Macroprudential Bulletin
Our Macroprudential Bulletin provides insight into the work we are currently doing in the field of macroprudential policy. Our goal is to raise awareness of macroprudential policy issues in the euro area by making our ongoing work and thinking in this field more transparent, and to encourage broader discussion on these key issues.
We aren’t trying to be transparent about our work just for the sake of it. This is also an opportunity to invite you to share your views with us by sending your feedback to ecb.macroprudential.bulletin@ecb.europa.eu. You can also send us an email if you want to be notified about future issues of the Macroprudential Bulletin.
Articles
Leveraged investment funds – A framework for assessing risks and designing policies
This article analyses risks from leverage in alternative investment funds by integrating entity-level and transaction-level data. Hedge funds and liability-driven investment funds are the most important groups of leveraged funds. Liability-driven investment funds are vulnerable to an increase in interest rates, whereas hedge funds appear to be more sensitive to other types of shocks.
Find out more about risk assessment and designing policiesSynthetic leverage in interest rate swaps
Synthetic leverage is a key source of vulnerability for non-bank financial intermediaries. Yet there is lack of consensus on how to measure it. This article proposes a novel methodological framework to measure synthetic leverage in interest rate swaps. The measure is sensitive to changes in the underlying risk factor and thus reflects different degrees of resilience to interest rate shocks.
Read more about synthetic leverage in interest rate swapsSystem-wide implications of counterparty credit risk
Counterparty credit risk arises from derivatives and securities financing transactions. Exposures to this risk are concentrated among the global systemically important banks and investment banks in the euro area. Hypothetical defaults among more vulnerable non-bank counterparties may spread across the banking system, leading to considerable losses.
More on the implications of counterparty credit riskIn focus
The impact of minimum haircuts on non-bank leverage in the euro area
This article analyses the impact that the haircut floors proposed by the Financial Stability Board would have on leverage of non-banks. We find that an introduction of these minimum haircuts would lead to a sizeable reduction in leverage, particularly among the largest entities.
More on the impact of minimum haircuts on non-bank leverageCentral clearing and the growing presence of the NBFI sector in euro area government bond repos
Mandating the use of central clearing of government bond repos is one way to mitigate financial stability risks from the rise of the non-bank sector in these markets. By imposing stricter risk management practices, it can limit the build-up of excessive NBFI leverage ex ante and support intermediation capacity. However, its impact on market functioning and liquidity requires careful assessment.
Read more about central clearing and the growing presence of the NBFI sectorInvestment funds’ financial leverage – material and systemic?
This box highlights how repurchase agreements and margin lending contribute to leverage, the systemic implications of highly leveraged funds, and the importance of monitoring these dynamics in the financial sector.
Find out more about investment funds’ financial leverageWANT TO LEARN MORE?
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