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What drives the demand of monetary financial institutions for domestic government bonds? Empirical evidence on the impact of Basel II and Basel III

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  • Schröder, Michael

Abstract

This paper examines the treatment of sovereign debt exposure within the Basel framework and measures the impact of bank regulation on the demand of Monetary Financial Institutions (MFI) for marketable sovereign debt. Our results suggest that bank regulation has a significant positive impact on MFI demand for domestic government securities. The results are representative for the MFI in the euro zone. They remain highly robust and significant after controlling for other influential factors and potential endogeneity.

Suggested Citation

  • Schröder, Michael, 2015. "What drives the demand of monetary financial institutions for domestic government bonds? Empirical evidence on the impact of Basel II and Basel III," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 113113, Verein für Socialpolitik / German Economic Association.
    • Handle: RePEc:zbw:vfsc15:113113
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    References listed on IDEAS

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    1. Buch, Claudia M. & Koetter, Michael & Ohls, Jana, 2016. "Banks and sovereign risk: A granular view," Journal of Financial Stability, Elsevier, vol. 25(C), pages 1-15.
    2. Nouy, D., 2012. "Is sovereign risk properly addressedby financial regulation?," Financial Stability Review, Banque de France, issue 16, pages 95-106, April.
    3. Adrian Blundell-Wignall & Patrick Slovik, 2010. "The EU Stress Test and Sovereign Debt Exposures," OECD Working Papers on Finance, Insurance and Private Pensions 4, OECD Publishing.
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    Cited by:

    1. Affinito, Massimiliano & Albareto, Giorgio & Santioni, Raffaele, 2022. "Purchases of sovereign debt securities by banks during the crisis: The role of balance sheet conditions," Journal of Banking & Finance, Elsevier, vol. 138(C).
    2. Bozena Chovancova & Vladimir Gvozdiak & Zoltan Rozsa & Rahman Ashiqur, 2019. "An Exposure of Commercial Banks in the Terms of an Impact of Government Bondholding with the Context of Its Risks and Implications," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(1), pages 173-188.
    3. Yakim Kitanov, 2015. "Are Risk Free Government Bonds Risk Free Indeed," Economy & Business Journal, International Scientific Publications, Bulgaria, vol. 9(1), pages 523-530.

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    More about this item

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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