Bundesbank-Analyse: So werden Staatsanleihen zum Risiko für Banken

The Bundesbank's analysis, published in its monthly report, highlights the significant risks that the interdependence between states and banks pose to financial stability. This so-called 'state-bank nexus' is deemed a critical source of risk. When a country's creditworthiness deteriorates, the Bundesbank notes, rising risk premiums on its bonds can burden banks that hold large holdings of these securities.

Conversely, if a bank's performance declines, it could put pressure on public budgets if state support is expected or required. While the European resolution framework and strengthened capital bases of banks have mitigated this risk, banks remain vulnerable to fiscal risks. The Bundesbank's analysis indicates that banks with high stocks of government bonds would be disproportionately affected.

The hardest hit would be institutions with substantial domestic bond holdings, with capital ratios falling significantly in simulations. In contrast, diversified portfolios would experience smaller declines. The Bundesbank argues that European reforms to weaken this nexus are well-founded, given the unique architecture of the European monetary union - a single monetary policy with national fiscal policies.

The main obstacle to the development of the banking union is the strong preference of many European banks for domestic government securities. This home bias exacerbates the state-bank nexus, as the state itself favors regulatory treatment of state claims. Consequently, there are no regulatory incentives for banks to avoid holding large claims against individual states.

If banks diversified their bond holdings, it would noticeably advance the banking union institutionally. However, individual banking systems still hold significant amounts of government securities, hindering the introduction of a common European deposit insurance scheme. This would insure risks that are not solely market-based but also arise from regulatory privileges for sovereign debtors that deviate from risk-appropriate regulation.