Phd-student: Prof. dr. Gert Peersman
End date: 5/18/2001
Abstract:
In this chapter, a general overview of the transmission
mechanism of monetary policy in the euro area is provided. We
give a brief overview of the different channels of monetary
transmission and their implications for the EMU. Further, the
existing empirical evidence on monetary transmission in the
euro area is discussed. Also, the new empirical evidence
provided in this thesis, is discussed in the context of the
literature. Finally, the general conclusions of this thesis are
reported.
Promotor: Prof. dr. Rudi Vander Vennet
Phd-student: Prof. dr. John Crombez
End date: 7/6/2001
Abstract:
Promotor: Prof. dr. Rudi Vander Vennet
Phd-student: Prof. dr. Lieven Baele
End date: 5/2/2003
Abstract:
Promotor: Prof. dr. Rudi Vander Vennet
Phd-student: Astrid Van Landschoot
End date: 10/9/2003
Abstract:
From 1998 onwards, the euro corporate bond market has become broader and more
liquid. The number of euro corporate bonds has doubled over the last five years from just
over 500 to around 1100. The development of the A and BBB rated market segment has
been particularly impressive, coming from virtual non-existence in early 1998, to account
for almost half the individual rated corporate bond issues outstanding in late 2002. The
credit derivatives market has also experienced considerable growth during these years and is
expected to grow strongly in the coming years. This evolution in both markets has reinforced
the need to study the markets of default-risky instruments such as corporate bonds and to
enhance the assessment of credit risk. An increasing amount of research on credit risk
has been carried out by banks, firms, regulators, and central banks. As a response to the
request of information by investors and regulators and to the internal risk monitoring, banks
and firms invest heavily in systems to measure credit risk and to understand the behavior
of default-risky instruments. Banks have developed credit risk models in an attempt to
quantify and manage risk across geographical and product lines. Firms want to price credit
exposure and develop a system of internal capital allocation. The regulators are motivated
by the objective to match the capital requirements more closely to the risks faced by a
bank. For a central bank, it is important to analyze the link between corporate bonds and
money markets to understand the transmission mechanism of monetary policy.
The composition of the euro market at the end of 2002 shows that, even though the euro corporate bond market has grown enormously, more than half of the bond issuance
still consists of government bonds.1 Although the latter are often considered to be defaultfree,
several EMU countries have sovereign ratings below AAA. For example, by the end
of 2002, Italy, Greece, Portugal, and Spain mainly issued respectively AA2, A2, AA2,
and AA1 rated bonds, whereas Germany, France and the Netherlands mainly issued AAA
rated bonds. Sovereign credit ratings give an assessment of the relative likelihood that a
sovereign borrower will default on its obligations. The rating differences between EMU
countries show that sovereign credit risk differs. The pricing of sovereign debt has received
much less attention compared to the pricing of corporate debt. One of the main reasons
is the difficulty of assessing the political and economic conditions that affect a country’s
creditworthiness. However, from the end of the 1980s and early 1990s, the sovereign rating
business has grown and the assessment of sovereigns’ credit risk has gained importance.
Besides the evolutions of the bond market, the changing regulatory framework,
more specifically the New Basel Accord (Basel II), has enhanced the focus on modeling
default-risky instruments. Basel II has been introduced to adapt to the changes of banking
industry, risk management, and financial markets. Formally, the New Basel Accord consists
of three mutually reinforcing pillars, which should enhance the safety and soundness of the
financial system: (1) minimum capital requirements, (2) supervisory review process and (3)
market discipline. market discipline.
Three pillars of the New Basel Accord
(1) First pillar: minimum capital requirements
(2) Second pillar: supervisory review of capital adequacy
(3) Third pillar: market discipline (public disclosure)
The first pillar contains the minimum requirement of 8% capital to risk. The proposal focuses
on improvements in the measurement of risks, namely credit, market, and operational
risk. The modifications are occurring in the definition of risk-weighted assets. The aim is
to reduce the risk of bank insolvency and the potential cost for depositors in the case of
insolvency. Since banks are especially sensitive to credit risk in their lending portfolio, a
1The majority of the issuance of euro bonds is from the euro area (around 90%).
Promotor: Prof. dr. Rudi Vander Vennet
Phd-student: Wim Van Hyfte
End date: 5/27/2005
Abstract:
http://www.feb.ugent.be/fac/research/Proefschriften/VanHyfte_W_proefschrift.pdf
Promotor: Prof. dr. Jan Annaert
