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  1. Developing macroprudential policy for alternative investment funds
    towards a framework for macroprudential leverage limits in Europe : an application for the Netherlands
    Author: Veer, Koen J. M. van der; Levels, Anouk; Lambert, Claudia; Molestina Vivar, Luis; Weistroffer, Christian; Chaudron, Raymond; Stralen, René de Sousa van
    Published: [2017]
    Publisher:  European Central Bank, Frankfurt am Main, Germany

    This joint ECB-DNB Occasional Paper aims to inform the ongoing discussions about an EU-level framework for operationalising macroprudential leverage limits for alternative investment funds (AIFs). It builds on, and extends, the analysis of an ECB-DNB... more

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    Location:
    Staatsbibliothek zu Berlin - Preußischer Kulturbesitz, Haus Unter den Linden
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    Unlimited inter-library loan, copies and loan

     

    This joint ECB-DNB Occasional Paper aims to inform the ongoing discussions about an EU-level framework for operationalising macroprudential leverage limits for alternative investment funds (AIFs). It builds on, and extends, the analysis of an ECB-DNB special feature article published in the ECB's Financial Stability Review in November 2016. First, this Occasional Paper presents new EU-level evidence suggesting that leveraged funds exhibit stronger sensitivity of investor outflows to bad past performance than unleveraged funds, which has the potential to exacerbate systemic risk. Second, it devises a framework for assessing financial stability risks from leverage in investment funds. This is applied to leveraged AIFs managed by asset managers in the Netherlands using Alternative Investment Fund Managers Directive (AIFMD) data for the two-year period from the first quarter of 2015 to the fourth quarter of 2016. Third, it discusses the potential effectiveness and efficiency of various designs for macroprudential leverage limits. To this end, it builds on the findings for the Dutch AIF sector and suggests design options for further exploration at EU level. Beyond assessing financial stability risks from leverage in the Dutch AIF sector, the case study aims to show how equivalent information on AIFs at the European level - which will be made available to the European Securities Markets Authority (ESMA) and the European Systemic Risk Board (ESRB) in the coming years - could be used when developing an EU-level framework for operationalising macroprudential leverage limits.

     
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    Source: Staatsbibliothek zu Berlin
    Language: English
    Media type: Ebook
    Format: Online
    ISBN: 9789289928649
    Other identifier:
    hdl: 10419/175744
    Series: Occasional paper series / European Central Bank ; no 202 (November 2017)
    Subjects: financial services; financial policy; public policy; macroeconomics; investment; Netherlands; asset managers; alternative investment funds; leverage; macroprudential policy; financial stability
    Scope: 1 Online-Ressource (42 Seiten), Illustrationen
  2. Simulating fire-sales in a banking and shadow banking system
    Author: Calimani, Susanna; Hałaj, Grzegorz; Żochowski, Dawid
    Published: [2017]
    Publisher:  European Systemic Risk Board, Frankfurt am Main, Germany

    We develop an agent based model of traditional banks and asset managers. Our aim is to investigate the channels of contagion of shocks to asset prices within and between the two financial sectors, including the effects of fire sales and their impact... more

    Location:
    Helmut-Schmidt-Universität, Universität der Bundeswehr Hamburg, Universitätsbibliothek
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    Location:
    ZBW - Leibniz-Informationszentrum Wirtschaft, Standort Kiel
    Signature:
    DS 611
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    We develop an agent based model of traditional banks and asset managers. Our aim is to investigate the channels of contagion of shocks to asset prices within and between the two financial sectors, including the effects of fire sales and their impact on financial institutions' balance sheets. We take a structural approach to the price formation mechanism as in Bluhm, Faia and Kranen (2014) and introduce a clearing mechanism with an endogenous formation of asset prices. Both types of institutions hold liquid and illiquid assets and are funded via equity and deposits. Traditional banks are interconnected in the money market via mutual interbank claims, where the rate of return is endogenously determined through a tatonnement process. We show how in such a set-up an initial exogenous liquidity shock may lead to a fire-sale spiral. Banks, which are subject to capital and liquidity requirements, may be forced to sell an illiquid security, which impacts its, endogenously determined, market price. As the price of the security decreases, both agents update their equity and adjust their balance sheets by making decisions on whether to sell or buy the security. This endogenous process may trigger a cascade of sales leading to a fire-sale. We find that, first, mixed portfolios banks act as plague-spreader in a context of financial distress. Second, higher bank capital requirements may aggravate contagion since they may incentivise banks to hold similar assets, and choose mixed portfolios business model which is also characterized by lower levels of voluntary capital buffer. Third, asset managers absorb small liquidity shocks but they exacerbate contagion when liquid buffers are fully utilised.

     
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    Source: Union catalogues
    Language: English
    Media type: Ebook
    Format: Online
    ISBN: 9789295081932
    Other identifier:
    hdl: 10419/193553
    Series: Working paper series / ESRB, European Systemic Risk Board, European System of Financial Supervision ; no 46 (June 2017)
    Subjects: bank; financial institution; public policy; liquidity control; banking system; prices; shadow banking; Fire sales; contagion; systemic risk; asset managers; agent based model
    Scope: 1 Online-Ressource (circa 27 Seiten), Illustrationen