Walking the talk? Green politicians and pollution patterns

11/20/2025 European Central Bank Central banks

Exploiting three decades of detailed regional data for Germany, we find that when the Green Party is successful at the polls, local hazardous emissions decline. The level of political representation matters, too. Green politicians’ gaining influence at county level is followed largely by a decline in air pollutants that have an immediate adverse health effect. In contrast, when the Green party joins the state government, only greenhouse gas emissions that affect the welfare of future generations via climate change decline.

Walking the talk? Green politicians and pollution patterns

11/20/2025 European Central Bank Central banks

Exploiting three decades of detailed regional data for Germany, we find that when the Green Party is successful at the polls, local hazardous emissions decline. The level of political representation matters, too. Green politicians’ gaining influence at county level is followed largely by a decline in air pollutants that have an immediate adverse health effect. In contrast, when the Green party joins the state government, only greenhouse gas emissions that affect the welfare of future generations via climate change decline.

The complex linkages between euro area insurers and sovereign bond markets

11/20/2025 European Central Bank Central banks

Euro area insurers manage several trillion euro in assets and take a long‑term investment perspective. To counteract the long period of low interest rates, they have shifted towards holding more alternative and less liquid assets. As a result, their balance sheets have become less liquid and more sensitive to market conditions overall. Meanwhile, their holdings of sovereign bonds show a significant home bias, which may have even increased with quantitative easing.

FEDS Paper: The Collateral Channel and Bank Credit(Revised)

11/19/2025 Federal Reserve Central banks

Arun Gupta, Horacio Sapriza, and Vladimir YankovWe examine the firm-level and aggregate effects of the collateral channel using administrative bank-firm-loan level data. We introduce novel instrumental variables related to the efficiency of federal district bankruptcy courts and show their importance as predictors of collateral use and banks' expected losses given default across collateral types.

Beyond the single bank: macroprudential insights from the 2025 EU-wide stress test and its extensions

11/19/2025 European Central Bank Central banks

This overview article provides an introduction to the 2025 Macroprudential Stress Test Extension Report (MaSTER), released as the 32nd edition of the Macroprudential Bulletin, which investigates how the EU-wide stress test and its extensions provide a broader assessment of the systemic vulnerabilities of euro area banks. The 2025 EU-wide stress test results are expanded via a top-down model-based toolkit to assess additional risks, perform policy simulation exercises, and present novel approaches to gauging the severity of the adverse scenario.

Integrating contagion risk into the 2025 EU-wide stress test: a system-wide analysis with amplification effects between banks and non-banks

11/19/2025 European Central Bank Central banks

This article expands the 2025 EU-wide stress test by incorporating a system-wide perspective to capture contagion risks across investment funds and insurance corporations alongside the banking sector. It examines potential short-term contagion effects under the EBA’s adverse scenario as financial institutions adjust their balance sheets in response to stress. These adjustments would result in additional average CET1 ratio depletion of 29 basis points, increasing first-round effects by 12%.

Simulating dynamic balance sheet reactions and macroprudential policy using the 2025 EU-wide stress test

11/19/2025 European Central Bank Central banks

Stress test simulations can enhance our understanding of the interplay between bank actions, the real economy and macroprudential buffers. Leveraging BEAST, the ECB’s workhorse top-down stress test model, this article explores impacts stemming from bank behavioural reactions by simulating them under the adverse scenario of the 2025 EU-wide stress test. The article shows that allowing banks to adjust their balance sheets only improves their capital ratios to a minor extent compared with simulations where they are assumed to keep their balance sheets constant.

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