Holger Markmann

Unconventional Monetary Policy

Unconventional monetary policy is an umbrella term for policy instruments, which a central bank would only use when its traditional tool-box is either exhausted or has lost its effectiveness in meeting the challenges it faces. This is generally the case, when the conventional tool of short-term interest setting reaches its limits at its natural lower bound at zero. During the GFC, central banks have largely resorted to outright asset purchases of sovereign and corporate bonds, which include covered bonds.

Short-term Announcement Impact on the Secondary Market

In response to the GFC, the ECB undertook a number of unconventional monetary policy measures of outright asset purchases. To stabilize banks and to foster lending activity by improving the funding conditions of the financial sector, the ECB initiated three CBPPs. While it acquired €60.0 billion and €16.4 billion in covered bonds for CBPP1 and CBPP2, respectively, purchases of approximately €10 billion per month were conducted under CBPP3.

Monetary Policy Implications

In drawing conclusions for the analyses presented, it is essential to not only consider the goals of the three CBPPs as put forward by the ECB, but instead to consider capital market and banking sector conditions and presenting the drivers of the ECB’s decision to conduct the programs.

Impact on Emission Activity

During the GFC, funding conditions for European banks deteriorated and led the ECB to initiate counter measures to improve banks’ ability to provide credit to the real economy and to lower the interest term structure. Among the unconventional monetary policy measures introduced were the outright purchases of sovereign and covered bonds. The three CBPPs are unique, because, in addition to the secondary market, the Eurosystem acquired covered bonds in the primary market.

Medium-term Impact on the Secondary Market

Covered bonds are an important vehicle for long-term funding of mortgages and present a safe investment due to their dual recourse structure. The latter is the main reason they trade at only a slight premium over sovereign bonds, and provide banks cheap access to mortgage funding. The covered bond market has been considered impeccable in terms of both, risk and pricing (e.g., Anand, Chapman, & Gai, 2012).

Covered Bond Market

Covered bonds are a sub-category of corporate bonds. They are different in that they are collateralized by high quality loans, which are ring-fenced to provide covered bond investors a preferential claim in case of an issuer default. As only financial institutions possess a sufficient volume of loans, covered bonds present a special funding vehicle for financial institutions.

Management von Wohnungsbeständen im Privatvermögen

Immobilien spielen in der privaten Vermogensplanung eine wichtige Rolle und reprasentieren die groste Anlageklasse deutscher Haushalte. Aufgrund der geringen Grose vieler privater Wohnungsbestande erfolgt deren Bewirtschaftung oftmals unprofessionell und gepragt durch emotionale Bindungen. Der Fokus in der Bewirtschaftung fremdgenutzten Immobilieneigentums liegt auf der Erzielung dauerhafter Einkunfte, dem Erhalt der Substanz fur der Funktion als Vermogensspeicher.

Geschichte des deutschen Wohnimmobilienmarktes

Die Entwicklung von Wohnimmobilien in Deutschland bietet hinreichende Beispiele von neoliberalen Markten des burgerlichen Zeitalters bis hin zur kommunistischen Wohnraumbewirtschaftung der DDR, um heutzutage wichtige Anhaltspunkte fur eine informierte Entscheidungsfindung zu erhalten. Die Entwicklung von Wohnimmobilien in dem Verstandnis als Bewirtschaftung von Gebauden zu Wohnzwecken wird chronologisch und unter Berucksichtigung von politischen und wirtschaftlichen Rahmenbedingungen dargestellt.

Decisions on Bond Issuances by Banks

Next to deposits, European banks have, unlike their US counterparties which heavily rely on securitization to fund mortgages, historically largely used bank obligations such as covered bonds and senior unsecured bonds. We assess the decision of 402 European banks between 2006 and 2014 to issue three types of bonds – (private label) mortgage backed securities (MBS), covered bonds (CB) and senior unsecured bonds (SUB) – to account for balance-sheet substitution effects and their underlying channels. We estimate conditional probit and tobit models to simultaneously account for the choice between the three securities implying dependence between the decisions to issue either instrument. We show evidence for substitution through a funding liquidity channel; banks with more liquid balance sheets would choose to issue less CB and MBS whereas banks with high balance sheet maturity mismatch would choose to issue more MBS. There are substitution effects also for banks which more heavily rely on deposits issuing less CB and SUB. Overall, there is a higher probability to issue non-agency MBS in Europe by banks with high reliance on deposits, less risky loan portfolios, and high maturity mismatch prompting to a different role of this instrument in European bank funding as compared to the US. Most of the above effects vanish for the crisis period suggesting that banks’ funding decisions may have been driven by unobserved factors.