The paper investigates the risks on financial stability connected to the level of banks’ asset encumbrance (Ae). To conduct this study, a panel regression analysis for 45 European listed banks is performed for the years from 2014 to 2017. A novel dataset is built hand-collecting data on Ae provided in banks’ Pillar III reports. Our empirical results point to the existence of a negative relationship between Ae and banks’ systemic risk, proxied by the Srisk index. Nevertheless, leverage and Roe play a strong moderating role in the link between Ae and Srisk, turning the sign of the relationship upside down. An increase in bank leverage or Roe, combined with an increase in Ae, may produce a growth in Srisk, showing a negative impact of encumbrance on bank systemic risk under certain conditions. According to our results, supervisory authorities should pay attention to the combined phenomena of high encumbrance and low level of bank capitalization, able to affect both leverage and Roe.

Asset encumbrance e rischio sistemico: il ruolo delle attività vincolate nei bilanci delle banche / Federica, Ielasi; Lorenzo, Gai. - In: BANCARIA. - ISSN 0005-4623. - STAMPA. - 11:(2020), pp. 1-11.

Asset encumbrance e rischio sistemico: il ruolo delle attività vincolate nei bilanci delle banche

Federica, Ielasi
;
Lorenzo, Gai
2020

Abstract

The paper investigates the risks on financial stability connected to the level of banks’ asset encumbrance (Ae). To conduct this study, a panel regression analysis for 45 European listed banks is performed for the years from 2014 to 2017. A novel dataset is built hand-collecting data on Ae provided in banks’ Pillar III reports. Our empirical results point to the existence of a negative relationship between Ae and banks’ systemic risk, proxied by the Srisk index. Nevertheless, leverage and Roe play a strong moderating role in the link between Ae and Srisk, turning the sign of the relationship upside down. An increase in bank leverage or Roe, combined with an increase in Ae, may produce a growth in Srisk, showing a negative impact of encumbrance on bank systemic risk under certain conditions. According to our results, supervisory authorities should pay attention to the combined phenomena of high encumbrance and low level of bank capitalization, able to affect both leverage and Roe.
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Goal 12: Responsible consumption and production
Federica, Ielasi; Lorenzo, Gai
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2158/1216314
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