By Isabel Schnabel The ECB’s unconventional monetary policy measures have significantly expanded its balance sheet over the past eight years, including a significant growth of excess reserves on the liabilities side. In recent years, these excess reserves have been instrumental in steering short-term interest rates. Having started quantitative tightening (QT) on 1 March 2023, which[…]
By Naz Koont, Tano Santos, Luigi Zingales Bank regulators have always assumed that bank deposits are ‘sticky,’ but the advent of digital banking is changing that. New research focuses not on the danger of bank runs, but rather on the new dangers of ‘bank walks.’ Link: Destabilizing Digital “Bank Walks”
By Antonio Garcia Pascual, Fabio Natalucci, Thomas Piontek NBFIs have emerged as key players in the financial sector, and global financial stability could hinge on their resilience as policy is tightened to tackle high inflation Link: Nonbank Financial Sector Vulnerabilities Surface as Financial Conditions Tighten
By Pilar Castrillo, Martin Iseringhausen, Rolf Strauch Over the coming years, the current tightening of financial conditions could diminish the financial vulnerabilities coming from high asset prices that built up during the period of low interest rates. But there are short-term risks, as recently seen when some banks outside the euro area fell upon troubled[…]
By Jon Danielsson, Charles Goodhart The downfall of Silicon Valley Bank and Credit Suisse has exposed failures in how we regulate the financial system. This column argues that the problems we now see in the system have arisen because the financial authorities have been trying to do the impossible: maintain growth while keeping inflation under[…]
By Viral Acharya, Rahul Chauhan, Raghuram Rajan, Sascha Steffen The last round of quantitative tightening caused two episodes of significant liquidity stress in US financial markets. This column asks whether the prior expansion and then shrinkage of the Fed’s balance sheet had left the private financial sector more vulnerable to such disruptions. The authors find[…]
The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap line arrangements. To improve the swap lines’ effectiveness in providing US dollar[…]
By Stephan Luck and Sergio Correia Call reports—regulatory filings in which commercial banks report their assets, liabilities, income, and other information—are one of the most-used data sources in banking and finance. Though call reports were collected as far back as 1867, the underlying data are only easily accessible for the recent past: the mid-1980s onward[…]
By Financial Stability Board (FSB) The Financial Stability Board (FSB) today published a report on the financial stability risks of Decentralised Finance (DeFi). DeFi is commonly used to describe services in crypto-asset markets that aim to replicate some functions of the traditional financial system in a supposedly decentralised manner – though the actual level of[…]
By European Central Bank ECB Banking Supervision aims to keep banks sound and healthy. This requires ongoing supervision of their activities today, as well as making sure they are fit for tomorrow. Especially in uncertain times, effectively adapting business models to changes in the macroeconomic environment is crucial for managing risk. This is why banks’[…]