Financial Stability Report 9

Downloads

• Financial Stability Report 9 (2005) (PDF, 1011 kB) June 2005.

Studies and Analyses

• Austria's Financial System Has Further Improved Its Resilience to Crises (PDF, 59 kB) Financial Stability Report 9 (6/2005) en Jun 15, 2005, 12:00:00 AM

• International Environment Increasingly Fraught with Risk (PDF, 235 kB) Financial Stability Report 9 (6/2005) en Jun 15, 2005, 12:00:00 AM

• Financial Position of Real Economy Sectors Strengthened (PDF, 151 kB) Financial Stability Report 9 (6/2005) en Jun 15, 2005, 12:00:00 AM

• Austrian Financial Intermediaries in Good Shape (PDF, 212 kB) Financial Stability Report 9 (6/2005) en Jun 15, 2005, 12:00:00 AM

• The Consistency of Self-Declared Hedge Fund Styles — A Return-Based Analysis with Self-Organizing Maps (PDF, 177 kB) Baghai-Wadj, El-Berry, Klocker, Schwaiger. Baghai-Wadji, El-Berry, Klocker, Schwaiger - Financial Stability Report 9 (6/2005) While hedge funds have common features, they remain an extremely diverse asset class. Despite this diversity, a consistent classification system is important for numerous purposes such as portfolio construction, performance attribution as well as risk management. This topic is also connected to the financial stability debate, which has recently dealt intensively with the issue of hedge funds. Diversified (fund) portfolios with an appropriate risk monitoring system in place will e.g. enhance risk-sharing among financial market participants. As fund self-declaration is prone to strategic misclassification, return-based taxonomies grouping funds along similarities in realized returns can be used to avoid this pitfall. In this paper we use Self-Organizing Maps (SOM) to find homogeneous groups of hedge funds based on similar (return) characteristics. Based on this technique, we can identify nine hedge fund classes. Whereas managed futures, sector financial and short-sell hedge funds are largely consistent in their self-declared strategies, we detect a number of declared hedge fund styles displaying no or very limited return similarities. Especially the so-called _equity hedge_ style encompasses too many different substyles with different return characteristics. Another important aspect that our paper addresses is the tendency of fund managers to perform undisclosed changes of their trading style or to strategically misdeclare their funds. Our results show that so called _style creep_ is an issue in the hedge fund business, with funds which misclassified themselves once being very likely to change their trading style again. en Hedge Funds G24 Jun 15, 2005, 12:00:00 AM

• Institutional Determinants of Equity Financing in Austria (PDF, 169 kB) Dirschmid, Waschiczek. Dirschmid, Waschiczek - Financial Stability Report 9 (6/2005) This study examines which institutional determinants are chiefly responsible for the fact that the capital structure of Austrian companies is dominated by debt. An international comparison shows that company taxation is generally not financing-neutral and, given the observed differences in equity ratios between countries, cannot be the primary factor influencing capital structure choice. Instead, the nature of creditor protections, which determine the position of investors and lenders in the event of bankruptcy, is probably a far more decisive factor. Equity ratios decline in parallel with creditor-friendly provisions across countries. Because of the predominance of small and medium-sized enterprises (SMEs) in Austria, the Hausbank principle plays an important role in determining capital structure. The associated intensive exchange of information between banks and companies allows borrowings to take on the functions usually performed by equity. In the future, financial market innovations and the transfer of severance pay and pension entitlements to outside institutions could have an influence on capital structure. en Financing Policy, Bankruptcy G32, G33 Jun 15, 2005, 12:00:00 AM

• Demographic Developments, Funded Pension Provision and Financial Stability (PDF, 172 kB) Schmitz. Schmitz - Financial Stability Report 9 (6/2005) The following study analyzes the impact of demographic developments in Austria on the long-term average real interest rate, funded pension provision and the implications of demographic developments for the stability of the financial system. The key results of this study are twofold: (1) Households_ net supply of savings and the demand for capital by the corporate sector both need to be integrated into the empirical and theoretical analysis of the impact of demographic developments on financial markets. (2) In addition, funded pension provision is exposed to demographic risks. en Financial Stability, Pension Funds, Demographics, Ageing G23, J10 Jun 15, 2005, 12:00:00 AM

• The Croatian Banking System (PDF, 153 kB) Reininger, Walko. Reininger, Walko - Financial Stability Report 9 (6/2005) This paper provides an analysis of the stability of the Croatian banking sector. After the banking crisis of 1998, the Croatian banking system underwent a deep transformation process; foreign investors gained a dominating market share of more than 90% of total assets, with Austrian banks holding 43% thereof. Compared to other Central and Eastern European countries (CEECs), the degree of banking intermediation is relatively high in Croatia. In recent years, lending to the private sector and in particular to households has risen whereas lending to the general government has declined. Foreign currencies continue to play an important role in the Croatian banking sector, in particular on the liabilities side of banks balance sheets. While maintaining a large negative net foreign currency position on their balance sheets (with an increasing portion of net liabilities to nonresidents), Croatian banks overall net foreign currency position seems to be marginally positive. Still, foreign currency(-indexed) lending represents a credit risk as it entails an indirect exchange rate risk. Asset quality, by contrast, has improved significantly over the past five years, the capital adequacy ratio is on a relatively high — albeit declining — level, and real return on equity (ROE) is now as high as the profitability levels observed in other CEECs. en Banks G21, P34 Jun 15, 2005, 12:00:00 AM

• Annex of Tables (PDF, 109 kB) Financial Stability Report 9 (6/2005) en Jun 15, 2005, 12:00:00 AM