Banks and Sovereign Risk: A Granular View
Claudia M. Buch, Michael Koetter, Jana Ohls
Abstract
We identify the determinants of all German banks’ sovereign debt exposures between 2005 and 2013 and test for the implications of these exposures for bank risk. Larger, more capital market affine, and less capitalised banks hold more sovereign bonds. Around 15% of all German banks never hold sovereign bonds during the sample period. The sensitivity of sovereign bond holdings by banks to eurozone membership and inflation increased significantly since the collapse of Lehman Brothers. Since the outbreak of the sovereign debt crisis, banks prefer sovereigns with lower debt ratios and lower bond yields. Finally, we find that riskiness of government bond holdings affects bank risk only since 2010. This confirms the existence of a nexus between government debt and bank risk.
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Is Subsidizing Companies in Difficulties an Optimal Policy? An Empirical Study on the Effectiveness of State Aid in the European Union
Nicole Nulsch
IWH Discussion Papers,
No. 9,
2014
Abstract
Even though state aid in order to rescue or restructure ailing companies is regularly granted by European governments, it is often controversially discussed. The aims for rescuing companies are manifold and vary from social, industrial and even political considerations. Well-known examples are Austrian Airlines (Austria) or MG Rover (Great Britain). Yet, this study aims to answer the question whether state aid is used effectively and whether the initial aim why aid has been paid has been reached, i.e. the survival of the company. By using data on rescued companies in the EU and applying a survival analysis, this paper investigates the survival rates of these companies up to 15 years after the aid has been paid. In addition, the results are compared to the survival rates of non-rescued companies which have also been in difficulties. The results suggest that despite the financial support, business failure is often only post-poned; best survival rates have firms with long-term restructuring, enterprises in Eastern Europe, smaller firms and mature companies. However, non-funded companies have an even higher ratio to go bankrupt.
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Old Age Poverty and Satisfaction with Living Conditions in East and West Germany, 1995 and 2009
L. J. Zhu, Anja Weißenborn, Herbert S. Buscher
Wirtschaft im Wandel,
No. 7,
2011
Abstract
The current contribution presents poverty indicators for West and East Germany for the years 1995 and 2009. The analysis is based on the two corresponding waves of the GSOEP. We only consider households with at least one senior citizen aged 65 or above. Furthermore, we distinguish between male and female pensioners. In the first part the weighted equivalized household income is calculated as well as various statistical measures such as the 20%- and 80%-percentile, the 80/20-ratio and the 90/10-ratio of the income distribution of senior citizen households. In an additional step we also present and discuss the main sources of income such households have. In the second part of the contribution we focus on social indicators with respect to the satisfaction with income and the current living conditions as well as the expected situation in five years. As the results show, old age poverty has increased in both parts in Germany with East German women being an exception. With respect to the future, most elder people look optimistically into the future.
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Poverty in EU Countries
Herbert S. Buscher, Ingmar Kumpmann, Li Huan
Wirtschaft im Wandel,
No. 6,
2010
Abstract
The contribution provides an overview of several poverty measures in European countries. These measures are recommended by the so-called Laeken criteria and include, among others, the level of poverty income, the Gini coefficient as a measure of inequality of the income distribution as well as the 90/10- and the 80/20-ratio of the income distribution to shed light on the relation of the income shares in the extreme tails of the distribution. Compared over the years 2000 and 2008, the results indicate an increase in poverty in Europe over time, with Germany being located in the middle of the selected countries. Relative poverty is most severe in the new EU member states such as Romania, Bulgaria, and Latvia.
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Tentative Recovery, Public Debt on the Rise
Wirtschaft im Wandel,
2. Sonderausgabe
2009
Abstract
In autumn 2009, the world economy appears to be growing again. The situation has improved mainly because drastic measures of central banks and governments stabilized the financial sector. More recently, the real economy is supported by fiscal programs taking effect. However, recoveries are usually slow if, as it is the case now, recessions have been intertwined with banking and housing crises. Thus, the industrial economies will not gain much dynamics this year and next, while chances for an upswing in emerging economies are much better.
The German economy stabilized during summer as well, with remarkably robust private consumption. An upswing, however, is, due to several factors, not in sight: Some important export markets will not rebound quickly, and consumption will be dampened by rising unemployment that, up to now, has been contained, not least with the aid of short-term working schemes. All in all, production shrinks by 5% in 2009 and will increase by no more than 1.2% next year. Public deficits are on the rise, with (in relation to GDP) 3.2% this year and 5.2% in 2010.
A credit crunch due to deteriorating balance sheets of banks is a major risk for the German economy. Policy should address this problem by making sure that equity ratios are sufficiently high. One way would be to impose public capital on banks that do not comply with certain regulatory ratios. These should be higher than the ones presently in force. Fiscal policy should begin consolidating in 2011, mainly by dampening the rise of expenditures. Tax cuts are only justified if they are accompanied by very ambitious spending cuts.
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Banking Regulation: Minimum Capital Requirements of Basel II Intensify Transmission from Currency Crises to Banking Crises
Tobias Knedlik, Johannes Ströbel
Wirtschaft im Wandel,
No. 8,
2007
Abstract
Emerging market currency crises are often followed by banking crises. One reason for the transmission is the increased value of foreign debt measured in local currency. Equity capital is often insufficient to ensure liquidity. This problem is addressed by Basel II, in particular by its minimum capital requirements. In difference to the current regulation (Basel I), Basel II employs a differentiated risk weighing on base of credit ratings. This contribution calculates the hypothetic effects of the new regulation on minimum capital requirements for the example of the South Korea currency and banking crises of 1997. The results are compared to current regulation. It can be shown that minimum capital requirements in the case of Basel II would have been lower than in the case of Basel I. Additionally, minimum capital requirements would have increased dramatically. The transmission from currency to banking crises would not have been prevented, but would have been accelerated. Thereby, minimum capital requirements under Basel I have been relatively low because of South Korea’s OECD membership. It can therefore be concluded that in other emerging market economies, which are not OECD members, the ratio of minimum capital requirements of Basel II to the minimum capital requirements of Basel I prior the crises would have been even lower. Therefore, the new instrument of banking regulation would have intensified the transmission from currency to banking crises.
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Armut von jungen Erwachsenen in der Bundesrepublik
Eva Reinowski, Christine Steiner
Vierteljahreshefte zur Wirtschaftsforschung,
No. 1,
2006
Abstract
In recent years the youth unemployment rate increased rapidly in Germany and reached the European average. Unemployment is considered as the main poverty risk. But even though the share of social benefit receivers among the youths is above average, youth poverty - unlike child poverty - has been neglected in recent research. Regarding youth, poverty is seen more as a temporary phenomenon. Considering only the standard poverty measure is not enough to figure youth poverty, because one would neglect the personal income situation of the youths. The article´s aim is to combine the equivalised household income and the individual income to find most effected young people. In a further step the socio-demographic factors of those persons are included to draw a more precise picture of the circumstances of poor young people in Germany. The analysis is based on the German Micro Census 2002.
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