We provide a simple and tractable accounting-based stress-testing framework to assess loss dynamics in the banking sector, in a context of leverage targeting. Contagion can occur through direct interbank exposures, and indirect exposures due to overlapping portfolios with the associated price dynamics via fire sales.
Highlights of the Basel III monitoring exercise as of 31 December 2019
Banks with a low price-to-book ratio have a greater propensity to pay out dividends. This propensity is especially marked for banks with a price-to-book ratio below a threshold of 0.7. As a sector, banks also tend to have higher dividend payout ratios than non-financial firms. We demonstrate these features using data for 271 advanced economy banks in 30 jurisdictions.
Report by the Consultative Group on Innovation and the Digital Economy (CGIDE) established at the BIS Representative Office for the Americas, 8 December 2020
BIS Quarterly Review for December 2020: This Quarterly Review shows markets rebounded in November, but concerns about the daylight between valuations and the economic outlook persisted. Government bond yields stayed unusually low, supported by monetary accommodation, sustaining the search for yield. The relative performance of EME currencies partly reflected structural features of domestic economies.
The Committee is issuing a supplemental note to its 2014 guidance External audits of banks following the implementation of expected credit loss (ECL) accounting frameworks in various jurisdictions that have brought about significant changes for banks and their external auditors.
Project Helvetia: Settling tokenised assets in central bank money
The effects of the Covid crisis have been felt unevenly across sectors, and the output of customer service industries could remain well below its pre-Covid trend for some time. Economies with large customer service industries could grow more slowly in the near term, even after accounting for the stringency of containment measures and the severity of virus outbreaks. Model projections suggest that large advanced economies could face a "98% economy" until constraints on customer service industries ease. The outlook for some economies, such as China, is more positive.
A report by a Working Group established by the Asian Consultative Council of the Bank for International Settlements
Almost five decades after the collapse of the Bretton Woods system, gold continues to form an important share of global foreign exchange reserves. This may be because gold has traditionally offered reserve managers many benefits, such as the absence of default risk. This paper explores whether these large investment shares in gold are also justified from a risk-return standpoint, or whether any other explanations have to be brought to bear.
