Central banks

Pricing or panicking? Commercial real estate markets and climate change

05/21/2025 European Central Bank Central banks

This paper provides the first study of climate risk pricing in euro area commercial real estate markets. We pay particular attention to changes in risk pricing over time, as a sudden market shift may significantly amplify the financial stability and macroeconomic implications of these risks. We find evidence of investors applying a penalty to buildings exposed to physical risk and that this penalty has increased significantly over the 2007-2023 period we study, particularly for properties exposed to risks associated with climate change.

Delays to changes to country groupings for International Banking Statistics

05/21/2025 Bank of England Central banks

This article provides an update regarding the timeline of implementing changes for country grouping conventions used in statistics covering the international business of monetary financial institutions operating in the UK and the consolidated claims of UK headquartered monetary financial institutions.

Just another crypto boom? Mind the blind spots

05/21/2025 European Central Bank Central banks

The market capitalisation of crypto-assets has surged recently, fuelled by positive and broadening investor interest, including from traditional finance. Several key financial stability risks associated with crypto-assets have been identified in past editions of this publication and by the Financial Stability Board. They include, among others, interconnectedness with traditional finance

Navigating financial stability in an ageing world

05/21/2025 European Central Bank Central banks

The number of older people in the EU has increased markedly in recent decades and is projected to go on rising. This trend may pose challenges to financial stability given the adjustments needed in both the real economy and the financial sector to adapt to the demands of an ageing society.

FEDS Paper: Scenario Synthesis and Macroeconomic Risk

05/20/2025 Federal Reserve Central banks

Tobias Adrian, Domenico Giannone, Matteo Luciani, and Mike WestWe introduce methodology to bridge scenario analysis and model-based risk forecasting, leveraging their respective strengths in policy settings. Our Bayesian framework addresses the fundamental challenge of reconciling judgmental narrative approaches with statistical forecasting.

FEDS Paper: Collateral Reuse and Financial Stability

05/20/2025 Federal Reserve Central banks

Jin-Wook B. Chang and Grace ChuanThe isolated effects of collateral reuse on financial stability are ambiguous and understudied. While greater collateral reuse can guarantee more payments with fewer assets, it can also increase the exposure to potential drops in collateral price. To analyze these tradeoffs, we develop a financial network model with endogenous asset pricing, multiple equilibria, and equilibrium selection.

Updates to the PRA’s approach of responsible openness to international banks

05/20/2025 Bank of England Central banks

The PRA has today clarified its expectations around business conducted within branches of international banks operating in the UK, as well as its booking model expectations and liquidity reporting for such branches.

The poor, the rich, and the credit channel of monetary policy

05/20/2025 European Central Bank Central banks

Monetary policy can have contrasting effects on economic inequality via distinct channels. We examine the effect working via the credit channel, whereby monetary policy induces heterogeneous access to credit for business owners based on their wealth. Using unique data on business loan applications from small firms, we find that monetary expansions increase the bank’s likelihood to approve loan applications, particularly so for low-wealth entrepreneurs, translating to higher future income and wealth.

The impact of monetary policy and macroprudential policy on corporate lending rates in the Euro area

05/20/2025 European Central Bank Central banks

We examine the differential impact of monetary policy and macroprudential policy on bank lending rates in the euro area, using granular corporate loan-level data for the period 2019-2023. We find three results: First, consistent with the predictions of a stylized theoretical model of bank lending rates, monetary policy exerts an order of magnitude larger impact on lending rates than macroprudential policy. Second, the effectiveness of monetary policy transmission weakens when interest rates are close to or below zero.

The impact of monetary policy and macroprudential policy on corporate lending rates in the Euro area

05/20/2025 European Central Bank Central banks

Central banks

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