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Emilio Siciliano
- 26 November 2025
- FINANCIAL STABILITY REVIEW - ARTICLEFinancial Stability Review Issue 2, 2025Details
- Abstract
- Trade turmoil in April 2025 saw a marked change in cross-asset behaviour compared with typical patterns. Notably, the US dollar depreciated strongly while US Treasury yields rose – the opposite of what usually happens in a risk-off environment. This prompted discussions as to whether the safe-haven properties of US dollar-denominated assets might be changing. This is particularly important for euro area financial stability since euro area investors hold US dollar-denominated securities in an amount equivalent to €6 trillion, which represents a significant share of their portfolios. As policy uncertainty remains high and alternative safe assets are scarce, investors’ risk management practices may be evolving. Immediate and decisive implementation of policies associated with the savings and investments union and the capital markets union would help foster an alternative market of safe assets for euro area and global investors.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
F31 : International Economics→International Finance→Foreign Exchange
- 19 May 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2025Details
- Abstract
- Since 2023 the price of gold has reached record highs, underscoring its role as a safe haven during periods of financial and geopolitical stress. Unlike other assets, gold does not provide cash flow and carries no counterparty risk, making it appealing in uncertain times. Gold outperforms equities and bonds during crises, reaffirming its stabilising role in investors’ portfolios. Recent trends in gold futures markets highlight increased investor demand and a preference for physical delivery amid economic policy uncertainty and trade tensions. Euro area investors have exposure to gold through derivatives, with notable foreign counterparty risks, indicating potential vulnerabilities. Although aggregate exposure is limited, the concentrated and leveraged nature of commodity markets poses systemic risks. During extreme geopolitical or economic events, these risk factors could lead to liquidity stress and market disruptions, affecting financial stability. Gold markets thus reflect broader risk perceptions, with important implications for financial systems.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G15 : Financial Economics→General Financial Markets→International Financial Markets
E44 : Macroeconomics and Monetary Economics→Money and Interest Rates→Financial Markets and the Macroeconomy
F13 : International Economics→Trade→Trade Policy, International Trade Organizations
F30 : International Economics→International Finance→General
- 19 November 2024
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2024Details
- Abstract
- The continuing shift from active to passive investing in equity markets over the past decade raises questions about the implications for financial stability along three dimensions. First, empirical evidence suggests that passive investing may increase co-movement among stock returns, making markets more volatile. Second, passive funds may increase equity market concentration, potentially exposing investors to heightened idiosyncratic risks from the largest companies. And third, the ability of equity markets to absorb shocks may be inhibited by the growing concentration of liquidity at closing auctions impacted by passive investing. In summary, passive investing continues to provide benefits to individual investors but might also adversely affect market functioning, thus highlighting the importance of investor heterogeneity.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G12 : Financial Economics→General Financial Markets→Asset Pricing, Trading Volume, Bond Interest Rates
G14 : Financial Economics→General Financial Markets→Information and Market Efficiency, Event Studies, Insider Trading
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors