تثبیت های مالی و ترازنامه های بانک

We empirically investigate the effects of fiscal policy on bank balance sheets, focusing on episodes of fiscal consolidation. To this aim, we employ a very large data set of individual banks’ balance sheets, combined with a newly compiled data set on fiscal consolidations. We find that standard capital adequacy ratios such as the Tier-1 ratio tend to improve following episodes of fiscal consolidation: for the median bank in our sample, a 1% of GDP fiscal consolidation increases the Tier-1 capital ratio by around 1.5 percentage points over two years. Our results suggest that this improvement results from a portfolio re-balancing from private to public debt securities which reduces the risk-weighted value of assets. In fact, if fiscal adjustment efforts are perceived as structural policy changes that improve the sustainability of public finances and, therefore, reduces credit risk, the banks’ demand for government securities should increase relative to other assets.

The interdependence between public and bank balance sheets has been a fundamental aspect of the financial and economic crisis which, in some European countries, turned into sovereign debt crises. The strong loosening of fiscal policies as a reaction to the severe economic downturn in 2008/09 coincided with sharp increases in deficit and debt ratios. At the same time, the combination of large fiscal imbalances and low growth potential as well as structural weaknesses in the economy or the financial system led markets to increasingly challenge the sustainability of public finances in some countries. The related abrupt change in the market perception of sovereign risk in turn weakened bank balance sheets and resulted in an adverse feedback loop between sovereign and banking risk (see, e.g., Bank for International Settlement (BIS) (2011). It is therefore widely agreed that sizable and sustained fiscal adjustments will eventually be necessary to restore sound fiscal positions and ease financial market pressures. Consequently, most industrialized countries have by now announced medium-term consolidation strategies which would lead to a significant fiscal tightening over the coming years. In this context, this paper analyzes the effects of fiscal consolidations on banking sector stability. There is a remarkable lack of work that investigates the channels through which fiscal policy can affect bank balance sheets. The research on the role of the banking sector in dynamic stochastic general equilibrium (DSGE) models is still at a relatively early stage. Angeloni et al. (2011), for example, propose a calibrated DGSE model that includes a banking sector and the government sector. The focus of the paper is on the composition of the fiscal adjustment, and on its consequences for banking stability. It finds that, compared to expenditure based consolidations, labor tax-based policies attain a more rapid debt adjustment and low intertemporal debt costs, but at the expense of higher oscillations in bank leverage and risk. Dib (2010) also presents a DSGE model that includes a banking sector as well as a fiscal sector. The impulse responses of bank balance sheet items to a structural shock to government spending suggest that bank leverage initially increases, but then decreases before it returns to the steady state. A report published by the Bank for International Settlements (BIS) analyses the impact of sovereign risk on the banking system (see Bank for International Settlement (BIS) (2011)). It highlights the main channels of transmission on banks’ funding conditions. The described ”asset channel” is closely related to the mechanism this paper aims to identify empirically. Rises in sovereign risk adversely affect banks through losses on their holdings of government papers. As a result of a weakening of the balance sheet, funding of banks becomes more costly. Banks may therefore react to changes in sovereign risk through adjustments on the asset side, i.e. changes in the portfolio composition. By the same token, a fiscal adjustment should trigger more appetite for government securities by banks, as treasuries are perceived to be safer after a fiscal consolidation. At the same time, banks’ perception of sovereign risk should depend on various determinants, notably the contemporaneous state of public finances and the economy as well as expectations regarding future developments. This paper therefore focuses on fiscal policy and analyzes empirically to what extent a tightening in the policy stance affects typical measures for the healthiness of bank balance sheets, notably the Tier-1 capital ratio. We see two channels that establish a link between fiscal policy and banks’ balance sheets: First, a direct channel related to the supply and demand effects on government bond markets. The supply of new government bond issuances will decline in times of a sustained adjustment of budgetary positions. At the same time, ambitious fiscal consolidation efforts may be regarded by investors as a structural policy change which improves long-run fiscal sustainability. A related lower perceived risk of default would increase the demand for government securities relative to other asset classes, thus, counteracting the negative liquidity effect. For US treasury bills Krishnamurthy and Vissing-Jorgensen (2012) show that liquidity and safety constitute important determinants of the demand for government bonds. Which of the two effects prevails theoretically depends on the specific features of the demand and supply curves. Focusing on the banks balance sheet, we would expect to observe an increase in the share of government securities over total assets if the demand effect prevail, and a decrease in such share if the supply effect is stronger. A second, and indirect, channel related to the macroeconomic effects of fiscal consolidations. If fiscal adjustment leads to an economic downturn, it would increase the likelihood of non-performing loans and write-offs. If those effects are strong, one should observe more investment in government securities when a country enters a period of fiscal consolidation. Controlling for the indirect macroeconomic channel, we test the portfolio choice hypothesis using a very rich data set of individual bank balance sheet observations for 17 industrialized countries, from 1994 to 2009. As a measure of fiscal consolidations, we rely on a new data set constructed by the IMF (see Devries et al. (2011)), which extends to a large set of advanced economies the ”narrative approach” proposed in Romer and Romer (2010) for the US. We exploit both time series and cross sectional variation and relate changes in capital adequacy ratios to periods of fiscal consolidations. Our baseline regressions use the Tier-1 and the total (risk-weighted) capital ratio. Both these indicators have been shown to be good predictors of bank failure. We find that fiscal consolidations are associated with an improvement in banks’ capital bases, a result that is robust with respect to different panel estimation approaches, and that is strongly driven by commercial banks. Indeed, our results suggest that a 1% of GDP fiscal consolidation can improve the Tier-1 capital ratio by around 1.5 percentage points over two years. Moreover, the empirical analysis suggests that the improvement of risk-weighted capital ratios is attributed to banks re-balancing their portfolios from private securities to government securities. We estimate that - for the median bank in our sample - the ratio of private over total (i.e. private plus public) securities would decrease by around 5 percentage points over two years following a 1% of GDP fiscal consolidation. We interpret this portfolio shift as resulting from an internalization of a policy-induced decline in sovereign risk, due to the adoption of fiscal consolidation plans by governments. Such a portfolio shift, in turn, fosters an improvement in the risk composition of bank balance sheets. The literature has not yet explored in much detail, neither empirically nor theoretically, the potential transmission from fiscal policy to bank balance sheets. To the best of our knowledge, this is one of the first papers to provide evidence on the existence of direct transmission channels. The remainder of the paper is organized as follows. Section 2 presents the data sets that we use, the empirical approach and discusses the results. Section 3 reports several robustness exercises. Finally, section 4 concludes.

The existing literature has not yet explored in much detail, neither empirically nor theoretically, the potential transmission from scal policy to bank balance sheets. This paper analyzes the eects of scal consolidations on banking sector stability. It argues that if a scal adjustment is perceived to reduce the credit risk of a sovereign borrower, a bank's demand for the bonds of this issuer should increase relative to other assets, thereby changing the bank's portfolio in the direction of a lower risk composition. This would improve standard capital adequacy ratios, such as the Tier-1 ratio, which have been shown to be good predictors for the likelihood of a bank failure. We empirically test this hypothesis using disaggregated bank balance sheet data for 17 countries from 1994 to 2009. As a measure of scal consolidations, we rely on a newly constructed data set that uses historical accounts to build a large country panel of episodes of scal consolidations. We nd that scal consolidations indeed are associated with an improvement in banks' capital bases, a result that is robust with respect to dierent panel estimation approaches, and that is strongly driven by commercial banks. Our results suggest that the improvement of capital ratios is attributed to banks re-balancing their portfolios from private securities to government securities.