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Philippe Molitor
Macro Prud Policy&Financial Stability
- Division
Market-Based Finance
- Current Position
-
Principal Financial Stability Expert
- 18 June 2024
- FINANCIAL INTEGRATION AND STRUCTURE BOXFinancial Integration and Structure in the Euro Area 2024Details
- Abstract
- The box highlights the importance of cross-border bank lending to non-banks in the euro area. Comparing the domicile of euro area banks and borrowers, we estimate the scale of direct cross-border lending to represent 14.1% of euro area bank lending to non-banks which increases to 23% when we include indirect cross-border lending. Direct cross-border lending represents an important driver for enhancing banking market integration. It also constitutes an instrument to improve banks’ risk diversification and the resilience of borrowers’ funding structure. Finally, the box discusses the implications of different lending approaches, and sheds light on the sectors relying more on cross-border lending.
- JEL Code
- G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
F02 : International Economics→General→International Economic Order
F34 : International Economics→International Finance→International Lending and Debt Problems
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
O52. : Economic Development, Technological Change, and Growth→Economywide Country Studies→Europe
- 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
- 28 September 2023
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 6, 2023Details
- Abstract
- The survey on credit terms and conditions in euro-denominated securities financing and over-the-counter derivatives markets (SESFOD) is a qualitative survey which collects information on the credit terms and conditions offered by large banks active in the targeted euro-denominated markets. On the tenth anniversary of the launch of SESFOD in 2013, this article assesses the information value of the survey and its leading indicator properties. It analyses the underlying individual responses over time and the drivers of aggregate developments. While changes are infrequent, they may have highly significant effects on financial stability, market functioning and monetary policy. More specifically, information on changes in the cost and availability of funding in wholesale markets, and in repo markets in particular, may support the analysis of monetary policy transmission and interbank funding conditions.
- JEL Code
- G10 : Financial Economics→General Financial Markets→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
C83 : Mathematical and Quantitative Methods→Data Collection and Data Estimation Methodology, Computer Programs→Survey Methods, Sampling Methods
- 27 March 2023
- OCCASIONAL PAPER SERIES - No. 311Details
- Abstract
- Over the past decade, geopolitical developments – and the policy responses to these by major economies around the world – have challenged economic openness and the process of globalisation, with implications for the economic environment in which central banks operate. The return of war to Europe and the energy shock triggered by the Russian invasion of Ukraine in 2022 are the latest in a series of episodes that have led the European Union (EU) to develop its Open Strategic Autonomy (OSA) agenda. This Report is a broad attempt to take stock of these developments from a central banking perspective. It analyses the EU’s economic interdependencies and their implications for trade and finance, with a focus on strategically important dimensions such as energy, critical raw materials, food, foreign direct investment and financial market infrastructures. Against this background, the Report discusses relevant aspects of the EU’s OSA policy agenda which extends to trade, industrial and state aid measures, as well as EU initiatives to strengthen and protect the internal market and further develop Economic and Monetary Union (EMU). The paper highlights some of the policy choices and trade-offs that emerge in this context and possible implications for the ECB’s monetary policy and other policies.
- JEL Code
- F0 : International Economics→General
F10 : International Economics→Trade→General
F30 : International Economics→International Finance→General
F4 : International Economics→Macroeconomic Aspects of International Trade and Finance
F5 : International Economics→International Relations, National Security, and International Political Economy
F45 : International Economics→Macroeconomic Aspects of International Trade and Finance
E42 : Macroeconomics and Monetary Economics→Money and Interest Rates→Monetary Systems, Standards, Regimes, Government and the Monetary System, Payment Systems
L5 : Industrial Organization→Regulation and Industrial Policy
Q43 : Agricultural and Natural Resource Economics, Environmental and Ecological Economics→Energy→Energy and the Macroeconomy
- 25 November 2020
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2020Details
- Abstract
- Market participants have been slow in transitioning to the euro short-term rate (€STR) as the new reference rate in the overnight index swap (OIS) market. The OIS market segment is a potential source of alternative risk-free interest rates to serve as a fall-back for the euro interbank offered rate (EURIBOR), the benchmark term rate underlying loan and debt security pricing for euro area households and corporates. The euro overnight index average (EONIA) rate is due to cease in January 2022. But trading activity in €STR-referencing OISs, although constantly growing, has remained at very low levels compared with EONIA-referencing OISs. Moreover, EONIA OIS trades that mature after the transition deadline have continued to rise. Market participants are encouraged are encouraged to redouble their efforts to ensure sufficient technical preparedness to trade, price and account for €STR-based products and manage risk related to usage of the €STR.
- JEL Code
- G10 : Financial Economics→General Financial Markets→General
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G13 : Financial Economics→General Financial Markets→Contingent Pricing, Futures Pricing
- 10 November 2020
- ECONOMIC BULLETIN - ARTICLEEconomic Bulletin Issue 7, 2020Details
- Abstract
- This article provides an overview of financial fragmentation during the coronavirus (COVID-19) crisis and the policies enacted to counter its effects. It does so through the lens of a set of high-frequency indicators for monitoring developments in financial integration. The readings from these indicators are then linked to unfolding economic and political events and to the main policy responses in monetary, fiscal and financial stability policy at the national and European levels. After initial sharp fragmentation, euro area financial integration broadly recovered to pre-crisis levels by mid-September, but not for all indicators. However, this recovery is still fragile and relies on an unprecedented amount of fiscal, monetary and prudential policy support.
- JEL Code
- G00 : Financial Economics→General→General
F36 : International Economics→International Finance→Financial Aspects of Economic Integration
- 29 November 2018
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2018Details
- Abstract
- ESTER (euro short-term rate) is the alternative euro risk-free rate administered by the ECB, which will replace EONIA (euro overnight index average) in 2020. The European Money Markets Institute (EMMI), the administrator of EONIA, concluded that under current market conditions, EONIA’s compliance with the EU Benchmarks Regulation (BMR) by January 2020 “cannot be warranted”. This implies that the usage of EONIA, at least in new contracts, may be prohibited by law as of 1 January 2020.
- 27 June 2016
- OCCASIONAL PAPER SERIES - No. 174Details
- Abstract
- This paper first highlights the structural features of shadow banking in the euro area, focussing on investment funds. It then discusses the potential systemic risks that the recent expansion of the investment fund sector presents. While investment funds provide important intermediation services to the real sector, including market and liquidity risk-sharing and the bridging of information gaps, their rapid expansion may present systemic risks that need to be detected, monitored and managed. In particular, the risk of fund outflows and the possible negative impacts on the wider financial system have risen due to the rapid expansion of the investment fund sector, its growing involvement in capital markets, its use of synthetic leverage, and the inherent and growing maturity and liquidity mismatch arising from the demandable nature of fund share investments. While available data suggest that vulnerabilities within the investment fund sector are growing and links to the wider financial system and real economy have strengthened, data limitations prevent drawing a definitive conclusion on the sectors' contribution to systemic risk.
- JEL Code
- G01 : Financial Economics→General→Financial Crises
G20 : Financial Economics→Financial Institutions and Services→General
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
- 29 April 2004
- OCCASIONAL PAPER SERIES - No. 13Details
- Abstract
- Accounting standard setters are considering the wider use of fair value accounting. This paper focuses on the financial stability implications of a move in the banking sector from the current accounting framework to full fair value accounting. A simulation exercise is performed on how various external shocks affect the balance sheet of an average European bank under the two frameworks. The paper further investigates the impact of the alternative framework on the main balance sheet items, and the interaction with banks
- JEL Code
- G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G21 : Financial Economics→Financial Institutions and Services→Banks, Depository Institutions, Micro Finance Institutions, Mortgages
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
M41 : Business Administration and Business Economics, Marketing, Accounting→Accounting and Auditing→Accounting