Financial Stability Report 37

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• Financial Stability Report 37 (PDF, 3,3 MB) Juni 2019

Studien und Analysen

• Call for applications: Klaus Liebscher Economic Research Scholarship (PDF, 56 kB) en 03.07.2019, 00:00:00

• Management summary (PDF, 75 kB) en 03.07.2019, 00:00:00

• International macroeconomic environment: global and European growth slows down somewhat as downside risks prevail (PDF, 514 kB) en 03.07.2019, 00:00:00

• Corporate and household sectors in Austria: income growth supports debt service capacity (PDF, 938 kB) en 03.07.2019, 00:00:00

• Austrian financial intermediaries: bank profits reach another post-crisis high, while insurance sector results are under pressure (PDF, 997 kB) en 03.07.2019, 00:00:00

• Nontechnical summaries (English and German) (PDF, 73 kB) de en 03.07.2019, 00:00:00

• Who puts our financial system at risk? A methodological approach to identify banks with potential significant negative effects on financial stability (PDF, 496 kB) Eidenberger, Redak, Ubl. Since the outbreak of the global financial crisis, a number of regulations have been issued to cope with the too-big-to-fail problem and its devastating effects on financial markets, government budgets and the broader economy in general. The aim of these regulations is to contain the risks stemming from large institutions which potentially jeopardize not only these institutions’ own existence but other institutions and segments of the economy as well. In particular, new legislation in macroprudential supervision and resolution that refers to systemically relevant institutions addresses the too-big-to-fail problem. Still, in practice, it is difficult for supervisory authorities to answer the question which institution may really compromise financial stability. The identification of systemically relevant banks is particularly important for banking systems (like the Austrian) with large numbers of banks, where even medium-sized banks might put stress on the entire financial system. Bringing together macroprudential regulations as well as recovery and resolution planning, this methodological paper aims to contribute to the literature and supervisory practice on the identification of systemically relevant banks. We develop a consistent and comprehensive framework that consists of more than 30 quantitative indicators reflecting four key stability criteria: financial market conditions, economic importance, direct contagion and indirect contagion. A particular challenge in this context is the setting of explicit thresholds for each of these indicators. To resolve this issue, we design a methodological approach to calibrating thresholds for different types of indicators: stress indicators, risk exposure indicators, system share indicators and network indicators. We identify thresholds based on quarterly panel data (from 1999 to 2016) for the Austrian banking sector. One basic assumption of our calibration is the idea of substitutability: If market activities of a failing bank can be absorbed promptly by other market participants, financial stability will not be at risk. As the substitution of bank activities also depends on the current phase of the economic cycle, we account for bust phases by developing stress scenarios. en financial stability, macroprudential supervision, resolution, systemically important banks, thresholds G21, G18 03.07.2019, 00:00:00

• Quantifying interest rate risk and the effect of model assumptions behind sight deposits (PDF, 615 kB) Kerbl, Simunovic, Wolf. Have Austrian banks taken on higher interest rate risks amid the low interest rate environment? According to the interest rate risk statistics, which quantify the effect of the regulatory 200-basis-point interest rate shock, interest rate risk as reported by banks has not risen significantly since the beginning of the low interest rate period. However, in measuring interest rate risk, banks need to rely on model assumptions, especially with regard to the repricing dates
  they assume for customer deposits. Harnessing this room for maneuver, banks may compensate for longer fixation periods on the assets side (maturity transformation). In turn, a higher degree of maturity transformation and interest rate sensitivity might not be fully reflected in the reported interest rate risk. Analyzing this room for maneuver, we calculate Austrian banks’ interest rate risk level over time while assuming standardized and conservative repricing dates. Under these conservative repricing dates, a different picture on interest rate risks emerges especially for large banks. We conclude that large banks in Austria have seen a marked increase in maturity
  transformation over time, which was mirrored by small and medium-sized banks to a lesser extent. It follows that interest rate risk in the banking book, and its quantification, is now more relevant for evaluating banks’ business models and capital adequacy than was the case before the start of the low interest rate phase. en interest rate risk, maturity transformation, low interest rate environment, risk quantification and management, bank capital G21, G28, G38, E43 03.07.2019, 00:00:00

• Annex of tables (PDF, 297 kB) en 03.07.2019, 00:00:00

• Annex of tables (XLSX, 93 kB) de