Financial Stability Report

Opinions expressed by the authors of studies do not necessarily reflect the official viewpoint of the Oesterreichische Nationalbank or of the Eurosystem.

Reports

International 
International Economic Developments 
International Financial Markets 

Financial Intermediaries in Austria 
Framework Conditions 
Banks 
Other Financial Intermediaries 

The Real Economy and Financial Stability in Austria 
Households 
Nonfinancial Corporations 
Stock Market 
Bond Market 

Special Topics

Macroeconomic Stress Testing: Preliminary Evidence for Austria 
The purpose of this paper is to perform preliminary stress tests for the Austrian banking system. Our focus is on the interdependence of credit risk and the state of the economy, as measured by macroeconomic variables. A simple linear regression approach serves to describe the relation between loan loss provisions (LLPs) as a share of total loans and potential explanatory factors. Among these, a rise in the short rate, a fall in business confidence, a decline in the stock market and a decline in industrial production have significant effects on the LLPs. Based on the regressions we evaluate the impact of hypothetical "worst cases" in key macroeconomic variables. These estimated percentage point changes in LLPs are then compared to the risk bearing capacity of the Austrian banking sector as proxied by its capitalization. We find that the largest effect amounts to 1.75% of tier 1 capital.

A New Approach to Assessing the Risk of Interbank Loans 
In this paper we suggest a new approach to assessing the risk of interbank credits at the level of the entire banking system rather than at the level of an individual institution. Such a perspective is necessary for the analysis of systemic risk because the complicated network of mutual credit obligations in the banking system may mask the risk exposure of the system at the level of individual institutions. We apply our framework to a cross section of individual bank data as they are usually collected by the central bank. The analysis is based on a network model of the interbank market. The model allows us to assess the default risk of banks for different scenarios of macroeconomic shocks like interest rate shocks, exchange rate and stock market movements as well as shocks related to the business cycle. In our analysis we take the feedback between individual banks into account. The model determines endogenously frequencies of default of interbank credits, recovery rates and default correlations as well as a measure of the stability of individual banks against the default of other banks in the system. Our approach can thus be seen as an attempt to assess systemic risk in the interbank market.


Determinants of Initial Public Offerings: A European Time-Series Cross-Section Analysis 
This paper studies the relationship between initial public offerings (IPOs) and selected macroeconomic factors. We use a panel data approach to investigate annual observations of IPO volumes for six continental European countries over a period of 18 years (1980 to 1997). The main results obtained in this work are: For stock index returns, all pooled procedures yield significantly positive parameter estimates, while individual country regressions working with untransformed IPO volumes tend to generate no significant parameter estimates. In contrast, logarithmic transformation of IPO volumes leads to persistently significant estimates for both pooled and individual country regressions. Across all specifications tested, the hypothesis that changes in savings deposits and GDP growth have explanatory power for IPO volumes could not be supported by empirical evidence; neither of the two factors exhibits any significant influence. The same holds for interest rates, which have not been found to perceivably influence demand for raising equity through IPOs.

Legend, Abbreviations 
Editoral close: May 10, 2002