 2025
- RESPONSES AND LETTERS
- 22 April 2025
- RESPONSES AND LETTERS
- 7 April 2025
- STRESS TESTINGAnnexes
- 7 April 2025
- STRESS TESTING
- 7 April 2025
- STRESS TESTING
- 28 February 2025
- STRESS TESTINGAnnexes
- 20 January 2025
- STRESS TESTINGAnnexes
- 28 February 2025
- STRESS TESTING
- 28 February 2025
- STRESS TESTING
- 20 January 2025
- STRESS TESTING
- 12 February 2025
- STRESS TESTING
- 28 February 2025
- STRESS TESTING
- 27 January 2025
- RESPONSES AND LETTERS
- 7 January 2025
- STRESS TESTINGAnnexes
- 7 January 2025
- STRESS TESTING
- 7 January 2025
- STRESS TESTING
- 20 December 2024
- RESPONSES AND LETTERS
- 4 December 2024
- OPINIONS
- 19 November 2024
- STRESS TESTING
- 28 October 2024
- OPINIONSAnnexes
- 28 October 2024
- OPINIONS
- 2 September 2024
- RESPONSES AND LETTERS
- 19 August 2024
- RESPONSES AND LETTERS
- 19 August 2024
- RESPONSES AND LETTERS
- 19 August 2024
- RESPONSES AND LETTERS
- 1 July 2024
- OPINIONS
- 30 April 2024
- OPINIONS
- 23 April 2024
- RESPONSES AND LETTERS
- 31 January 2025
- 31 December 2024
- 31 December 2024
- 30 December 2024
- 23 December 2024
- 12 December 2024
- 11 December 2024
- 6 December 2024
- 6 December 2024
- 6 December 2024
- 4 December 2024
- 4 December 2024
- 2 December 2024
- 2 December 2024
- 2 December 2024
- 2 December 2024
- 1 December 2024
- 1 December 2024
- 1 December 2024
- 1 December 2024
- 1 December 2024
- 1 December 2024
- 1 December 2024
- 1 December 2024
- 29 November 2024
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