Suchergebnisse

This paper explores the sovereign-bank nexus in emerging markets and developing economies: the interconnectedness between the health of the sovereign and the banking system. Data from 140 emerging markets and developing economies suggest that this nexus is rising. First, banks have increased their exposure to their sovereigns in the past decade. Second, government debt has grown, and fiscal positions have deteriorated, raising the specter of sovereign stress. Third, banking system assets and bank credit to the private sector have steadily increased, which may restrict the sovereign's capacity to contain a banking crisis. Fourth, empirical evidence from 36 emerging markets and developing economies documents the existence of the nexus and suggests that it has increased recently. However, deeper country analysis is required for a better understanding of the sovereign-bank nexus, given country idiosyncrasies, including the structure of sovereign debt and the composition of the investor base, and data lags and opacities. To minimize the adverse effects of the sovereign-bank nexus, efforts should be focused on maintaining fiscal and bank buffers, strengthening surveillance and supervision of the banking system, improving transparency and data quality of bank-sovereign linkages, better addressing the regulatory treatment of the sovereign exposures and government support of the banking sector, and carefully evaluating the policy trade-offs in the sovereign-bank nexus.

Using the universe of all externally issued bonds by corporates and sovereigns in emerging and developing economies during 2000-14, this paper analyzes various issuance trends, including the unprecedented post-crisis surge. The paper focuses on external issuance at the country-industry and individual bond levels and finds that global factors matter greatly for emerging and developing economies issuance. A decrease in U.S. expected equity market (or interest rate) volatility, U.S. corporate credit spreads, and U.S. interbank funding costs and an increase in the Federal Reserve's balance sheet (i) raise the odds that the monthly issuance volume of a country-industry is above its historical average; (ii) decrease individual bond yields and spreads; and (iii) raise bond maturities, after controlling for country pull factors, bond characteristics (for example, type of issuer, industry, and riskiness). Additionally, we document support that the risk-taking channel of exchange rate appreciation also operates for external bond issuance. Moreover, while the paper finds that country pull factors affect the impact of global factors, it does not find consistent evidence for this across the board. This result suggests that, during loose global funding conditions, flows are mostly driven by push factors and do not systematically discriminate between emerging and developing economies. Taken together, the findings suggest that although issuers might be able to benefit from benign international funding conditions, the large issuance volumes, currency risks, and high exposure to global factors could pose external and domestic challenges for policy makers, particularly when global cycles reverse.

This paper introduces a new global database and a policy classification framework that records the financial sector policy response to the COVID-19 pandemic across 155 jurisdictions and over time. It documents that authorities around the world have taken a diverse array of measures to mitigate financial distress in the markets and for borrowers, and to support the provision of critical financial services to the real economy. Using Cox proportional hazards and Poisson regressions, the paper takes initial steps to analyze the determinants of policy makers' responsiveness and activity in emerging markets and developing economies, respectively. The results indicate that policy makers in richer and more populous countries have been significantly more responsive and have taken more policy measures. Belonging to a monetary union is also significantly associated with a faster and more frequent intervention. Countries with higher private debt levels tend to respond earlier with banking sector and liquidity and funding measures. The spread of COVID-19, macro-financial fundamentals, pressure on foreign exchange markets, political settings, and fiscal and containment policies appear to play a limited role in determining policy response. In a substantially smaller sample, the paper explores the role of banking sector characteristics and finds that emerging markets and developing economies with higher private bank credit to GDP and that have adopted Basel III reforms have taken fewer policy measures.

This paper introduces a new global database and a policy classification framework that records the financial sector policy response to the COVID-19 pandemic across 154 jurisdictions. It documents that authorities around the world have taken a diverse array of measures to mitigate financial distress in markets and for borrowers, and to support the provision of critical financial services to the real economy. Measures that focus on the banking sector constitute the majority of policies taken and aim to take advantage of the flexibility embedded in the international standards. However, emerging markets and developing economies tend to rely more on prudential measures that go beyond this embedded flexibility compared with advanced economies, which may reduce bank balance sheet transparency and increase risks. Using Cox proportional hazards and Poisson regressions, the paper takes initial steps to analyze the determinants of policy makers' responsiveness and activity in emerging markets and developing economies, respectively. The results indicate that policy makers have typically been significantly more responsive and have taken more policy measures in emerging markets and developing economies that are richer and more populous. Countries with higher private debt levels tend to respond earlier with banking sector and liquidity and funding measures. The spread of COVID-19, macro-financial fundamentals, and fiscal and containment policies appear to play a limited role. In a substantially smaller sample, the paper explores the role of banking characteristics and finds that emerging markets and developing economies with higher private credit levels and that have adopted Basel III features have taken fewer policy measures. Future work is necessary for better understanding the country determinants of the policy response as well as the effectiveness and potential unintended consequences of the measures.

Cross-border banking in emerging markets and developing economies has expanded across most World Bank regions and has become large relative to some home and host economies. This paper analyzes recent trends of bank activities of financial groups headquartered in 46 emerging markets and developing economies, as well as the ownership structure of 51 prominent financial groups from emerging markets and developing economies. The data suggest that cross-border groups in most regions have grown in size, geographical reach, range of activities, and group complexity. The increasing relevance and complexity of cross-border banking pose challenges for policy makers in home and host jurisdictions as well as for the groups themselves to maximize the benefits of international financial integration while mitigating the risks. This balance calls for stronger consolidated supervision, more regional coordination and harmonization, and better group-wide corporate governance and controls. However, key challenges include institutional capacity constraints and political factors.

This paper examines the interaction between macro-financial and climate-related risks. It brings together different strands of the literature on climate-related risks and how these relate to macro-financial management and risks. Physical impacts of climate change as well as the transition toward a resilient low-carbon economy pose significant challenges for macro-financial management, as they can damage the balance sheets of governments, households, firms, and financial institutions due to the adverse and possibly abrupt impacts on investment and economic growth, fiscal revenue and expenditure, debt sustainability, and the valuation of financial assets. In turn, macro-financial risks translate into weakened resilience to physical climate risks and constrained capacity for climate adaptation and mitigation efforts. The paper finds that many countries face the "double jeopardy" of simultaneous elevated climate-related and macro-financial risks. Reducing macro-financial risks in countries under double jeopardy is an important component of international efforts to tackle climate change to complement and support country-specific efforts.