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Fire-Sale Externalities in the Euro Area Banking Sector

Author

Listed:
  • Cappiello, Lorenzo
  • Supera, Dominik
Abstract
This special feature studies the effects of fire-sale externalities in the euro area banking sector. Using individual bank balance sheet data and a framework developed by Greenwood et al. (forthcoming), an indicator is constructed to quantify the effects of fire-sale spillovers in terms of losses in equity capital in the banking system. For some countries, loans to monetary financial institutions are the most systemic assets, while for others loans to households can pose systemic risks. Thanks to the fine granularity of the background data and monthly updates, the index can be used as an early warning indicator and a measure of systemic risk. JEL Classification: G00

Suggested Citation

  • Cappiello, Lorenzo & Supera, Dominik, 2014. "Fire-Sale Externalities in the Euro Area Banking Sector," Financial Stability Review, European Central Bank, vol. 2.
    • Handle: RePEc:ecb:fsrart:2014:0002:1
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    File URL: https://www.ecb.europa.eu//pub/pdf/fsr/art/ecb.fsrart201411_01.en.pdf
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    Citations

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    Cited by:

    1. Calimani, Susanna & Hałaj, Grzegorz & Żochowski, Dawid, 2017. "Simulating fire-sales in a banking and shadow banking system," ESRB Working Paper Series 46, European Systemic Risk Board.
    2. William F. Bassett & David E. Rappoport, 2022. "Enhancing Stress Tests by Adding Macroprudential Elements," Finance and Economics Discussion Series 2022-022, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    risk; spillovers; systemic asset;
    All these keywords.

    JEL classification:

    • G00 - Financial Economics - - General - - - General

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