Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/119325
Authors: 
Buch, Claudia M.
Koetter, Michael
Ohls, Jana
Year of Publication: 
2015
Series/Report no.: 
IWH Discussion Papers 12/2015
Abstract: 
We identify the determinants of all German banks' sovereign debt exposures between 2005 and 2013 and test for the implications of these exposures for bank risk. Larger, more capital market affine, and less capitalised banks hold more sovereign bonds. Around 15% of all German banks never hold sovereign bonds during the sample period. The sensitivity of sovereign bond holdings by banks to eurozone membership and inflation increased significantly since the collapse of Lehman Brothers. Since the outbreak of the sovereign debt crisis, banks prefer sovereigns with lower debt ratios and lower bond yields. Finally, we find that riskiness of government bond holdings affects bank risk only since 2010.This confirms the existence of a nexus between government debt and bank risk.
Subjects: 
sovereign debt
bank-level heterogeneity
bank risk
JEL: 
G01
G11
G21
Document Type: 
Working Paper

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