Andrzej Sowiński
Macro Prud Policy&Financial Stability
- Division
Market-Based Finance
- Current Position
-
Financial Stability Expert
- Fields of interest
-
Financial Economics,Macroeconomics and Monetary Economics
- Education
- 2009-2011
MA in Finance and Accounting, SGH Warsaw School of Economics
- 2006-2009
BA in Finance and Accounting, SGH Warsaw School of Economics
- Professional experience
- 2011-2021
Economic Expert, National Bank of Poland (Central Bank)
- 2010-2010
Futures Trader, BRE Bank (Investment Firm)
- 2010-2010
Financial Markets Analyst, NWAI DM (Investment Firm)
- 2009-2009
Intern, FMC Management (FX Advising Company)
- Awards
- 2018
Investment Adviser - Polish Financial Supervision Authority
- 2017
Chartered Financial Analyst (CFA) - CFA Institute
- 2011
Polish Investing Champion - Polish Ministry of State Treasury
- 2009
Stockbroker - Polish Financial Supervision Authority
- Teaching experience
- 2017-2018
Capital Markets - Guest Lecturer, SGH Warsaw School of Economics
- 2016-2017
Financial Markets - Teaching Assistant, SGH Warsaw School of Economics
- 20 November 2024
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2024Details
- Abstract
- Structural liquidity mismatches within euro area investment funds are both a source and an amplifier of systemic risk. These funds often offer more favourable redemption terms than the liquidity of their holdings justifies, potentially creating financial stability risks. Negative market shocks can quickly lead to large investor outflows, necessitating substantial asset sales that exert downward pressure on asset prices. This can result in a self-reinforcing cycle of further outflows and increased volatility. Investment funds have a larger footprint in euro area corporate bonds, which tend to be less liquid than other assets. This makes corporate bonds especially susceptible to sharp price declines under forced sale conditions, heightening the likelihood of disorderly market corrections. By contrast, euro area sovereign bonds are relatively resilient due to their higher liquidity and the more diversified investor base, reducing the market impact of sales by specific types of investors. This analysis highlights the need for regulatory adjustments to better safeguard financial stability. Extending redemption notice periods for funds with less liquid assets is a key recommendation, as such measures can help stabilise markets during times of stress by allowing more orderly liquidation and reducing abrupt price impacts.
- JEL Code
- G17 : Financial Economics→General Financial Markets→Financial Forecasting and Simulation
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
- 19 November 2024
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2024Details
- Abstract
- The continuing shift from active to passive investing in equity markets over the past decade raises questions about the implications for financial stability along three dimensions. First, empirical evidence suggests that passive investing may increase co-movement among stock returns, making markets more volatile. Second, passive funds may increase equity market concentration, potentially exposing investors to heightened idiosyncratic risks from the largest companies. And third, the ability of equity markets to absorb shocks may be inhibited by the growing concentration of liquidity at closing auctions impacted by passive investing. In summary, passive investing continues to provide benefits to individual investors but might also adversely affect market functioning, thus highlighting the importance of investor heterogeneity.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 18 June 2024
- FINANCIAL INTEGRATION AND STRUCTURE BOXFinancial Integration and Structure in the Euro Area 2024Details
- Abstract
- The issuance of these temporary recovery instruments has renewed the discussion on the benefits of a common safe asset and their transformative potential for EU financial integration. Given that a common safe asset may foster financial integration in the euro area by facilitating diversification and de-risking banks’ sovereign portfolios, this box assesses the extent to which these newly issued EU bonds (i) are perceived by market participants as a common safe asset, and (ii) can facilitate diversification and affect banks’ sovereign portfolio composition.
- JEL Code
- G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
H63 : Public Economics→National Budget, Deficit, and Debt→Debt, Debt Management, Sovereign Debt
- 16 May 2024
- FINANCIAL STABILITY REVIEW - BOXAssessing the liquidity preparedness of investment funds to meet margin calls in derivatives marketsFinancial Stability Review Issue 1, 2024Details
- Abstract
- Recent episodes of liquidity stress highlight the need to monitor funds’ liquidity preparedness to meet margin calls on derivatives. This box proposes four indicators of fund-level liquidity preparedness to meet margin calls to identify potential vulnerabilities that may require higher cash buffers and/or more diversified high-quality liquid assets (HQLA). Both the stock of initial margin posted and the flow of initial and variation margin are examined, offering complementary insights. The first set of indicators considers the ratios between the volumes of margin stock or flow over cash holdings, while the second set replaces cash with HQLA. The results highlight how cash alone may not be enough to cover margin calls, thus emphasising the importance of funds relying on diverse and reliable sources of liquidity and collateral. Moreover, existing vulnerabilities in the fund sector can lead to procyclical behaviours, amplifying market-wide stress and spreading to other market participants.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G10 : Financial Economics→General Financial Markets→General
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
- 16 May 2024
- FINANCIAL STABILITY REVIEW - BOXFinancial stability risks from basis trades in the US Treasury and euro area government bond marketsFinancial Stability Review Issue 1, 2024Details
- Abstract
- Basis trades are arbitrage strategies which exploit mispricing between the spot price and the futures price of a given security. They improve market functioning but are also subject to funding and liquidity risks, especially when excessively leveraged. Hedge funds have built up leveraged exposures in the US Treasury market, giving rise to financial stability concerns. While risks are partly mitigated by already elevated margin requirements in the futures market, disruptions in the repo market could still force some entities to unwind their basis trades. Given the role of US Treasury bonds as global risk-free assets, dislocations resulting from widespread unwinding of basis trades could spill over into other jurisdictions and asset classes. Furthermore, a build-up of hedge fund exposures has also been observed in the euro area government bond market, but the size of basis trade activity seems contained.
- JEL Code
- G10 : Financial Economics→General Financial Markets→General
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G13 : Financial Economics→General Financial Markets→Contingent Pricing, Futures Pricing
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 16 May 2024
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2024Details
- Abstract
- Implied equity market volatility has been low in recent quarters, in both absolute and relative terms, despite tighter monetary policy, rising geopolitical tensions and a balance of risks to economic growth tilted to the downside. This box discusses several factors that may have contributed to the low levels of implied equity market volatility. It describes how progress in bringing inflation down without a deep economic contraction has supported investor optimism and highlights how increasingly common short volatility strategies may also have suppressed implied equity market volatility. The box then examines the divergence of implied equity market volatility from the implied volatility in interest rate markets and discusses possible implications for financial stability. Elevated implied interest rate market volatility could point to downside macro-financial risks that seem not fully priced in by equity investors. Subdued implied equity market volatility – despite broader uncertainties – might suggest an underestimation of risks in equity markets and excessive risk-taking. Consequently, adverse economic surprises or geopolitical shocks could lead to significant market corrections. Large exposures in volatility instruments could, in turn, increase the likelihood of a disorderly correction.
- JEL Code
- G10 : Financial Economics→General Financial Markets→General
G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
- 16 May 2024
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2024Details
- Abstract
- Euro area private markets have grown significantly in recent years, providing alternative funding sources for companies and diversification benefits for investors. While private markets are currently small relative to public markets and bank lending in the euro area, continued strong growth, financial innovation and opaqueness in private markets could contribute to financial stability risks. Adverse economic shocks could result in rising defaults, valuation corrections and losses for private funds and their investors. Additionally, such shocks may be exacerbated by multiple layers of leverage at company, fund and investor level, or by liquidity mismatches for some open-ended private funds. For banks, risks could arise from lending exposures to these markets, as well as from rising competition with private funds, which could incentivise lower underwriting and credit standards.
- JEL Code
- G20 : Financial Economics→Financial Institutions and Services→General
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G24 : Financial Economics→Financial Institutions and Services→Investment Banking, Venture Capital, Brokerage, Ratings and Ratings Agencies
G30 : Financial Economics→Corporate Finance and Governance→General
G32 : Financial Economics→Corporate Finance and Governance→Financing Policy, Financial Risk and Risk Management, Capital and Ownership Structure, Value of Firms, Goodwill
- 22 November 2023
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2023Details
- Abstract
- The digitalisation of financial services brings a variety of benefits but could also amplify and accelerate the materialisation of financial stability risks. While the increased popularity of retail trading via apps enables wider risk sharing across the economy, it could result in more procyclicality in financial markets. In addition, digitalisation in the form of social media allows information to spread faster but could also trigger or amplify shocks in financial markets or the banking sector especially when interacting with the increased use of online banking. Overall, the digitalisation of financial services may have broader policy-relevant implications for financial markets and banks that should be monitored.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G18 : Financial Economics→General Financial Markets→Government Policy and Regulation
G2 : Financial Economics→Financial Institutions and Services
G41 : Financial Economics
G53 : Financial Economics
:
- 22 November 2023
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2023Details
- Abstract
- The surge in trading volumes for short-term equity options, particularly 0 days to expiry (0DTE), poses some risks due to amplified leverage embedded in these contracts. Market participants find 0DTE options cost-efficient, providing flexibility for hedging or speculating on immediate market impacts, especially during periods of heightened economic uncertainty. However, the lower premia for shorter expiry options significantly increase effective leverage, potentially amplifying their impact on underlying markets. The dynamic hedging strategies employed by option sellers, driven by the option’s sensitivity to changes in the underlying index, could fuel intraday volatility spirals. While aggregate market impact depends on investors’ positioning and hedging activities, an imbalance in positions, especially with higher leverage in shorter-dated and out-of-the-money options, might trigger disorderly market moves.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G15 : Financial Economics→General Financial Markets→International Financial Markets
G17 : Financial Economics→General Financial Markets→Financial Forecasting and Simulation
:
- 30 May 2023
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2023Details
- Abstract
- The ability of market participants to access funding and conduct transactions in an efficient way is a prerequisite for financial stability, providing shock-absorption capacity and, in turn, limiting the scope for shock amplification. Market liquidity and funding liquidity are inherently connected. When market liquidity evaporates, financial market pricing becomes less reliable and tends to overreact, leading to increased market volatility and higher funding costs. Funding liquidity enables market participants to take exposures onto their balance sheets, thus absorbing fluctuations in demand and supply in the name of efficient market functioning. Under extreme conditions, markets can stop functioning altogether. While liquidity has many dimensions, from a systemic perspective the interplay between market liquidity and funding liquidity is key, as these two dimensions can reinforce each other in ways that generate liquidity spirals. Cyclical factors such as the business cycle, systemic leverage and monetary and fiscal policy affect the probability of liquidity stress arising. In the light of the current challenges of high financial market volatility, increased risk of recession, bouts of heightened risk aversion and monetary policy normalisation, this special feature constructs composite indicators for market liquidity and funding liquidity. It attempts also to identify the causes of poor market and funding liquidity conditions and to show how the two dimensions interact in the euro area.
- JEL Code
- E52 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Monetary Policy
E58 : Macroeconomics and Monetary Economics→Monetary Policy, Central Banking, and the Supply of Money and Credit→Central Banks and Their Policies
G15 : Financial Economics→General Financial Markets→International Financial Markets
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
- 16 November 2022
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2022Details
- Abstract
- Energy sector firms use energy derivatives under different strategies depending on their main area of activity, business model and exposure to risk in physical markets. The significant volatility and skyrocketing prices seen in energy markets since March 2022 have resulted in large margin calls, generating liquidity risks for derivatives users. Strategies employed by companies to alleviate liquidity stress may lead to an accumulation of credit risk for their lenders or their counterparties in less collateralised segments of the derivatives market. Further price increases would accentuate nascent vulnerabilities, creating additional stress in a concentrated market. These issues underline the need to review margining practices and enhance the liquidity preparedness of all market participants to deal with large margin calls.
- JEL Code
- Q02 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→General→Global Commodity Markets
G13 : Financial Economics→General Financial Markets→Contingent Pricing, Futures Pricing
G20 : Financial Economics→Financial Institutions and Services→General