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Sovereign exposures in the Portuguese banking system: determinants and dynamics

Author

Listed:
  • Maria Manuel Campos
  • Ana Rita Mateus
  • Álvaro Pina

Abstract

This paper studies the dynamics of the exposure of the Portuguese banking system to the domestic public sector over 2008-2016 and assesses possible underlying motivations. The analysis relies on a new dataset built from granular information that provides full coverage of the Portuguese banking sector and the public sector. The results suggest that moral suasion was an important driver of the evolution of sovereign exposures during the euro area crisis: domestic banks provided financing to the sovereign when the Treasury needed to issue debt amidst rising yields and, although to a smaller extent, when State-Owned Enterprises faced funding shortages in international markets. Moreover, increases in central bank funding are also related to increases in holdings of sovereign debt securities. These findings mainly hold for medium-sized and large banks. In contrast, we find no evidence of gambling for resurrection behaviour by banks with lower prudential capital or depressed profitability.

Suggested Citation

  • Maria Manuel Campos & Ana Rita Mateus & Álvaro Pina, 2019. "Sovereign exposures in the Portuguese banking system: determinants and dynamics," Working Papers w201916, Banco de Portugal, Economics and Research Department.
  • Handle: RePEc:ptu:wpaper:w201916
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    File URL: https://www.bportugal.pt/sites/default/files/anexos/papers/wp201916_1.pdf
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    References listed on IDEAS

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    5. Steven Ongena & Alexander Popov & Neeltje Van Horen, 2019. "The Invisible Hand of the Government: Moral Suasion during the European Sovereign Debt Crisis," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(4), pages 346-379, October.
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    8. Maria Manuel Campos & Ana Rita Mateus & Álvaro Pina, 2019. "Sovereign exposures in the Portuguese banking system: evidence from an original dataset," Working Papers o201903, Banco de Portugal, Economics and Research Department.
    9. Viral V Acharya & Tim Eisert & Christian Eufinger & Christian Hirsch, 2018. "Real Effects of the Sovereign Debt Crisis in Europe: Evidence from Syndicated Loans," Review of Financial Studies, Society for Financial Studies, vol. 31(8), pages 2855-2896.
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    Cited by:

    1. Maria Manuel Campos & Ana Rita Mateus & Álvaro Pina, 2019. "Sovereign exposures in the Portuguese banking system: evidence from an original dataset," Working Papers o201903, Banco de Portugal, Economics and Research Department.

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    More about this item

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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