We study determinants of sovereign portfolios of Spanish banks over a long time-span, starting in 2008. Our findings challenge the view that banks engaged in moral hazard strategies to exploit the regulatory treatment of sovereign exposures. In particular, we show that being a weakly capitalized...

Using novel data on individual euro area banks' balance sheets this paper shows that exposure to stressed European sovereigns manifested in a liquidity shock to their international funding through two channels: (i) a contraction in cross-border funding, and (ii) a contraction in US wholesale...

The admission by the Greek government on October 18, 2009, of large-scale accounting fraud in its national accounts sparked an unprecedented sovereign debt crisis that rapidly spread to the Euro-Zone's weakest member states. As the crisis increasingly drove a wedge between a seemingly resilient...

The sharp rise in public debt-to-GDP ratios in the aftermath of the financial crisis of 2008 posed serious challenges for fiscal policy in the euro area countries and culminated for some member states in a sovereign debt crisis. This note examines the public policy responses to the euro area...

We develop a stylized balance sheet framework to help identify ‘quasi-fiscal’ components of central bank crisis interventions and show how sources of fiscal risk are created from both the new claims and how they are funded. Combining central bank balance sheet data with survey evidence from...

As reliance on excessively short-term wholesale funding has been one of the major causes for the 2007-2009 financial crisis, recent advances in global liquidity regulation try to curb the excessive reliance on short-term wholesale funding without being clear on how such an approach will affect...

Financial market crises with the threat of a subsequent debt-deflation depression have occurred with increasing regularity in the United States from 1980 through the present. Almost reflexively, when confronted with such circumstances, US institutions and the policymakers that run them have...

Financial market crises with the threat of a subsequent debt-deflation depression have occurred with increasing regularity in the United States from 1980 through the present. Almost reflexively, when confronted with such circumstances, US institutions and the policymakers that run them have...

In the wake of the Great Recession, a massive monetary policy stimulus was provided in the main OECD economies. It helped to stabilise financial markets and avoid deflation. Nonetheless, GDP growth has been sluggish and in some countries lower than expected given the measures taken, and...