We analyze the main forces affecting financial system pro-cyclicality (the fact that developments in the financial sector can amplify business cycle fluctuations). We first review some major structural developments in financial markets that may influence pro-cyclicality and that have been...

We use a macroeconomic euro area model with a bank sector to study the pro-cyclical effect of the capital regulation, focusing on the extra pro-cyclicality induced by Basel II over Basel I. Our results suggest that this incremental effect is modest. We also find that regulators could offset the...

We analyse the wide array of rescue programmes adopted in several countries, following Lehman Brothers' default in September 2008, in order to support banks and other financial institutions. We first provide an overview of the programmes, comparing their characteristics, magnitudes and...

More than three years since the outbreak of the sovereign debt crisis in the euro area the banking systems of several countries remain exposed to the vagaries of government bond markets. The paper analyzes the different channels through which sovereign risk affects banking risk (and vice versa),...

Participation in supplementary pension funds allows workers to exploit tax benefits and payroll employees to take advantage of employer contributions. The simulations reported in the paper show that these two components can considerably increase workers' retirement wealth. Data show that returns...

In the euro area, macroprudential policy can be a powerful complement to monetary policy. However, its coordination with microprudential policy is a particularly delicate task. The coexistence of two supervisory regimes that rely on similar tools to pursue different objectives may at times give...

The Basel III regulation explicitly prescribes the use of Hodrick-Prescott filters to estimate credit cycles and calibrate countercyclical capital buffers. However, the filter has been found to suffer from large ex-post revisions, raising concerns over its fitness for policy use. To investigate...

We use an extensive loan-level dataset to study the influence of non-performing loans (NPLs) on the supply of bank credit to non-financial firms in Italy between 2008 and 2015. We use time-varying firm fixed effects to control for shifts in demand and changes in borrower characteristics, and we...

This paper analyzes the challenges posed by the implementation of the countercyclical capital buffer framework in Italy and proposes ways of meeting them. In the first part of the analysis we review the limitations of the standardized Basel III credit-to-GDP gap; we then propose possible...

We develop a methodology to identify and rank ‘systemically important financial institutions' (SIFIs). Our approach is consistent with that followed by the Financial Stability Board but, unlike the latter, it is free of judgment and it is based entirely on publicly available data, thus filling...