End of the sovereign-bank doom loop in the European Union? The Bank Recovery and Resolution Directive

@article{Covi2020EndOT,
  title={End of the sovereign-bank doom loop in the European Union? The Bank Recovery and Resolution Directive},
  author={Giovanni Covi and Ulrich Eydam},
  journal={Journal of Evolutionary Economics},
  year={2020},
  volume={30},
  pages={5-30}
}
  • G. Covi, U. Eydam
  • Published 1 January 2020
  • Economics
  • Journal of Evolutionary Economics
In this paper we examine the relationship between the default risk of banks and sovereigns, i.e. the ‘doom-loop’. Specifically, we try to assess the effectiveness of the implementation of the new recovery and resolution framework in the European Union. We use a panel with daily data on European banks and sovereigns ranging from 2012 to 2016 in order to test the effects of the Bank Recovery and Resolution Directive on the two-way feedback process. We find that there was a pronounced feedback… 
Bank Capital Regulation and the Sovereign-Bank Nexus: Evidence from European Banks
European sovereign debt benefits from privileges in banking regulation throughout all risk categories. In contrast to the risk-based approach applied to other asset classes, it does not have to be
European Significant Bank Stock Market Volatility: Is there a Bail-In Effect?
In 2016 the “bail-in” tool, set by the European Bank Recovery and Resolution Directive (BRRD), started to enter into force: shareholders of European banks lose their money in the case of bank rescue.
Economic Policy Uncertainty, Interest Rates and the Co-Movement of Sovereign-Bank Default Risk
The present study examines political roots of bank and sovereign default risk co-movements for banks in Europe and the United States. A flattening of the yield curve, lower bank interest margins,
A Macro-Financial Model of the Eurozone Architecture Embedded in the Global Offshore US-Dollar System
It is a convention to say that the Eurozone architecture is ill-constructed and deficient. However, monetary architecture is not a well-defined term in monetary theory, and there is no consensus what
Policy uncertainty, interest rate environment and the dynamic correlation between sovereign and bank default risk
Abstract This study assesses the impact of policy uncertainty and the interest rate environment on the sovereign-bank nexus considering 48 banks in 14 countries. By applying principal component
Preferential treatment of government bonds in liquidity regulation: Implications for bank behaviour and financial stability
This paper analyses the impact of different treatments of government bonds in bank liquidity regulation on financial stability. Using a theoretical model, we show that a sudden increase in sovereign
Euro area growth differentials: diverging and reinforcing factors in a Kaleckian SVAR approach
The aim of this paper is to identify the euro area economic heterogeneity by disentangling the factors and characteristics shaping and exacerbating growth differentials between surplus and deficit

References

SHOWING 1-10 OF 23 REFERENCES
The emerging regulatory landscape: a new normal
The study provides an insight on the regulatory requirements that banks have been complying with since the financial crisis of 2009. Precisely, it focuses upon the Bank Recovery and Resolution
Monetary Policy, Bank Bailouts and the Sovereign-Bank Risk Nexus in the Euro Area
The paper analyses the empirical relationship between bank risk and sovereign credit risk in the euro area. Using structural VAR with daily financial markets data for 2003-13, the analysis confirms
The Dynamics of Spillover Effects during the European Sovereign Debt Crisis
In this paper we modify and extend the framework of Diebold and Yilmaz (2011) to quantify spillovers between sovereign credit markets and banks in the euro area. Spillovers are estimated recursively
The Eurozone Crisis: How Banks and Sovereigns Came to Be Joined at the Hip
We use the rise and dispersion of sovereign spreads to tell the story of the emergence and escalation of financial tensions within the eurozone. This process evolved through three stages. Following
Hazardous tango: sovereign-bank interdependence and financial stability in the euro area
The strong interdependence between banking and sovereign crisis has emerged as a salient feature of euro area crisis. This interdependence, for sure, is not a specific feature of the euro area. But
Sovereign and Bank Credit Risk During the Global Financial Crisis
This paper investigates the interaction of market views on the sustainability of sovereign debt and the perceived credit risk of banks. This interaction came into spotlight during the recent
Credit Spread Interdependencies of European States and Banks During the Financial Crisis
We investigate the interdependence of the default risk of several Eurozone countries (France, Germany, Italy, Ireland, the Netherlands, Portugal, and Spain) and their domestic banks during the period
The Recovery Framework in the BRRD and its Effectiveness
The EU has made great endeavors in establishing a bank resolution procedure after the global financial crisis (GFC). In April 2014 the directive on establishing a framework for the recovery and
Bail-In and Private International Law: How to Make Bank Resolution Measures Effective Across Borders
Bank resolution is key to avoiding a repetition of the global financial crisis in which failing financial institutions had to be bailed out with taxpayers’ money. It permits recapitalizing banks or
...
...