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Reproduction permitted only if source is stated.ISBN 978-3-95729-094-6 (Printversion) Non-technical summary Research QuestionBank distress can have severe negative consequences for public finances, which became obvious during the latest financial crisis. Bank levies can be one instrument to internalize the costs of bank distress. As they are not a common instrument in policymakers' toolkits, it is important to examine the consequences of their introduction. We focus on two main questions in the context of the German bank levy: What is the tax burden on different types of banks? How does the levy affect bank behavior? ContributionThis is the first empirical study of the effects of the German bank levy. Moreover, the results not only give insights at the national level but are able to inform the debate about the design of the contribution to the single resolution fund at the European level. ResultsThe descriptive analysis shows that low tax rates and high thresholds for tax exemptions limit the revenues raised through the bank levy. Moreover, systemically important banks are the main contributors. Our empirical regression approach exploits the retrospective nature of the introduction of the bank levy. The details of the tax were made public in 2011, but the bank levy was calculated based on balance sheet data of 2010. This represents an exogenous policy change and allows the effects of the bank levy on bank behavior to be studied in a differencein-difference setting. The results show that the levy has a significant effect on lending and interest rate setting. Banks affected by the levy reduce their loan supply and increase deposit rates. Nichttechnische Zusammenfassung AbstractBank distress can have severe negative consequences for the stability of the financial system, the real economy, and for public finances. Regimes for the restructuring and resolution of banks, financed by bank levies and fiscal backstops, seek to reduce these costs. Bank levies attempt to internalize systemic risk and to increase the costs of leverage. This paper evaluates the effects of the German bank levy implemented in 2011 as part of the German Bank Restructuring Act. Our analysis offers three main insights. First, revenues raised through the bank levy are lower than expected, because of low tax rates and high thresholds for tax exemptions. Second, the bulk of the payments were contributed by large commercial banks and by the central institutions of savings banks and credit unions. Third, for the banks affected by the levy, we find evidence for a reduction in lending and higher deposit rates.

Mitigating the negative externalities that systemic risk can create for the financial system is the goal of macroprudential supervision. In Europe, macroprudential supervision is conducted both, at the national and at the European level. In principle, national regulators are responsible for macroprudential policies. Since the establishment of the Banking Union in 2014, the largest banks in the Euro Area are under the direct supervision of the European Central Bank (ECB). In this capacity, the ECB can tighten macroprudential measures implemented at the national level. In this paper, we ask whether the drivers of systemic risk differ when applying a national versus a European perspective. We use market data for about 100 listed European banks to measure each bank's contribution to systemic risk (SRISK) at the national and at the Euro Area level. Our research has three main findings. First, on average, systemic risk has increased during the financial crisis. The difference between systemic risk at the national and the European level is not very large but there is a considerable degree of heterogeneity both across countries and banks. Second, we explore the drivers of systemic risk. A bank's contribution to systemic risk increases in bank size, in bank profitability, and in the share of banks' nonperforming loans. It decreases in the share of loans to total assets and in the importance of non-interest income. Third, the qualitative determinants of systemic risk are similar at the national and at the European level while the quantitative importance of some factors differs.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractSince the onset of the eurozone sovereign debt crisis, credit risk spreads in Europe have diverged. Despite this divergence, credit risk comoves strongly within certain country groups such as the eurozone periphery. We seek to answer what the determinants of the observed pattern of credit risk co-movements are and whether and during which periods sovereign debt markets have been subject to contagion.We proceed in three steps. First, we apply dynamic conditional correlations from a multivariate GARCH model to sovereign CDS spreads of 17 countries over the period 2008 to 2012. Second, we separate periods of simple interdependence fromcontagion. Third, we analyze the determinants behind credit risk co-movements and the role of contagion using regression analysis. Our results reveal a high degree of co-movements in sovereign credit risk, especially for eurozone countries during the sovereign debt crisis. We find strong evidence for both fundamentals and nonfundamentals based contagion. Similarities in economic fundamentals, cross-country linkages in banking and common market sentiment play a significant role.Keywords: Sovereign debt crisis, financial contagion, banking market integration JEL Classification: F30, F65, G01, G15 * We are grateful to Claudia Buch and Elena Carletti for continuous advice and encouragement. Furthermore, we would like to thank Mascia Bedendo, Martin Biewen, Elena Dumitrescu, Carlo Favero, Peter Hansen, Massimiliano Marcellino, Giovanni Piersanti, Esteban Prieto and Saverio Simonelli for many helpful comments as well as the Bank for International Settlements for kindly providing data. The paper has also benefited from comments by seminar participants at the This divergence can be explained by worsened fiscal positions following government interventions in the banking sector during the financial crisis as well as fiscal stimulus packages. At the same time, a high degree of financial integration in eurozone countries due to cross-border activities of banks and the existence of a common currency gave rise to interdependencies. In how far these interdependencies translate into volatile market reactions across countries and cause co-movements in sovereign credit risk is, however, hardly understood.Our objective is to take a closer look at the pattern of sovereign credit risk across European countries. To do so, we ask the following questions: First, does sovereign credit risk comove across ...