Page 314 - Special Topic Session (STS) - Volume 1

STS441 Giulio B. et al.
analyze the correlation. In section 7 we study whether bank-affiliated funds
acquired more risky sovereign bonds than their unaffiliated peers during the
sovereign debt crisis, and in section 8 we focus on whether banks with affiliated
funds sold off more risky bonds during the crisis period compared to other
banks. Section 9 reports results from various robustness tests and section 10
concludes.

2. Data and sample description
For our empirical analysis, we obtain two key data sets: the first is from the
Deutsche Bun-desbank’s securities holdings statistics (SHS) and reports the
proprietary security holdings of each bank operating in Germany, as well as,
for each bank, the aggregate portfolio of all retail customers at the security
level. The second data set comprises the security holdings for each investment
fund operating in Germany from the investment funds statistics (IFS).
The data set for the securities holdings statistics and the investment funds
statistics lists the quarterly holdings of banks, its customers and mutual fund
companies on a security- by-security basis for the time period Q3 2009 to Q1
7
2016. For our analysis, we exclude affiliates of foreign banks operating in
Germany, as well as special-purpose banks, such as development banks.
We focus on the holdings of government bonds from the 19 euro-area
8
countries and exclude from our analysis bonds not denominated in euro.
These sovereign bonds only account for around 2% of the total, both in the
banks’ proprietary portfolios and in the investment funds’ holdings.
The first sample we construct focuses on banks’ and their affiliated mutual
funds’ sovereign bond holdings. We use a hand-collected matching list to
match banks to their affiliated asset management companies, i.e. to asset
management companies fully owned by the parent bank, and ultimately to the
asset management companies’ mutual funds. In doing so, we take into
account changes in the ownership structure of asset management companies
that occurred during our sample period. In total, 19 banks appear in the
matched sample. As asset management companies typically own more funds,
the median number of fund holdings matched with a single bank holding in
the sample is 4, while the average is 7.77. Our data at the fund level also
contain an indicator for whether the fund is public (open to retail investors) or
special (dedicated to a specific institutional investor). In our sample of
matched holdings, the observations that refer to public funds are just over

7 Before September 2009 the investment funds statistics were not available at the security level.
8 If we kept non-euro denominatade bonds in the original currency in our data, changes in the
nominal holdings would have different magnitudes for diff erent currencies. Alternatively we
could convert them into euro. But then exchange rate fluctuations would introduce spurious
correlations in the holdings that are unrelated with the trading activity of banks/funds. For these
reasons, we drop securities not denominated in euro.
303 | I S I W S C 2 0 1 9