Non disponibile in italiano
Paolo Alberto Baudino
- 26 November 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2025Details
- Abstract
- This box assesses the liquidity risks of UCITS hedge funds during periods of market stress. The UCITS segment combines the elevated synthetic leverage typical of hedge funds with the frequent redemption terms that are typical of UCITS funds. This combination can cause UCITS hedge funds to act as amplifiers of market stress, as they may face simultaneous liquidity pressures from investor redemptions and margin calls on derivatives exposures.
- JEL Code
- G10 : Financial Economics→General Financial Markets→General
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors
G28 : Financial Economics→Financial Institutions and Services→Government Policy and Regulation
- 26 November 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 2, 2025Details
- Abstract
- This box examines the stabilising role of household investors for investment funds during market stress, with a focus on the April 2025 market turmoil. Households’ long-term investment strategies make them less sensitive to market volatility, which can enhance fund resilience. An analysis of the April 2025 market turmoil and other past market downturns reveals that funds held by households experienced smaller outflows than those dominated by institutional or foreign investors. Following the April 2025 market sell-off, households also reinvested more quickly, further stabilising fund liquidity.
- JEL Code
- D14, G11, G23, G40, G50 : Microeconomics→Household Behavior and Family Economics→Household Saving; Personal Finance
- 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
- 21 May 2025
- FINANCIAL STABILITY REVIEW - BOXFinancial Stability Review Issue 1, 2025Details
- Abstract
- This box examines the decline in the share of non-banks’ liquid asset holdings and the implications of this for financial stability. In recent years, the share of cash equivalents and HQLA Level 1 holdings has significantly decreased, which may reduce the ability of non-banks to absorb shocks and meet payment obligations, especially under stressed market conditions. Valuation losses on HQLA Level 1 bonds, higher valuation gains on HQLA Level 2 equities and increased investment in less liquid assets have been the key drivers of this decline. Additionally, not all HQLAs retain their liquidity in times of stress. The growing share of HQLA Level 2 assets primarily consists of traded equities, which can suffer sharp valuation losses during periods of market stress and it may only be possible to liquidate them at a significant discount. Furthermore, growing non-bank reliance on indirect exposure to liquid assets via holdings of investment fund shares introduces additional risks, as their liquidity may be uncertain in stress periods. This creates the potential for financial contagion across non-bank financial intermediation sectors, highlighting the need for closer monitoring of liquidity risk and its broader systemic implications.
- JEL Code
- G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions
G22 : Financial Economics→Financial Institutions and Services→Insurance, Insurance Companies, Actuarial Studies
G23 : Financial Economics→Financial Institutions and Services→Non-bank Financial Institutions, Financial Instruments, Institutional Investors