Next Article in Journal
Impact of Fintech on Bank Risk-Taking: Evidence from China
Previous Article in Journal
The Impact of the Development of Society on Economic and Financial Crime. Case Study for European Union Member States
Article

The Sovereign-Bank Nexus in the Face of the COVID-19 Pandemic Outbreak—Evidence from EU Member States

1
Faculty of Finance and Banking, Bucharest University of Economic Studies, 010374 București, Romania
2
Institute of Finance, Poznań University of Economics and Business, 61-875 Poznań, Poland
*
Author to whom correspondence should be addressed.
Academic Editor: Mogens Steffensen
Received: 10 February 2021 / Revised: 13 May 2021 / Accepted: 14 May 2021 / Published: 18 May 2021
The major focus of this paper is on the sovereign–banks relationship following the COVID-19 pandemic crisis outbreak, with a view to gaining an insight into banks’ exposure to the sovereign. We rely on a series of complementary research approaches, such as desk research, comparative statistical analysis, exploratory learning algorithm, and a deterministic panel regression framework. The analysis reveals that most EU countries were not prepared for the pandemic crisis as they lacked a financial security buffer. The growing fiscal pressure and lockdown restrictions additionally resulted in an increase in banks’ exposure to the government debt market and higher government debt securities exposure on their balance sheets. One of the novelties of the research is the adoption of the gap method in order to measure the changes between banking assets major items (government securities vs. loans) and uncovering the preference for holding a specific type of asset. Additional insight is brought by the clustering solution, which shows increased cross-country heterogeneity in terms of the sovereign–banks relationship. Empirical research shows that banks’ involvement in the sovereign debt market is sensitive mainly to negative information related to pandemic occurrence and, to a lower extent, to positive information reflected by government’s reactions and economic stimulus measures. In addition, our results reveal there is no crowding-out effect triggered by the pandemic, in terms of lending to the sovereign against lending to the real economy. In the pandemic onset banks did not proceed to a sharp portfolio rebalancing in favor of the sovereign. View Full-Text
Keywords: sovereigns; banks; government debt; banking loans; pandemic; COVID-19; cluster analysis; panel regression sovereigns; banks; government debt; banking loans; pandemic; COVID-19; cluster analysis; panel regression
Show Figures

Figure 1

MDPI and ACS Style

Boitan, I.A.; Marchewka-Bartkowiak, K. The Sovereign-Bank Nexus in the Face of the COVID-19 Pandemic Outbreak—Evidence from EU Member States. Risks 2021, 9, 98. https://0-doi-org.brum.beds.ac.uk/10.3390/risks9050098

AMA Style

Boitan IA, Marchewka-Bartkowiak K. The Sovereign-Bank Nexus in the Face of the COVID-19 Pandemic Outbreak—Evidence from EU Member States. Risks. 2021; 9(5):98. https://0-doi-org.brum.beds.ac.uk/10.3390/risks9050098

Chicago/Turabian Style

Boitan, Iustina A., and Kamilla Marchewka-Bartkowiak. 2021. "The Sovereign-Bank Nexus in the Face of the COVID-19 Pandemic Outbreak—Evidence from EU Member States" Risks 9, no. 5: 98. https://0-doi-org.brum.beds.ac.uk/10.3390/risks9050098

Find Other Styles
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.

Article Access Map by Country/Region

1
Back to TopTop