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Claudiu Moldovan
- 21 November 2023
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2023Details
- Abstract
- Tighter financing conditions have reduced the affordability of and demand for real estate assets, putting downward pressure on prices. They have also increased the debt service costs faced by existing borrowers, with more-indebted borrowers in countries with widespread variable-rate lending being the most affected. Robust labour markets have thus far supported household balance sheets, thereby mitigating credit risk in banks’ relatively large residential real estate exposures. Commercial real estate firms, by contrast, have faced more severe challenges in a context of rising financing costs and declining profitability. While commercial real estate markets have comparatively low bank exposures, losses in this segment could act as an amplifying factor in the event of a wider shock.
- JEL Code
- G00 : Financial Economics→General→General
G01 : Financial Economics→General→Financial Crises
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G51 : Financial Economics
R30 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→General
R31 : Urban, Rural, Regional, Real Estate, and Transportation Economics→Real Estate Markets, Spatial Production Analysis, and Firm Location→Housing Supply and Markets
- 26 May 2020
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2020Details
- Abstract
- Private equity (PE) funding, and buyout funds in particular, have grown rapidly as a form of corporate financing in recent years, as the search for yield intensified. The outstanding amount of PE managed by global funds amounted to close to USD 8 trillion in December 2019, of which buyout funds accounted for around a third. Buyout funds have grown faster than any other PE strategy over recent years, even as their managers have diversified their activities. Institutional investors’ demand for access to PE buyout funds has been reflected in increasing rates of oversubscription of buyout funds in the primary market (see Chart A, left panel). This box provides an overview of the main developments in the PE buyout market and assesses potential financial stability risks to both investors in PE funds and the overall financial system.
- 29 May 2019
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2019Details
- Abstract
- Collateralised loan obligations (CLOs) – structured finance vehicles which repackage the credit risk of assets – hold around a third of the outstanding leveraged loans in Europe and the US. In parallel to the growth of leveraged loans, CLOs have almost doubled in size in the last five years. Most of the CLO tranches outstanding have been issued since 2016, when the underlying credit quality had already deteriorated through increased leverage and lower investor protection. In addition, CLO exposures tend to be relatively more concentrated in lower-rated leveraged loans. Amid recent developments in leveraged loan markets, this box focuses on financial stability risks deriving from CLOs.
- 24 May 2018
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2018Details
- Abstract
- The market for leveraged loans is significant and recent developments may be generating financial stability risks.25 In both Europe and the United States, the markets for leveraged loans issued by non-financial corporates are about five times larger than high-yield bond markets. In 2017 US leveraged loan issuance rose well above its pre-crisis levels, with gross issuance, depending on methodology and data source, estimated at between €500 billion and €1 trillion, while EU issuance, estimated at between €120 billion and €320 billion, is around the previous highs recorded in 2007 and 2014.
- 24 May 2017
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 1, 2017Details
- Abstract
- Large stocks of non-performing loans (NPLs) on euro area bank balance sheets continue to present risks to financial stability. Significant legal and administrative reforms have been undertaken over recent years in countries with high levels of NPLs to streamline insolvency proceedings and maximise NPL recovery values. Yet, the market continues to provide low NPL valuations that result in wide bid-ask spreads, thus impeding large-scale NPL sales. This special feature highlights the potential role and benefits of co-investment strategies (between the private sector and the state) for addressing NPLs. These co-investment strategies may reduce information asymmetries between buyers and sellers, thereby enabling transactions that might otherwise not occur, or facilitate sales at higher prices. Moreover, the proposed schemes are priced at market levels and may, therefore, be free of state aid.
- JEL Code
- G00 : Financial Economics→General→General