This paper investigates the determinants influencing banks’ decisions to disclose P&L misconduct-related charges and assesses the extent to which these P&L charges can predict future misconduct penalty announcements. Previous research has largely focused on the penalty announcements as the...

Central bank balance sheet stress testing (CBST) models are designed to support central banks in determining appropriate capital levels and informing decisions on dividend distribution. A key concept in this context is policy solvency, which refers to a central bank's ability to generate...

Recently, there has been increasing research interest in the historical composition of central bank reserves. However, studies in this area is hindered by a lack of data, as such data spanning multiple centuries is only available for a small number of countries. This paper presents an empirical...

This paper studies how Treasury market dynamics depend on adjustments to the central bank balance sheet. We introduce a dynamic model of Treasury bonds with traditional and shadow banks. In the model, both Treasury and repo market disruptions arise as a joint consequence of three frictions: (i)...

This paper studies how Treasury market dynamics depend on adjustments to the central bank balance sheet. We introduce a dynamic model of Treasury bonds with traditional and shadow banks. In the model, both Treasury and repo market disruptions arise as a joint consequence of three frictions: (i)...

This paper explores the impact of the regulatory leverage ratio (LR) on banks' demand for reserves and thus the pricing of overnight liquidity in the euro area money markets. We use daily transaction-level money market data during the period between January 2017 - February 2023 and examine the...

This paper studies how banks manage their equity capital in the short run, particularly during periods of distress, based on Basel III monitoring data. The findings challenge the conventional assumption that bank capital is largely exogenous in the short run, meaning that banks cannot adjust...

The loan impairment rules recently introduced by IFRS 9 require banks to estimate their future credit losses by using forward-looking information. We use supervisory loan-level data from Germany to investigate how banks apply their reporting discretion and adjust their lending upon the...

The objective of this research is to assess the effect of holding government securities on the credit channel, taking into account the heterogeneity of WAEMU banks' balance sheets. The methodology adopted to achieve this objective is VAR panel modelling, proposed by Abrigo and Love. The...

We study whether it is desirable for the central bank to supply reserves abundantly, i.e. beyond the level that satisfies financial institutions' aggregate liquidity needs. Using a theoretical framework, we demonstrate that abundant reserves would help fulfil the private sector's demand for safe...

When capital in the banking system becomes depleted, the degree to which financial intermediation and the macroeconomy are adversely affected is likely to depend on the financial and macroeconomic environment. However, existing studies either assume that the effects of bank capital shocks are...

Purpose: This paper examines the significant effect of off-balance sheets (OBS) on earnings management in the banking industry in Indonesia. Furthermore, this study also examines the role of market power as a moderating variable that moderates the relationship between off-balance sheet...

This CD engagement covered two distinct areas to help the National Bank of Georgia (NBG) deliver on its price stability mandate, it: 1) provided a forward-looking analysis of the NBG's balance sheet to assess its policy solvency and to help institutionalize such a process, and 2) outlined a...

This paper explores the relationship between banks and stablecoins and their issuers, focusing on the mechanical effects on banks' capital and liquidity ratios when issuing stablecoins or collecting deposits from stablecoin issuers. The analysis reveals that converting retail deposits into...

In March 2020, Covid-19 was declared a pandemic by the World Health Organization. Most European governments reacted with lockdowns. A drop in demand as well as supply disruptions affected the economy which also hit European banks with quite a lot of uncertainty, not only regarding possible...

In the European Union the goal of transition towards a carbon-neutral economy by 2050 is identified as a major aim of the European Commission. The integral role of the financial services sector in funding such investments and enhancing the (re-) direction and allocation of capital flows towards...

Firms’ investment behavior is intermittent, and a significant fraction of capital formation occurs during “investment spikes”. We define financial flexibility as the capacity to accommodate investment spikes, as potentially determined by (i) external financing frictions, and (ii) the state...

The present article proposes to draw on the recent experiences of many central banks of advanced economies and the evolution of their operational frameworks in the new context of increased domestic liquidity, when analysing the operations of central banks that engage in exchange rate management...

The systemic risk measure (SRISK) by V-Lab provides a market view of the vulnerability of financial institutions to a sudden downturn in the economy. To overcome the shortcoming that it cannot be applied to non-listed banks, SRISK characteristics of listed banks are mapped on balance sheet...

This Technical Assistance Report on the Seychelles discusses Stress Testing the Central Bank Balance Sheet (CBS). The CBS balance sheet is weak, due to the cost of carrying foreign exchange (FX) reserves. The conditions of CBS lending in Seychellois rupees (SCR) also contributed to weakening the...

We quantify the sovereign-bank doom loop by using the 1999 Marmara earthquake as an exogenous shock leading to an increase in Turkey's default risk. Our theoretical model illustrates that for banks with higher exposure to government securities, a higher sovereign default risk implies lower net...

Banks are crucial enablers of financial and economic development. They have an immense corporate social responsibility (CSR) towards society. Bank´s CSR activities are considered increasingly vital for their own success and sustainable growth, especially as they operate in a business...

This chapter aims to analyze the Brazilian Central Bank (BCB) balance sheet and its main policy instruments since the adoption of inflation targeting in 1999. This period was characterized by a process of international reserves accumulation, which led to many changes in the liabilities of the...