Michele Modugno and Dino PalazzoThe equity market’s reaction to macroeconomic news is consistent with the propagation of news into the real economy. We embody all the macro news in an activity news index and a price news index that together explain 34% of the quarterly stock price returns variation.
The Bank is launching an exciting competition that aims to develop people’s economic literacy in a fun and engaging way.
The Prudential Regulation Authority (PRA), in consultation with HM Treasury, has decided to delay the implementation of Basel 3.1 in the UK by one year until 1 January 2027. This allows more time for greater clarity to emerge about plans for its implementation in the United States.
Housing affordability is at the centre of the political debate in many euro area countries. With steadily increasing rents and house prices still high relative to historical standards, many young households, particularly in large cities, are devoting an ever larger share of their income to housing expenses, and are finding it increasingly hard to access their desired size and quality of housing.
The Bank of England (the Bank) and the Commodity Futures Trading Commission (the CFTC) have co-chaired international work on centrally cleared margin practices stemming from the March 2020 market turmoil, also known as the ‘dash for cash’.
Flexibility has progressively become a distinctive feature of the implementation of the Eurosystem’s asset purchases. In its many manifestations, flexibility has also been used by asset managers in the daily selection of sovereign bonds to limit the impact of asset purchases on repo market specialness. This study shows that, since the inception of the Public Sector Purchase Programme, flexible purchases of bonds greatly mitigated the Eurosystem’s footprint on the repo market.
Flexibility has progressively become a distinctive feature of the implementation of the Eurosystem’s asset purchases. In its many manifestations, flexibility has also been used by asset managers in the daily selection of sovereign bonds to limit the impact of asset purchases on repo market specialness. This study shows that, since the inception of the Public Sector Purchase Programme, flexible purchases of bonds greatly mitigated the Eurosystem’s footprint on the repo market.
The aim of this article is to assess the scale and systemic nature of counterparty credit risk (CCR) stemming from banks’ derivatives activities and securities financing transactions. Using supervisory data, along with data collected from the EU-wide stress test carried out by the European Banking Authority in 2023, the article analyses the distribution of CCR across banks. It focuses on the concentration of risk within specific bank business models and products, and on links between the banking and NBFI sectors.
Leverage in the non-bank financial intermediation (NBFI) sector can be a source of systemic risk and amplify stress in the wider financial system. Policymakers are currently considering ways to address NBFI leverage risks, with the focus on containing the build-up of such risks ex ante. To achieve this, authorities need a broad toolkit that allows them first to identify leverage risks and then to address them. Taking advantage of recent improvements in data availability, this edition of the Macroprudential Bulletin explores novel approaches to identifying risks and designing policies.
We use transaction-level data on the euro area repo market to assess the impact of the Financial Stability Board’s (FSB) recommended minimum haircut framework on leverage in non-bank financial institutions. We find that it would affect larger and more leveraged entities the most, indicating its capability to make a meaningful contribution to addressing risks from leverage in non-bank financial institutions.
