Financial Stability Report 20

Downloads

• Financial Stability Report 20 (PDF, 2 MB) December 2010.

Studies and Analyses

• EU Support Measures Underpin Fragile Recovery – Financial Markets Still Face Challenges (PDF, 237 kB) en Dec 15, 2010, 12:00:00 AM

• Fragile Post-Recession Recovery (PDF, 1.4 MB) en Dec 15, 2010, 12:00:00 AM

• Financing Conditions Stabilize for Real Economy (PDF, 788 kB) en Dec 15, 2010, 12:00:00 AM

• Recovery of Austrian Financial System on Course, while Overall Conditions Remain Difficult (PDF, 588 kB) en Dec 15, 2010, 12:00:00 AM

• Foreign Currency Lending in Central, Eastern and Southeastern Europe: The Case of Austrian Banks (PDF, 456 kB) Pann, Seliger, Übeleis. Pann, Seliger, Übeleis – Financial Stability Report 20 This paper describes the exposure of Austrian banks to foreign currency loans in Central, Eastern and Southeastern Europe and the CIS and elaborates on its risks to banking sector stability. Austrian banks’ foreign currency loan exposure more than doubled between 2005 and 2009, their regional subsidiaries’ foreign currency loan exposure continued to be higher than the market average in this period. Our findings confirm the key importance of funding risks and do not contradict the assumption of a nonlinear relationship with regard to credit risk. However, a simple comparison of risk indicators does not unambiguously indicate an overall higher credit risk in the foreign currency loan portfolio. Most recent data suggest that Austrian banks’ foreign currency loan exposure is declining. Policymakers are now called upon to use the momentum and strike a balance between restricting foreign currency lending to foster a more sustainable growth path and avoiding negative procyclical effects. en Austrian banks, Eastern Europe, foreign currency loan, banking sector stability, credit risk G15, G21, F34 Dec 15, 2010, 12:00:00 AM

• Russian Banks on the Route of Fragile Recovery (PDF, 760 kB) Barisitz, Lahnsteiner. Barisitz, Lahnsteiner – Financial Stability Report 20 Largely thanks to the recovery of the real economy, the situation of Russian banks has improved again. After month-on-month loan growth had quickly ground to a halt in late 2008, banks contributed to Russia’s deep economic slump in 2009. The share of nonperforming loans had tripled to 10% of total loans by late 2009 and has since remained at about this level. An incipient recovery of lending made itself felt only in the second quarter of 2010. However, as the national authorities had delivered a comprehensive policy response which helped sustain or reestablish confidence, Russia did not experience any major bank run or failure. Temporary deposit withdrawals after the collapse of Lehman Brothers were followed by a rapid expansion of deposits, starting from early 2009. Following a modest crisis-triggered rise, the share of foreign currency loans declined again to about one-fifth of total loans. Banks’ access to international capital markets improved from late 2009/early 2010. Profitability, having plunged to zero in mid-2009, subsequently recovered but is still modest. Thanks to recapitalization exercises, capital adequacy is satisfactory. The stabilization of the banking sector has allowed the authorities to start exiting from crisis response measures. Banks face a vulnerable environment given the world economy’s post-crisis fragility and Russia’s undiminished dependence on the oil price and capital flows, which is exacerbated by persisting structural weaknesses. Nonetheless, the existing shock-absorbing factors are sizeable. en Banking sector, banking crisis, credit boom, credit crunch, connected lending, crisis-response policies, nonperforming loans, restructuring, shock-absorbing factors, Russia G21, G28, P34 Dec 15, 2010, 12:00:00 AM

• The Economic Impact of Measures Aimed at Strengthening Bank Resilience – Estimates for Austria (PDF, 906 kB) Kopp, Ragacs, Schmitz. Kopp, Ragacs, Schmitz – Financial Stability Report 20 This paper proposes a conceptual framework for analyzing the effects that proposals to strengthen the resilience of the banking sector may have on the Austrian economy. We use this framework to quantify the macroeconomic costs of the following regulatory reform measures: Requiring banks to raise the quality of the regulatory capital base, with or without requiring them to hold additional common equity buffers; introducing a global liquidity standard based on a net stable funding ratio; implementing a contingent capital regime to address the risks created by systemically important banks; abolishing implicit government guarantees for senior bank bonds; and reforming EU rules on deposit guarantee schemes. We estimate the macroeconomic costs for different scenarios on a cumulative three-year basis, comparing medium- and long-term effects on the one hand and direct effects (generated in the domestic economy) and indirect effects (including spillover effects from other euro area countries) on the other hand. The results differ significantly depending on the individual measures, but the macroeconomic costs appear to be within reasonable limits and are comparable with those established for other countries by the Basel Committee on Banking Supervision. In any case, the costs are substantially below the results published by individual banks and interest groups. en Bank regulation, economic growth E44, G21 Dec 15, 2010, 12:00:00 AM

• The Economics of Bank Insolvency, Restructuring and Recapitalization (PDF, 697 kB) Elsinger, Summer. Elsinger, Summer – Financial Stability Report 20 Bank insolvency law, bank restructuring and the recapitalization of banks are not only legal or administrative issues but are of preeminent economic importance. To highlight the economic perspective, the OeNB hosted a two-day workshop on September 16 and 17, 2010, that was organized jointly by the OeNB’s Economic Studies Division and the Bonn-based Max Planck Institute for Research on Collective Goods. Controversial and intense discussions proved that there are many innovative ideas to tackle the problems but that there is also a great need for economic policy discussion. en Dec 15, 2010, 12:00:00 AM

• Annex of Tables (PDF, 337 kB) en Dec 15, 2010, 12:00:00 AM

• Notes (PDF, 146 kB) en Dec 15, 2010, 12:00:00 AM