2024
DOI: 10.1371/journal.pone.0292040
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Does BRRD mitigate the bank-to-sovereign risk channel?

Martien Lamers,
Thomas Present,
Nicolas Soenen
et al.

Abstract: We investigate the effectiveness of the Bank Recovery and Resolution Directive (BRRD) in mitigating the transmission of credit risk from banks to their sovereign, using CDS spreads to capture bank and sovereign credit risk for a sample of 43 banks in 8 Euro Area countries over the period 2009–2020. If the BRRD bail-in framework is credible, changes in bank default risk should not be transmitted to sovereign risk. In a novel approach we use banks earnings announcements to identify exogenous shocks to bank credi… Show more

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