Dominik Meyland
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Meyland
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Dominik
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dominik.meyland@unisg.ch
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+41 71 224 7027

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  • Publication
    Home Bias in Sovereign Exposure and the Probability of Bank Default - Evidence from EU Stress Test Data
    (DIW Berlin, 2021-04)
    Meyland, Dominik
    ;
    Schäfer, Dorothea
    Since the European debt crisis economists and politicians discuss intensively the sovereign-bank nexus. The high activity in sovereign bond issuance required to mitigate the burden of the Covid19 crisis will rather intensify this debate than calm it down. Surprisingly, however, we still have only limited knowledge about the impact of a home bias in sovereign exposure on bank stability. This paper provides a new way to use European stress test data to study this relationship. In addition, we explore the effect on a bank’s probability of default if the existing capital requirement privilege for EU sovereign exposures were abolished. Our results support the conceptual idea behind the nexus theory. Interestingly, the effect of a home bias on bank stability is contingent on the home country’s solvency. If the home country is sufficiently solvent, investments in home sovereign bonds may improve bank stability. The findings clearly support the benefits of additional CET1 capital buffers. Regulation focusing on the home bias should account for heterogeneous effects depending on the home country’s solvency.
    Type: journal article
    Journal: DIW Berlin Discussion Paper
    Volume: 1943
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/110519
  • Publication
    Households’ Pecking Order of Debt and the Pricing of Asset-Backed Securities
    ( 2024)
    Roland Füss
    ;
    Dominik Meyland
    ;
    Stefan Morkötter
    This paper studies the role of households' pecking order of debt in the pricing mechanism and rating migration of U.S. consumer debt asset-backed securities (ABS). Our empirical results show that the household's delinquency on mortgage and auto loan increases spreads of ABS using these loan types as collateral. However, an increase in delinquency on credit card and student loans often lower ABS spreads in other types of collateral. We argue that delinquencies on these types of loans in a household's loan portfolio provide liquidity to other loans. In contrast, rising delinquencies on mortgages, which are typically the first to be repaid in the pecking order, are an indicator of a severe shock that spills over to other loan types, triggering a simultaneous increase in ABS spreads. Furthermore, we find for residential mortgage-backed securities (RMBS) a lower probability of future rating downgrades in times of high mortgage delinquency. In general, ratings are adjusted according to changes in the business cycle. Our empirical results suggest that liquidity provision causes a larger downgrade probability, and thus, is not sufficient to avoid future downgrades.
    Type: working paper
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/120553