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Macroprudential policy analysis and tools - Monitoring euro area banks’ risk weight developments

Author

Listed:
  • Caccavaio, M.
  • Rodriguez d´Acri, C.

Abstract

While risk-taking by financial institutions can foster the intermediation needed to support economic recovery, if excessive it can lead to the build-up of financial imbalances, especially in a low yield environment where institutions struggle to boost their profitability. To ensure that macroprudential policy measures are effective in preserving financial stability, the regular monitoring of financial institutions’ risk-taking behaviour is required. By using detailed bank-level information on SSM significant institutions’ asset developments in the last year, this analysis shows that, at the current juncture, banks are de-risking and reshuffling their portfolios towards safer assets. Evidence of de-risking is identified in the reduction in average risk weights and the shift towards exposures with lower PDs. JEL Classification: G00

Suggested Citation

  • Caccavaio, M. & Rodriguez d´Acri, C., 2016. "Macroprudential policy analysis and tools - Monitoring euro area banks’ risk weight developments," Macroprudential Bulletin, European Central Bank, vol. 2.
    • Handle: RePEc:ecb:ecbmbu:2016:0002:2
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    macroprudential policy; risk-taking; financial stability;
    All these keywords.

    JEL classification:

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

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