Bundesbank-Analyse: So werden Staatsanleihen zum Risiko für Banken

The German Bundesbank published an analysis in its monthly report, revealing that the interplay between states and banks poses significant risks to financial stability. The analysis, titled "So werden Staatsanleihen zum Risiko für Banken," highlights how worsening a state's creditworthiness can increase risk premiums on its bonds and burden banks with large holdings of these securities.

Conversely, bank failures could put pressure on public budgets if government assistance is anticipated or required. Although the European resolution framework and strengthened capital bases have mitigated this risk, banks remain vulnerable to fiscal risks. The analysis suggests that banks with large portfolios of government bonds suffer disproportionately, with their hard-core capital ratios falling more significantly in simulations.

Portfolios with greater diversification show lower declines. The Bundesbank emphasizes that, given the unique architecture of the European Monetary Union—fixed currency policy with variable fiscal policy—the Staaten-Banken Nexus, or state-bank nexus, can be weakened through European reforms. However, the bank's own preference for national government bonds, or home bias, exacerbates the risk.

Furthermore, regulatory treatment that favors state liabilities could worsen the situation, hindering the development of a more integrated banking union. While some banking systems still hold substantial amounts of government bonds, this makes the establishment of a European Deposit Insurance Scheme (Edis) challenging. Edis would ensure that risks are insured collectively, not just market risks, but also arise from regulatory privileges granted to sovereign debtors that diverge from risk-conscious regulation.