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Impact of financial contagion on borrowing operations within the euro area
| Content Provider | OECD iLibrary |
|---|---|
| Organization | OECD |
| Abstract | Issuers had to deal with euro area-induced contagion effects. This chapter notes that, although direct effects are easier to quantify, indirect channels could prove to be more damaging. Indirect channels of contagion include a re-pricing of both sovereign risk and counter-party risk among financial intermediaries. This, in turn, may lead to higher funding costs and roll-over risk for sovereigns and financial institutions, impaired ability to pledge sovereign securities as collateral and flight-to-safety by investors. The chapter also argues that monetary union sovereigns are in particular vulnerable for liquidity crises leading to situations where they cannot (easily) obtain funds to roll over their debt at ‘reasonable’ interest rates. |
| Page Count | 5 |
| Starting Page | 49 |
| Ending Page | 53 |
| Language | English |
| Publisher | OECD Publishing |
| Publisher Date | 2012-03-01 |
| Access Restriction | Open |
| Subject Keyword | Finance and Investment Governance |
| Content Type | Text |
| Resource Type | Chapter |
