The empirical evidence from a number of studies suggests that banks with higher levels of capital, more stable funding and stronger risk controls performed better during the recent crisis. It also suggests that greater regulation of banks experiencing large increases in stock market valuation is warranted. The main empirical findings are in line with the Basel III recommendations. In recent months several euro area insurers have announced plans to increase their lending activities – in particular for commercial property investment – to fill the void left by banks that, in some cases, have scaled back their commercial property lending. This box presents some data on insurers’ lending activities and highlights some financial stability implications. Euro area banks have built up sizeable positions in US dollars over the last ten years. According to data from the Bank for International Settlements (BIS), the US dollar assets of euro area banks at the end of the fourth quarter of 2010 totalled approximately USD 3.2 trillion. These positions were accumulated progressively over the last ten years and reached a temporary high between the third quarter of 2007 and the first quarter of 2008. They are largely the result of search-for-yield types of investment in USD-denominated assets, but also include business expansions into the United States, as well as customer-driven US dollar financing requirements for corporate or project financing. This box looks at the funding consequences linked to these sizeable positions. An important policy issue is whether higher bank capital facilitates access to private funding markets. If the risk profile of banks’ assets is similar, higher risk-weighted capital ratios should imply that banks are able to fund themselves at lower credit spreads. Bank funding risk has been one of the most important sources of banking sector vulnerability throughout the financial crisis. Indeed, one of the notable implications of the ongoing sovereign debt crisis was the intensification of this risk. Especially in some euro area countries where access to market funding has been particularly constrained in recent years, banks have tried to compensate for this by turning to more stable funding sources, such as retail deposits. In order to attract depositors, many banks have increased deposit rates, which has, in turn, resulted in decreasing, and lately even negative, deposit margins having adverse consequences for bank profitability. Using a panel econometric approach and exploiting confidential information from the Eurosystem’s bank lending survey (BLS), this box illustrates how impaired access to wholesale funding during the recent financial crisis has influenced the cost of euro area banks’ deposit funding. Exchange-traded funds (ETFs) are (mostly) passive index-tracking investment products granting investors cost-effective and liquid exposure to a wide range of asset classes and geographical areas. These products have experienced impressive growth since 2000, and they weathered the crisis relatively unscathed. The growth of these products, the pace of the related financial innovation and (linked to the latter) their increasing degree of complexity have attracted supervisory bodies’ attention at the international level. This box summarises the key characteristics of ETFs, describes the evolution of ETFs in terms of the number of funds and assets under management (AuM) (also providing where possible relevant euro area or EU data) and finally sketches in broad terms the issues that may require closer scrutiny in the near future by the international financial stability, supervisory and regulatory communities. Financial option prices – through the estimation of risk-neutral densities (RNDs) – offer the possibility to gauge the uncertainty attached by market participants to future asset prices and to track its changes over time. This box discusses the uncertainty surrounding the short-term (three-month) outlook for the ten-year German government bond ("Bund") price – gauged using the prices of options on Bund futures – and relates it to that for the Dow Jones EURO STOXX 50 index during the financial turbulence of the last few years. The tensions in euro area sovereign debt markets are currently considered one of the major risk factors for financial stability. Looking back at the developments in euro area sovereign credit spreads since 2008, one may distinguish two different types of driving forces. First, there are "common factors", such as investors’ risk aversion that tends to lift all credit spreads for a given perceived "amount" of credit risk. In a similar fashion, a worsening global macroeconomic outlook would tend to increase all spreads – albeit likely to a varying extent – via the expected adverse impact on a country’s public expenditures and tax base. Second, there are country-specific influences such as political developments or the sudden requirement to support certain financial institutions. Such country-specific developments have the potential to change investors’ outlook concerning the success of fiscal consolidation and thereby affect the respective country’s sovereign credit spreads. If country-specific influences are more (less) important than common factors, the correlation between different countries’ sovereign credit spreads would tend to be low (high).