Asset encumbrance and bank risk: First evidence from public disclosures in Europe
Asset encumbrance refers to the existence of bank balance sheet assets being subject to arrangements that restrict the bank's ability to freely transfer or realise them. Asset encumbrance has recently become a much discussed subject and policymakers have been actively addressing what some consider to be excessive levels of asset encumbrance. Despite its importance, the phenomenon of asset encumbrance remains poorly understood. We build a novel dataset of asset encumbrance metrics based on information provided in the banks' public disclosures for the very first time throughout 2015. We provide descriptive evidence of asset encumbrance levels by country, credit quality, and business model using different encumbrance metrics. Our empirical results point to the existence of an association between CDS premia and asset encumbrance that is negative, not positive. That is, on average encumbrance is perceived to be beneficial. Still, certain bank-level variables play a mediating role in this relationship. For banks that have high exposures to the central bank, high leverage ratio, and/or are located in southern Europe, asset encumbrance is less beneficial and could even be detrimental in absolute terms.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
|Date of creation:||Jul 2017|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Arvind Krishnamurthy & Stefan Nagel & Dmitry Orlov, 2014. "Sizing Up Repo," Journal of Finance, American Finance Association, vol. 69(6), pages 2381-2417, December.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2009.
"Market Liquidity and Funding Liquidity,"
Review of Financial Studies,
Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
- Brunnermeier, Markus K & Pedersen, Lasse Heje, 2007. "Market Liquidity and Funding Liquidity," CEPR Discussion Papers 6179, C.E.P.R. Discussion Papers.
- Lasse Heje Pederson & Markus K Brunnermeier, 2007. "Market Liquidity and Funding Liquidity," FMG Discussion Papers dp580, Financial Markets Group.
- Brunnermeier, Markus K. & Pedersen, Lasse Heje, 2007. "Market liquidity and funding liquidity," LSE Research Online Documents on Economics 24478, London School of Economics and Political Science, LSE Library.
- Markus K. Brunnermeier & Lasse Heje Pedersen, 2007. "Market Liquidity and Funding Liquidity," NBER Working Papers 12939, National Bureau of Economic Research, Inc.
- Helberg, Stig & Lindset, Snorre, 2014. "How do asset encumbrance and debt regulations affect bank capital and bond risk?," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 39-54.
- Affinito, Massimiliano & Tagliaferri, Edoardo, 2010.
"Why do (or did?) banks securitize their loans? Evidence from Italy,"
Journal of Financial Stability,
Elsevier, vol. 6(4), pages 189-202, December.
- Massimiliano Affinito & Edoardo Tagliaferri, 2010. "Why do (or did?) banks securitize their loans? Evidence from Italy," Temi di discussione (Economic working papers) 741, Bank of Italy, Economic Research and International Relations Area.
- Prasanna Gai & Andrew G Haldane & Sujit Kapadia & Benjamin Nelson, 2013. "Bank Funding and Financial Stability," RBA Annual Conference Volume,in: Alexandra Heath & Matthew Lilley & Mark Manning (ed.), Liquidity and Funding Markets Reserve Bank of Australia.
- Houben, A. & Slingenberg, J W., 2013. "Collateral scarcity and asset encumbrance: implications for the European financial system," Financial Stability Review, Banque de France, issue 17, pages 197-206, April.
- Daniel C. Hardy, 2014. "Bank resolution costs, depositor preference and asset encumbrance," Journal of Financial Regulation and Compliance, Emerald Group Publishing, vol. 22(2), pages 96-114, May.
- Jiri Podpiera & Inci Ötker, 2010. "The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions," IMF Working Papers 10/153, International Monetary Fund.
- Eisenbach, Thomas M. & Keister, Todd & McAndrews, James J. & Yorulmazer, Tanju, 2014. "Stability of funding models: an analytical framework," Economic Policy Review, Federal Reserve Bank of New York, issue Feb, pages 29-47.
- Ahnert, Toni & Anand, Kartik & Gai, Prasanna & Chapman, James, 2015.
"Safe, or not safe? Covered bonds and Bank Fragility,"
Annual Conference 2015 (Muenster): Economic Development - Theory and Policy
112875, Verein für Socialpolitik / German Economic Association.
- Ahnert, Toni & Anand, Kartik & Gai, Prasanna & Chapman, James, 2016. "Asset encumbrance, bank funding and financial fragility," Discussion Papers 17/2016, Deutsche Bundesbank.
- Toni Ahnert & Kartik Anand & Prasanna Gai & James Chapman, 2016. "Asset Encumbrance, Bank Funding and Financial Fragility," Staff Working Papers 16-16, Bank of Canada.
- Ahnert, Toni & Anand, Kartik & Gai, Prasanna & Chapman, James, 2016. "Asset Encumbrance, Bank Funding, and Financial Fragility," Annual Conference 2016 (Augsburg): Demographic Change 145782, Verein für Socialpolitik / German Economic Association.
- Gorton, Gary & Metrick, Andrew, 2012.
"Securitized banking and the run on repo,"
Journal of Financial Economics,
Elsevier, vol. 104(3), pages 425-451.
- Gary B. Gorton & Andrew Metrick, 2009. "Securitized Banking and the Run on Repo," NBER Working Papers 15223, National Bureau of Economic Research, Inc.
- Gary Gorton & Andrew Metrick, 2009. "Securitized Banking and the Run on Repo," Yale School of Management Working Papers amz2358, Yale School of Management, revised 01 Sep 2009.
- Adrian, Tobias & Shin, Hyun Song, 2010. "Liquidity and leverage," Journal of Financial Intermediation, Elsevier, vol. 19(3), pages 418-437, July.
- Carbó-Valverde, Santiago & Marques-Ibanez, David & Rodríguez-Fernández, Francisco, 2012. "Securitization, risk-transferring and financial instability: The case of Spain," Journal of International Money and Finance, Elsevier, vol. 31(1), pages 80-101.
- Adrian Van Rixtel & Gabriele Gasperini, 2013. "Financial crises and bank funding: recent experience in the euro area," BIS Working Papers 406, Bank for International Settlements.
- Laura Chiaramonte & Barbara Casu, 2013. "The determinants of bank CDS spreads: evidence from the financial crisis," The European Journal of Finance, Taylor & Francis Journals, vol. 19(9), pages 861-887, October.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:12168. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.