Central banks

Inflation narratives and risk premia

09/21/2026 European Central Bank Central banks

Theory suggests inflation risk premia are positive when supply shocks are expected to dominate demand shocks and negative otherwise. We measure these beliefs using demand and supply narratives derived from inflation news via Causality Extraction, which identifies causal relations between inflation and its drivers. Using narrative extracted from inflation news from the Financial Times for the Euro Area and the Wall Street Journal for the US, our key variable, NetDemand, measures the difference in articles attributing inflation to demand versus supply factors.

The impact of macroprudential policy fragmentation on corporate lending – evidence from a novel indicator

09/21/2026 European Central Bank Central banks

We construct a novel bank-level index that quantifies fragmentation in the capital buffer framework faced by euro area banks. Defined at quarterly frequency, it measures fragmentation by looking at the number of simultaneously active buffers, their geographical dispersion, and the frequency of buffer rate changes within the preceding year. The index is orthogonalised with respect to the level of capital requirements, bank size, and the financial cycle, thus controlling for these factors when measuring fragmentation as defined above.

The uneven journey of wholesale gas and electricity prices to consumer bills

09/21/2026 European Central Bank Central banks

The sharp rise in energy prices in the first half of 2026 evoked memories of the 2021-22 energy price shock. However, the 2026 energy price shock has so far been smaller in scale. This reflects more limited growth in wholesale gas prices and an increased share of electricity generated from renewables, which has dampened the pass-through of gas prices to wholesale electricity prices. The transmission of wholesale prices to retail prices has also changed, becoming somewhat faster for gas prices.

Out with the new, in with the old? Supranational bank supervision and the composition of firm investment

09/18/2026 European Central Bank Central banks

Using exogenous variation generated by the creation of the Single Supervisory Mechanism (SSM) in the euro area, we find that relative to firms borrowing from banks subject to national supervision, firms borrowing from banks subject to supranational supervision reduce their share of intangible assets. This effect does not pre-date the supervisory reform and it does not obtain in non-SSM jurisdictions.

Bank competition and credit risk: the conditioning role of capital

09/18/2026 European Central Bank Central banks

This paper examines how bank capital conditions the effect of competition on credit risk in lending markets, informing the debate on banking competition, deregulation, and risk-based supervision. Using ECB supervisory data for 146 euro area banks across 19 countries over 2020Q2–2025Q3, we analyze whether this relationship depends on banks’ regulatory capital positions. We find that greater market power is associated with higher subsequent credit risk, while stronger capitalization is associated with lower risk.

Out with the new, in with the old? Supranational bank supervision and the composition of firm investment

09/18/2026 European Central Bank Central banks

Using exogenous variation generated by the creation of the Single Supervisory Mechanism (SSM) in the euro area, we find that relative to firms borrowing from banks subject to national supervision, firms borrowing from banks subject to supranational supervision reduce their share of intangible assets. This effect does not pre-date the supervisory reform and it does not obtain in non-SSM jurisdictions.

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