These are not four parallel stress paths. They are one ordered transmission cascade, read in order — and the order is the argument. CH·01 is the protective link: in this position, the home-bias sovereign holding closes the doom-loop path, not opens it. CH·02 is the one instrumented channel. CH·03 is where the suppressed margin is displaced. CH·04 is where the cascade closes on itself, with the Sparkassen–Landesbank institutional-protection scheme as the terminal modifier. A reader should see both at a glance: which channel is measured, and how the four wire together as a chain.
CH·01
Protective link
Mechanism + precedent
CH·02
Measured
The one instrumented channel
CH·03
Displacement
Mechanism + analogue
CH·04
Terminal + mutualisation
Endogenous-feedback modifier
Ordered transmission cascade
CFG-01 · German position
Mechanism — the inversion
Risk-off flows into the Bund. The sovereign does not re-rate against the bank. The doom-loop path closes here, at CH·01.
The same home-bias sovereign structure that transmits as fragility in a stressed-periphery position transmits as protection in a German one, because the sovereign is the safe asset, not the fragile one. The home-bias holding compresses funding costs and stabilises mark-to-market through the risk-off pulse rather than amplifying them. This channel structurally closes the sovereign-fragility path to the prescribed depletion. The depletion must therefore reach the prescribed outcome through some other path — which is what the rest of the cascade traces.
Bund-as-safe-asset inversion of the home-bias channel [corpus] [modelled]
Precedent (depletion shape, not magnitude)
2011–12 euro-area sovereign stress — the period the Bund strengthened while peripheral sovereigns re-rated.
Through 2011–12, the Bund 10Y traded into deeply negative real territory as periphery spreads widened. That is the precedent shape the protective-link reading rests on: in a euro-area risk-off pulse, the German sovereign absorbs flows rather than transmitting fragility. Bearing is not asserting a magnitude from that precedent; the channel's structural reading is what travels into this cycle, not a number.
2011–12 euro-area sovereign-stress precedent · Bund inflow asymmetry [corpus]
Trigger
Bund-flight / EUR-rate state — observable, not yet instrumented in this channel.
The trigger this channel watches is the joint Bund-flight intensity and EUR-rate state under risk-off conditions. No σ is asserted, because the live instrument that would justify a σ does not exist for this channel in this cycle. The honesty of saying so is the depth — and the structural protection is the substantive read, not the absence of a number.
Watch · Bund-flight / EUR-rate state [corpus]
↓
The protection closes the sovereign-fragility path — but the same configuration does not spare the rest of the book. Next: the one instrumented channel.
Corporate-book leg · focal
German energy-intensive / export-Mittelstand NPL migration off the 2022 RU–EU gas anchor
σ · — derivation under review
The empirical anchor is fixed: 2022 Russia–Europe gas crisis, German energy-intensive / export-Mittelstand NPL migration as the German analogue of the corpus's industrial-NPL migration shape. The σ derivation chain is the same form the other cycles use, with the focal-leg analytical decision still open before a number is surfaced.
Migration shape2022 RU–EU gas, German energy-intensive / export-Mittelstand
Baseline volatilityECB SSM German corporate NPL baseline
Focal σ— · named gap, not a number
[corpus]
[reconstructed]
σ derivation under review
Discipline note
No σ invented for the focal leg; no equivalent figures manufactured for CH·01 / CH·03 / CH·04
The four-honest-depths discipline says: CH·02 is the channel where Bearing holds both configuration and live instrument; until the focal-leg derivation closes, the channel is presented as a
named gap, not a number. The other three channels stay deliberately not-dressed-as-quantitative. The supervisor's quant team should find nothing to recompute and nothing overclaimed.
[corpus]
Why this channel is measured
The 2022 Russia–Europe gas crisis / industrial NPL migration cycle is the corpus's empirical anchor for this configuration class. Re-anchored against the German energy-intensive / export-Mittelstand segment, the corpus-substrate plus live-signal coverage is sufficient to instrument this channel directly when the focal derivation is closed.
Discipline
Show the measurement — or, when the measurement is not yet derived, show the named gap. Do not invent equivalent figures for the other channels, and do not invent a σ for the focal leg to fill the slot. That same discipline is what makes the rest of the cascade legible at its honest depths.
Surface to ICAAP file
When derived, the measured figures travel in the data/mono register; the mechanism-and-precedent channels travel in prose. The supervisor's quant team should be able to recompute the σ-derivation directly from the line shown.
↓
The ECB sets policy for the aggregate euro area, not for German domestic conditions. Next: where the suppressed margin lands instead.
Mechanism
A below-domestic-warranted ECB rate is a structural NIM suppressor for a German book. The suppressed margin does not disappear — it is displaced into reach-for-yield.
The ECB calibrates to the aggregate euro area, not to German domestic conditions. In an environment where the configuration's risk-off pulse routes flows into the Bund, the resulting EUR-rate setting runs persistently below what German conditions alone would warrant. NIM compresses on the deposit-floor and lending-spread mechanics, and the bank is structurally pushed to reach for yield into the domestic real-estate / Pfandbrief / Mittelstand cluster — the exposure the displacement inflates.
ECB aggregate-area policy-fit-gap vs German domestic conditions [reconstructed]
Analogue · 2015–2022 negative-rate period
The structural analogue for persistent below-domestic-warranted rates and the reach-for-yield it forced.
Through 2015–2022, the German banking system absorbed a sustained policy-fit gap; the documented response was a measurable reach into Pfandbrief, domestic real-estate, and Mittelstand-credit yield pickups. Bearing reports the period here as the empirical analogue for the displacement shape, not a forecast magnitude for this cycle. The reader's question is whether this configuration looks structurally similar.
2015–2022 negative-rate period · reach-for-yield displacement [corpus]
Trigger
ECB policy-fit-gap state vs German domestic conditions — observable.
The trigger this channel watches is the policy-fit-gap state — the spread between what the ECB sets for the aggregate area and what German domestic conditions alone would warrant — in concurrence with the Bund-flight signal. No σ is asserted; the channel is mechanism-and-analogue-grounded by design.
Watch · ECB policy-fit-gap state [corpus]
↓
The reach-for-yield loop tightens against the very exposure the rate suppression inflates. Next: where the cascade closes on itself — with the network as terminal modifier.
Mechanism — endogenous feedback
The reach-for-yield loop tightens against the inflated exposure. The cascade closes on itself.
The displacement from CH·03 lands in the domestic real-estate / Pfandbrief / Mittelstand cluster. As the inflated exposure repriced under the risk-off pulse meets the same book that the rate suppression pushed yield-seeking into, the loop becomes endogenous: the inflation of the exposure and the vulnerability of the exposure are the same movement. This is where a generic stress test stops looking; it is where this cell's depletion path arrives.
Reach-for-yield endogenous-feedback loop [corpus]
Precedent
German real-estate / Pfandbrief cyclicality through the 2015–2022 yield-suppressed period; the IPS structure of the Sparkassen–Landesbank sector.
The Sparkassen–Landesbank Institutssicherung is the system-internal loss-absorption and contagion mechanism: a confidence-contingent network arrangement where loss-absorption capacity is mutualised across the regional cluster. The precedent here is the public shape of how that structure absorbs idiosyncratic stress — not a magnitude Bearing derives.
Institutssicherung / IPS network structure [corpus] [modelled]
Trigger
Network IPS activation — binary, confidence-contingent.
The trigger this channel watches is a network-level IPS activation or a credible expectation of one. No σ is asserted, and a σ should not be invented: the load-bearing variable is structural, not quantitative — the network's loss-absorption capacity is itself confidence-contingent and the bank's own self-diagnosis, not a Bearing read.
Watch · IPS activation state [corpus]
Terminal modifier
institutional-protection scheme
The Institutssicherung enters here as the terminal structural modifier. It dampens the individual institution's depletion path — and simultaneously transmits the stress across the network. Protective for the institution, contagion-bearing for the system. Marked here as a structural variable; not dressed as a number.
Closing read
cascade inversion
The protection on one axis is the mechanism of the vulnerability on another. The Bund link that closes the sovereign-fragility path is the same configuration that suppresses NIM through ECB aggregate calibration, displaces margin into the domestic cluster, and meets the inflated exposure inside a network whose loss-absorption is itself confidence-contingent. That is this bank's compound, and it is why this configuration reaches the prescribed depletion through a path a general stress test does not look at.