Financial institutions

A study on the interaction of capital, liquidity and bank stability

10/07/2025 European Central Bank Central banks

The purpose of this paper is to empirically examine the effects of capital and liquidity on bank stability as well as the existence of a potential complementary or substitute relationship between both dimensions to explain bank stability. We use a sample of 16,061 banks from 27 countries during the period 2013-2023. Our results show that both capital and liquidity increase bank stability. However, the joint interactive effect presents a negative coefficient indicating the existence of a potential substitution effect between both variables.

Foreign Currency Reserves 2025 – Market Notice 6 October 2025

10/06/2025 Bank of England Central banks

Not for distribution, directly or indirectly, in or into the United States, Canada, Australia, Japan or any other jurisdiction where it is unlawful to distribute this announcement.

How do rising temperatures affect inflation expectations?

10/06/2025 European Central Bank Central banks

Global temperatures are rising at an alarming pace and public awareness of climate change is increasing, yet little is known about how these developments affect consumer expectations. We address this gap by conducting a series of experiments within a large-scale, population-representative survey of euro area consumers. We randomly assign consumers to hypothetical global temperature change scenarios, after which we elicit their expectations for inflation and key macroeconomic indicators under these conditions.

From Brussels to Bangkok: how investment funds transmit financial spillovers

10/06/2025 European Central Bank Central banks

We explore whether investment funds transmit spillovers from local shocks to financial markets in other economies. As a laboratory we consider shocks to financialmarket beliefs about the probability of a rare, euro-related disaster and their spillovers to Asian sovereign debt markets. Given their geographic distance from and relatively limited macroeconomic exposure to the euro area, these markets are an ideal testing ground a priori stacking the deck against finding evidence for investment funds transmitting spillovers from euro disaster risk shocks.

Green notice 2025/01

10/03/2025 Bank of England Central banks

Green notices cover significant and/or significant proposals for Bank of England reporting. If any of these proposals are finalised and are to be implemented, they will appear in a statistical notice.

Update from the Chair of Court David Roberts: Sir Ron Kalifa

10/03/2025 Bank of England Central banks

Update on Sir Ron Kalifa

Minutes of the Meeting of the Court of Directors held on 24 July 2025

10/03/2025 Bank of England Central banks

The Bank's Court of Directors acts as a unitary board, setting the organisation's strategy and budget and taking key decisions on resourcing and appointments. Required to meet a minimum seven times per year, it has five executive members from the Bank and up to nine non-executive members.

Hidden weaknesses: the role of unrealized losses in monetary policy transmission

10/02/2025 European Central Bank Central banks

This paper investigates how unrealized losses on banks’ amortized cost securities affect monetary policy transmission to bank lending in the euro area. Leveraging the sharp increase in interest rates between 2022 and 2023 and using granular supervisory data on security holdings and loan-level credit register data, we show that a one percentage point increase in the share of unrealized losses on amortized cost securities amplifies the contractionary effect of monetary tightening on lending supply by approximately one percentage point.

Macroprudential policy, monetary policy and non-bank financial intermediation

10/02/2025 European Central Bank Central banks

This paper examines the interplay between macroprudential policy, monetary policy and the non-bank financial intermediation (NBFI) sector, drawing on recent research and zooming in particularly on evidence from the euro area2. It documents the growth in the NBFI sector over the past two decades and its particular role in financing the real economy, assesses systemic risks that can emanate from the sector, considers how it interacts with monetary policy, and discusses the implications for macroprudential regulation.

The impact of capital requirements on bank capital

10/01/2025 European Central Bank Central banks

This paper presents the first causal evidence on how banks adjust their voluntary capital buffers (the capital headroom above the required level) in response to changes in capital requirements. Using granular euro area data and exploiting the threshold-based assignment of Other Systemically Important Institution (O-SII) buffers within a regression discontinuity design, we study the liability side of banks’ balance sheets, complementing the asset-focused literature on lending and risk-taking.

Financial institutions

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